Pakistan proposes Rs1 trillion development program amid fiscal constraints
Pakistan has proposed a Rs1 trillion federal PSDP for FY2026-27 as part of a broader Rs3.675 trillion national development outlay
Haris Zamir
Business Editor
Experience of almost 33 years where started the journey of financial journalism from Business Recorder in 1992. From 2006 onwards attached with Television Media worked at Sun Tv, Dawn Tv, Geo Tv and Dunya Tv. During the period also worked as a stringer for Bloomberg for seven years and Dow Jones for five years. Also wrote articles for several highly acclaimed periodicals like the Newsline, Pakistan Gulf Economist and Money Matters (The News publications)
The Rs1 trillion federal PSDP is the government's primary tool for channeling domestic and foreign resources into development priorities.
Pakistan's government has proposed a Rs1 trillion Public Sector Development Program for fiscal year 2026-27, part of a broader national development outlay of Rs3.675 trillion, according to budget documents obtained by Nukta.
The National Economic Council approved the overall plan, which also includes Rs2.224 trillion for provincial development programs and Rs451 billion in spending by state-owned enterprises. Officials said the program was prepared under strict fiscal discipline, with priority given to high-impact projects.
What is Pakistan's PSDP for 2026-27 and what does it fund?
The Rs1 trillion federal PSDP is the government's primary tool for channeling domestic and foreign resources into development priorities. Of the total, Rs745 billion comes from domestic resources and Rs255 billion from foreign assistance.
The program supports Pakistan's 13th Five-Year Plan, URAAN Pakistan, and the government's "5Es" framework covering exports, e-Pakistan, environment, energy and infrastructure, and equity and empowerment.
Among federal ministries and divisions, the largest allocation has gone to provinces and special areas at Rs233.39 billion, followed by the National Highway Authority at Rs224.51 billion, the Water Resources Division at Rs103.09 billion, and the Higher Education Commission at Rs46 billion. Social sector spending remains a stated priority, with increased allocations for higher education and the Daanish Schools initiative, which aims to expand access for underserved communities.
Why is Pakistan's development budget under pressure?
The development portfolio is constrained by significant "throw-forward" liabilities, the accumulated cost of completing already-approved ongoing schemes. These commitments leave limited fiscal space for new projects. As a result, tighter controls have been placed on fresh project approvals, with priority given to finishing existing initiatives and those aligned with national strategic goals.
The overall national development outlay draws on Rs838 billion in foreign funding and Rs2.837 trillion from domestic resources, reflecting the government's effort to sustain development spending while meeting fiscal consolidation targets. Officials acknowledged that demand from active projects considerably exceeds available funding, forcing planners to limit new additions to the development portfolio.
What are the key priorities in Pakistan's PSDP for 2026-27?
The PSDP has been aligned with URAAN Pakistan priorities, including productivity enhancement, expansion of digital infrastructure, development of an artificial intelligence ecosystem, improved regional connectivity, and strengthened energy and water security. These areas reflect the government's broader ambition to modernize the economy while managing constrained public finances.
Special emphasis has been placed on development in Azad Jammu and Kashmir, Gilgit-Baltistan and the Newly Merged Districts of Khyber Pakhtunkhwa, with targeted funding for regional programs in each area. The proposed PSDP allocations will be presented to parliament as part of the federal budget process for FY2026-27.
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