Provinces’ PKR 420 billion development splurge may put Pakistan’s IMF deal at risk

Pakistan’s provincial governments, led by Punjab and Sindh, are projected to overspend their development budgets by a staggering PKR 420 billion in fiscal year 2024-25, threatening the federal government’s ability to meet key fiscal deficit targets agreed with the International Monetary Fund (IMF), official documents show.

Under the IMF-backed framework, the federal government had committed to containing the fiscal deficit at PKR 7,285 billion this year, with the provinces expected to contribute a combined surplus of PKR 1,217 billion to ease budgetary pressures.

However, fresh projections submitted to the Annual Plan Coordination Committee (APCC) reveal that provincial development expenditures will hit PKR 2,606 billion—far above the PKR 2,186 billion ceiling agreed upon.

Punjab and Sindh lead the surge

Punjab tops the list, forecasting development spending of PKR 1,089 billion—overshooting its PKR 842 billion target by PKR 247 billion.

Sindh plans to spend PKR 953 billion, PKR 126 billion above its PKR 827 billion allocation.

Khyber Pakhtunkhwa and Balochistan also project excess spending—by PKR 44 billion and PKR 3 billion, respectively—raising concerns about fiscal discipline at the sub-national level.

Federal belt-tightening undermined

In contrast, the federal government has slashed its development budget from PKR 1,400 billion to PKR 1,100 billion in an attempt to offset the fiscal strain.

But the provinces’ spending spree may cancel out federal austerity measures, casting doubt on Pakistan’s ability to comply with IMF conditionalities.

IMF targets at risk

The spending divergence could derail IMF loan disbursements or force Islamabad back to the negotiating table to revise fiscal targets.