Federal Minister for Planning and Development Ahsan Iqbal has warned that development projects worth nearly Rs3 trillion could be shelved in FY27 as funding demands far exceed the government’s available development budget.
“Against a total demand of Rs4.097 trillion from different ministries, the Ministry of Finance has allocated only Rs1.126 trillion. This means there is an unmet demand of nearly Rs3 trillion,” he said.
According to the minister, projects amounting to roughly Rs3 trillion may not receive approval due to budgetary limitations.
“We will have to selectively allocate only Rs1.126 trillion out of demands exceeding Rs4 trillion. This is a very unpleasant task,” Iqbal said.
The remarks were made during the Annual Plan Coordination Committee meeting in Islamabad, where officials reviewed recommendations for the federal development budget and economic plan for FY27.
The committee examined proposals for next year’s development programme while also assessing the utilisation and performance of the current fiscal year’s development spending. Allocations for federal ministries and divisions were also reviewed.
Addressing a press conference, Iqbal said the Ministry of Planning must work within the financial limits set by the Ministry of Finance.
“This is one of the biggest dilemmas facing the Ministry of Planning: we are being forced to make allocations within shrinking development budgets.”
Of the total Rs1.126 trillion allocated under the Public Sector Development Programme (PSDP), Rs125 billion has been earmarked for the N-25 highway project.
“If you deduct this amount from the total PSDP, only Rs1.001 trillion remains. This is the same number as the PSDP in 2018,” he shared.
Iqbal noted that coalition partners had sought development projects worth approximately Rs87 billion last year. In addition, around Rs100 billion has been allocated for projects in Balochistan, excluding the N-25 highway.
He further stated that Rs153 billion has been reserved for Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and the merged districts.
“Ideally, these funds should come through the NFC mechanism. However, since no consensus has yet been reached on this issue, both their current and development budget allocations of GB and AJK continue to come from the federal government’s share,” he said.
The minister added that another Rs70 billion has been allocated for initiatives linked to the Sustainable Development Goals (SDGs).
After accounting for these commitments, only around Rs591 billion remains available for development spending, he said.
Iqbal explained that the government must also provide rupee cover for externally funded projects, including those financed by institutions such as the Asian Development Bank, the World Bank, and other multilateral lenders.
“The initial demand for rupee cover amounted to Rs832 billion, but after rationalisation by the Economic Affairs Division (EAD) in consultation with ministries, the figure was reduced to Rs426 billion,” he said.
After setting aside Rs426 billion for rupee cover, only Rs165 billion remains in the PSDP. Factoring in the Rs180 billion carry-forward impact from previous budget cuts pushes the programme into a negative balance of Rs15 billion, according to the minister.
“If we further deduct the Rs180 billion carry-forward impact of last year’s cuts, the PSDP effectively moves into a negative balance of Rs15 billion,” he said.
“Practically speaking, this is the situation in which we are operating. There is not much development, and this is not a happy state for any nation,” said Iqbal.
“The first reality we must acknowledge is that there is virtually no fiscal space available for a new project,” he added.
