The federal government is scheduled to unveil the next fiscal year’s budget on June 2, featuring a 16% reduction in development spending, with allocations dropping to Rs921 billion. This cut is expected to lead to the closure of approximately 200 ongoing development schemes.
At a press briefing, Planning Minister Ahsan Iqbal revealed that the Ministry of Finance has set an indicative budget ceiling (IBC) of Rs921 billion for the upcoming Public Sector Development Programme (PSDP). This figure is significantly lower than the Rs2.9 trillion sought by the Planning Commission based on the demands of various ministries.
The proposed allocation is also Rs178 billion less than the revised Rs1.1 trillion for the current year, which had already been reduced from Rs1.4 trillion in line with International Monetary Fund (IMF) recommendations.
Iqbal said he intends to appeal to the prime minister for a higher allocation of at least Rs1.6 trillion to ensure sufficient rupee cover for foreign-funded projects.
The minister also launched the Planning Ministry’s new Monthly Development Update for May 2025, modeled after the finance ministry’s monthly economic outlook.
In response to a query, Iqbal confirmed that disbursement authorizations amounting to about Rs900 billion out of the Rs1.1 trillion for the current year have already been issued. He expressed hope that this amount would rise further in May and June, though he acknowledged that increasing development funds hinges on improving the tax-to-GDP ratio.
The Annual Plan Coordination Committee is scheduled to meet on May 23 to finalize the next development plan in consultation with provinces, Azad Jammu and Kashmir, and Gilgit-Baltistan. The National Economic Council (NEC) is expected to convene on May 26 or 27 to give formal approval to the development program and macroeconomic targets for 2025–26.
Iqbal voiced concern over the reduced development budget, warning that insufficient rupee cover for foreign-funded projects would hinder their execution. “If we can’t meet the rupee requirements, foreign exchange allocations will go unused,” he noted.
He added that due to the financial constraints, significant projects could not be properly funded, causing delays and increased costs. As a result, the number of provincial projects in the PSDP will be reduced, and nearly 200 underperforming schemes will be phased out.
Irregularities in Major Projects
Iqbal highlighted several issues in key infrastructure projects. The Diamer-Bhasha Dam’s cost has ballooned from Rs480 billion to Rs1.5 trillion, while the Dasu Hydropower Project’s cost surged from Rs500 billion to Rs1.7 trillion due to delays and poor oversight.
He pointed out management failures in the Dasu project, noting that no project director or CFO was hired, and operations were left entirely to WAPDA personnel. Contracts for road construction were also awarded in dollars, which the minister labeled as highly irregular.
The Neelum-Jhelum Hydropower Project, he added, also suffered from procedural lapses. He criticized the project for mobilizing contractors before consultants were appointed and disclosed that the CFO had an unrelated academic background—holding a master’s degree in geography.
Iqbal said a report from the International Marine Corps on the failure of the Neelum-Jhelum project is awaited. He also suggested that the chairmanship of WAPDA should go to a civilian hydrology expert of international standing, and he would recommend this change to the prime minister.
The minister reaffirmed that future PSDP allocations would be aligned with the government’s Uraan Pakistan initiative, aimed at boosting employment and economic growth. Projects under Uraan are expected to create around 120,000 direct and indirect jobs, he said.
