Development Spending Down 80%, Govt Used FY26 Budget to Control Fuel Prices

Spending under the Public Sector Development Program (PSDP) share has fallen by nearly 80 percent since FY2017-18, with a large share used to manage economic shocks and subsidize energy price differentials in the outgoing fiscal year.

Opening the Annual Plan Coordination Committee (APCC) meeting, Planning Minister Ahsan Iqbal explained that development spending has been significantly squeezed, with PSDP shrinking from 19.6 percent of the federal budget in FY2017-18 to just 4.0 percent in FY2025-26.

This equates to a roughly 80 percent decline in development funds.

Ahsan said the reduction reflects mounting debt servicing obligations, macroeconomic stress, and repeated external shocks that have limited fiscal space for development spending.

PSDP allocations had been adjusted downward due to economic pressures, including energy price differential subsidies and stabilization measures.

The minister stressed that Pakistan’s development capacity has been constrained at a time when demand for infrastructure and growth-oriented investment is rising sharply. He added that the country must shift from debt dependence toward export-led self-reliance.

He reiterated that “the PSDP is not merely a budget line but a statement of national intent”.

He further said Pakistan must move toward a sustainable economic model based on exports, competitiveness, and domestic resource mobilization, warning that reliance on borrowing is neither dignified nor sustainable.

The minister said the IMF program reflects past economic mismanagement and described it as “economic therapy” necessary for stabilization and recovery.

He emphasized that countries such as Vietnam, Korea, Malaysia, and China progressed by focusing on production and exports, urging Pakistan to adopt a similar model.

The APCC reviewed development priorities under the URAAN Pakistan framework and approved a heavily constrained PSDP allocation strategy, with nearly all resources directed toward ongoing projects due to limited fiscal space.