No Money Left for New Development Projects, Ahsan Iqbal Reveals

The federal government may have little to no fiscal space for launching new development projects in FY2026-27 as existing commitments continue to consume most of the Public Sector Development Programme (PSDP), Planning Minister Ahsan Iqbal said on Tuesday.

Speaking at the Annual Plan Coordination Committee (APCC) meeting, Ahsan Iqbal said ministries had sought nearly Rs. 3 trillion for development projects in the upcoming fiscal year, but limited resources would force the government to focus only on selected schemes.

He said Pakistan’s development spending has steadily declined over the years, falling from around 2.6 percent of GDP to just 0.6 percent. According to the minister, development resources have been shrinking since FY2018, leaving many projects stalled and creating a throw-forward liability of approximately Rs. 10 trillion.

Ahsan Iqbal said the federal PSDP remains stuck around the Rs. 1 trillion level seen in 2018, while provincial development budgets have expanded significantly due to higher resource transfers under the NFC framework.

The minister revealed that Rs. 125 billion has already been earmarked for the N-25 highway project in Balochistan on the directions of Prime Minister Shehbaz Sharif. In addition, around Rs. 100 billion has been allocated for Balochistan and another Rs. 150 billion for Azad Jammu and Kashmir, Gilgit-Baltistan, and the merged districts of Khyber Pakhtunkhwa.

He said foreign-funded projects alone required a rupee cover of Rs. 832 billion, which was reduced to Rs. 426 billion after extensive efforts. After meeting these obligations, only Rs. 165 billion remains available within the PSDP. Factoring in the current year’s development spending cuts would leave a funding gap, effectively eliminating room for new projects.

The planning minister said there are currently 786 projects in the PSDP portfolio, including 197 major projects. About 81 percent of development funds have been allocated to mega projects, while another 15 percent has been reserved for medium-sized schemes. He urged provinces to play a larger role in financing development initiatives, noting that provincial governments now possess greater financial resources than the federal government in several areas.