The federal government has decided to gradually phase out provincial development projects from the Public Sector Development Program (PSDP), a major policy shift that has already triggered strong reservations from the governments of Sindh and Khyber Pakhtunkhwa.
The move is part of the proposed PSDP 2026-27 strategy, which seeks to direct limited federal development resources toward high impact national projects amid mounting fiscal pressures.
According to the Planning Commission’s APCC working paper, ministries and divisions submitted development demands exceeding Rs. 4.1 trillion, while the Finance Division was only able to provide an indicative budget ceiling of Rs. 1.126 trillion for the next fiscal year.
Planning Commission documents identify the growing inclusion of provincial and small scale projects in the federal development portfolio as one of the key challenges facing the PSDP.
The working paper explicitly recommends discouraging provincial nature projects except in least developed areas, a policy that is also proposed for approval by the National Economic Council (NEC).
Under the proposed allocations, only about Rs. 99 billion has been earmarked for provincial projects through the Provinces and Special Areas division, while the overall federal PSDP stands at Rs. 1.126 trillion.
In contrast, provincial Annual Development Programmes (ADPs) are projected to reach Rs. 3.138 trillion in 2026-27, nearly three times the size of the federal development budget.
Sources said the proposed shift has raised concerns in Sindh and Khyber Pakhtunkhwa, particularly regarding future federal support for development schemes. Documents show that Khyber Pakhtunkhwa’s proposed ADP alone is estimated at Rs. 564 billion next year, while Sindh’s development programme is projected at Rs. 816 billion.
The policy change comes as Pakistan continues negotiations with the International Monetary Fund over fiscal consolidation measures. The government is seeking to contain spending while also meeting ambitious revenue and primary surplus targets.
According to the Planning Commission, the federal PSDP has already suffered mid year cuts of nearly Rs. 173 billion during the current fiscal year because of economic and energy related pressures.
When you only build roads and then break them abs build them again
You get this. People need medicine education