Development budget hits historic low, warns Ahsan Iqbal

ISLAMABAD: Planning Minister Ahsan Iqbal has deplored a massive decline in allocation of funds for development, stunting economic growth and job creation and has linked clearance of new foreign-funded projects to prior certification for availability of additional rupee cover.

The minister has conveyed to the Economic Affairs Division (EAD) that no new foreign-funded projects would be acceptable for consideration by the Central Development Working Party (CDWP) or Executive Committee of the National Economic Council (Ecnec) unless the Ministry of Finance (MoF) provides a no-objection certificate (NOC) along with allocation of additional local funds to cover foreign loans.

The minister held a review meeting to assess the full-year performance of the Public Sector Development Programme (PSDP) 2024-25, along with the first quarter review of authorisation and expenditures under PSDP 2025-2026. The session focused on the progress of development projects executed by Ministries, Divisions and provinces as well as strategies to streamline and optimise limited development funds for the current fiscal year PSDP.

The minister expressed concern over the shrinking development space. “For the first time in Pakistan’s history, PSDP utilisation crossed Rs1 trillion last year, a record achievement. Unfortunately, this year, we are moving in reverse”, he said, adding that the PSDP had “shrunk from 2.6pc of GDP in 2018 to just 0.8pc in 2025, placing immense pressure on the country’s ability to sustain growth and employment”.

He said the development budget was the backbone of national progress, but “in view of the IMF progra­mme, there are restrictions due to which the development budget has been curtailed” and called for spending every rupee on high-priority projects.

Says funding cuts stunt growth, job creation; links new foreign projects to rupee cover, NOC

The minister stated that a special committee was constituted by the prime minister at the request of the planning ministry, which conducted a four-day intensive review of all ongoing projects. The committee “recommended Rs1.267tr for PSDP 2025-26; however, only Rs1tr was earmarked by the Finance Division”.

The minister directed all the ministries to “thoroughly reassess their portfolios and bring forward only essential and high-impact projects” as delays in project revision often result in cost escalations, as seen in the past when 36 projects were revised last year, doubling their cost, and 26 projects were revised this year under similar circumstances. “The impact of cost revision/escalation was over Rs1.1tr,” he said.

The meeting was told that PSDP 2024-25 started with a total throw-forward of Rs10.216tr. The sponsoring agencies demanded Rs2.904tr for their ongoing and new projects. The original allocation of Rs1.4tr was revised downward to Rs1.1tr under the IMF programme, while actual utilisation against the allocation fund was Rs1.077tr (98pc).

The meeting was also told that 221 projects were planned to be completed, and another 123 to be capped by June 2025, resulting in a significant reduction of Rs2tr in the overall throw-forward to focus on fast-moving and vital projects of national significance.

During the formulation of PSDP 2025-26, priority was given to Ecnec and CDWP-approved projects, with no new provincial projects except those located in the least developed districts.

Notably, 62pc of allocations were directed toward Ecnec and CDWP projects and 98pc toward ongoing projects initiatives. “Furthermore, a no-obje­ction certificate will be required for the initiation of all new projects, keeping in view the resource constr­aints,” the meeting was told.

The planning minister has also called for a comprehensive report on all foreign-funded education projects from the last ten years, including their results, highlighting concerns over a lack of visible impact despite significant borrowing.

Expressing displeasure over the slow progress of some projects that have been lingering on since 2014 and the non-utilisation of foreign grants and soft loans for projects of strategic importance, the minister “directed the EAD to negotiate new foreign loan agreements only if the Ministry of Finance guarantees the availability of adequate rupee cover in the PSDP.

Otherwise, due to the lack of rupee cover, the reduced PSDP will increase the portfolio of sick projects and result in multiple throw-forwards beyond control, turning into another circular debt–like menace for the economy,” an official statement said.

Published in Brackly News, September 17th, 2025