Budget 2025-26: Rs1trn planned for PSDP, says Ahsan Iqbal
Planning minister Ahsan Iqbal said on Monday the government would propose Rs1 trillion for Public Sector Development Programmes (PSDP) in the upcoming federal budget for the financial year 2025-26.
The development came as the Annual Plan Coordination Committee (APCC) met in Islamabad under the chairmanship of Ahsan Iqbal to review the progress of the PSDP 2024–25 and finalise recommendations for the upcoming PSDP 2025–26, said a statement from the Planning ministry.
The meeting brought together high-level federal and provincial representatives, including secretaries, principal accounting officers, and planning officials from Gilgit-Baltistan and Azad Jammu & Kashmir.
Due to fiscal discipline agreed with International Monetary Fund, the government is constrained to not increase PSDP
While addressing the participants, Planning minister emphasised that despite limited fiscal space and competing demands, the government 'remains fully committed to sustaining development momentum through strategic realignment of resources and policy reforms'.
'The Finance Division, after consultations with the IMF, has firmed up an Indicative Budget Ceiling of Rs1 trillion for the federal PSDP, including Rs270 billion in foreign aid,' Ahsan said.
He noted that when the current government assumed office in early 2024, it inherited an economic landscape marked by 'constrained revenues, pressing foreign obligations, and structural imbalances'.
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During the meeting, a review of PSDP 2024–25 was presented. It was noted that the National Economic Council had approved a National Development Outlay of Rs3.79 trillion, which included Rs1.40 trillion for the federal PSDP, Rs2.09 trillion for provincial annual development programes, and Rs196.9 billion for state-owned enterprises (SOEs).
'However, due to financial constraints, the federal PSDP was later reduced to Rs1.100 trillion.'
As of May 31, 2025, Rs1.036 trillion had been authorised for release, and Rs596 billion had been utilised. A total of 1,071 projects were included in the PSDP, with an approved cost of Rs13.427 trillion, of which Rs3.216 trillion had already been spent by June 2024.
'A throw-forward liability of Rs10.216 trillion remains, underscoring the urgent need for project rationalisation and financial discipline.'
The minister highlighted that there was a dire need to increase the development budget of the country, which had direct bearing on growth and job creation.
'However, due to fiscal discipline agreed with International Monetary Fund (IMF), the government is constrained to not increase PSDP. The only way to increase development spending is to increase the revenues by increasing tax/GDP ratio from 10% to 16-18%,' he said. 'By being lowest tax paying economy we can't aspire to grow'.
The minister informed that the government had undertaken reforms to overhaul tax administration.
'To ensure maximum value for the investment in development sector, the ministry has taken multiple reviews of project performance, including quarterly and mid-year reviews for better investment efficiency.'
Over 118 slow-moving or redundant projects, mostly approved at the Departmental Development Working Party (DDWP) level, were recommended for capping or closure, potentially 'saving Rs1.000 trillion and freeing resources for high-impact initiatives'.
Moreover, the Planning Commission facilitated re-appropriations of Rs84 billion to fast-moving projects and critical interventions, while Rs80 billion were reallocated through TSGs for emergent national priorities such as the solarization of tube wells in Balochistan.
Looking ahead to FY 2025–26, the minister announced that the proposed PSDP had been restructured in line with core principles of sustainability', impact, and equity'.
'The Finance Division, after consultations with the IMF, has firmed up an Indicative Budget Ceiling of Rs1.000 trillion for the federal PSDP, including Rs270 billion in foreign aid.'
The PSDP 2025–26 portfolios have been developed following extensive consultations with ministries and provinces through Priority Committee meetings and high-level reviews chaired by the deputy prime minister and advisor to the prime minister.
'The final recommendations reflect a strict prioritisation of ongoing high-impact, foreign-aided, and near-completion projects. In total, 1,120 projects have been included in the proposed PSDP, of which a significant number are designed to be completed within the next 3–4 years if fiscal space is maintained.'
Pakistan faces serious challenge of water security therefore Diamer Bhasha Dam is given top priority, according to the statement.
'Hyderabad-Sukkur Motorway will be started during 2025-26. Balochistan will get highest share in development funds of nearly Rs250 billion.'
The minister further informed that sectoral allocations had been finalised with Rs644 billion allocated to infrastructure, including Rs332 billion for transport and communications and Rs144 billion for energy.
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A total of Rs150 billion has been proposed for the social sector, including Rs63 billion for education and higher education and Rs22 billion for health. Special areas like AJK and GB will receive Rs63 billion, while Rs70 billion has been allocated for merged districts of Khyber Pakhtunkhwa. Science and IT sectors have been allocated Rs53 billion, while Rs9 billion has been proposed for governance, according to the statement.
Moreover, production sectors, including food, agriculture, and industries, are expected to receive Rs11 billion.
In addition, SOEs have submitted development plans amounting to Rs288 billion, with major contributions from entities like WAPDA, NTDC, OGDCL, and others.
The minister informed the participants that one of the 'most serious challenges' had been the increasing tension and security risks following the events of May 7, 2025, when hostilities broke out along the eastern border with India.
'This conflict has led to increased defense spending requirements and exerted additional pressure on the already limited development budget.'
He acknowledged the dilemma faced by the government: choosing between critical national defense and the developmental needs of the people.
However, he reassured participants that the government remained committed to maintaining a careful balance.
The minister stated that the strength of a nation 'lies not just in its defense capabilities, but also in the health, education, and economic empowerment of its citizens'.
'The government will not allow Pakistan's development journey to be derailed. Instead, it will adopt innovative planning, smart budgeting, and rigorous monitoring to ensure that the needs of both defense and development are addressed.'
The APCC also deliberated on critical policy reforms. It endorsed the proposal to stop at-source deduction of Cash Development Loans (CDL) from the PSDP funds, saying the practice hampered project cash flows and delayed implementation.
'The committee reiterated the policy that provincial nature projects should be funded by provinces, except in cases involving strategic national interest or implementation in deprived regions.
'Furthermore, the APCC recommended imposing a moratorium on DDWP-level project approvals during the tenure of the IMF programme, except in exceptional cases with full justification and review by the CDWP. It was also proposed that no development funds be diverted to recurring expenditures during the fiscal year.'
'We are not just managing a budget—we are shaping the future. The world may see limitations, but we see opportunities,' Ahsan said.
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