Development spending falls short

The government on Thursday released a new development report, revealing that it could hardly spend Rs449 billion during the first ten months of this fiscal year, which was Rs648 billion less than the planned spending and affected projects across all the sectors.

Such a low spending against an annual allocation of Rs1.1 trillion renders the entire exercise of approving large-size Public Sector Development Programme by the National Assembly to cosmetic. The Finance Ministry controls the spending as a tool to offset the negative impact of tax shortfall sustained by the Federal Board of Revenue.

The development came amid Planning Minister Ahsan Iqbal’s statement on Thursday that for the next fiscal year 2025-26, the Finance Ministry has indicated only Rs921 billion for the PSDP. The Rs921 billion indicative budget was only equal to 58% of the development needs of Rs1.6 trillion for the next fiscal year, he added.

The minister was speaking during the launching ceremony of the new series, the monthly Development Outlook. The first of its kind monthly Development Update report has been initiated by the recently appointed chief economist of Pakistan Dr Imtiaz Ahmad in line with his earlier report of monthly economic outlook that he began in the Finance Ministry.

While speaking at the occasion, Ahsan Iqbal admitted that the projects with inflated costs had been approved in the past and there were also leakages. Since 1997, Ahsan Iqbal has remained the Deputy Chairman of the Planning Commission for four times and chaired those meetings where these projects were approved.

The new report does not paint a rosy picture for the government and its narration underscores that the claimed fiscal stabilisation has been mainly achieved by containing the development expenditures.

The government had planned to spend the entire nearly Rs1.1 trillion development budget in the first 10 months of this fiscal year. “According to the SAP system, ministries, divisions have utilised Rs448.6 billion ie 50% of authorisation and 41% of allocation”, according to the development outlook report.

The report further stated that based on the quarterly release strategy of the Finance Division, the Planning Ministry authorised a total of Rs894 billion (82% so far) including Rs229.5 billion during the fourth quarter in April, 2025. Further authorisation is being made on the basis of adjusted PSDP and satisfactory pace of utilization, it added.

 

For the sake of the International Monetary Fund (MF) programme, the Finance Ministry has squeezed the PSDP to achieve quarterly primary surplus targets. Both the Planning Ministry and the Pakistan Peoples Party have termed the next fiscal year’s indicative less than Rs1 trillion budget insufficient.

While launching the first report, Ahsan Iqbal said that the ministry was strengthening mechanisms to stop the leakages and corruption in the development projects. He further said that in many sectors, the projects had been approved with the inflated cost. He said that with a shrinking fiscal envelope, it was now more important to save every penny from being misused.

The development report stated that during the first ten months of this fiscal year, 191 out of 240 projects have been monitored, while 27 of 32 projects have undergone formal evaluation. This project approach has contributed to notable cost savings, it added. In April 2025 alone, 20 mega projects were planned and another 20 were monitored, it added.

The report disclosed that the lower than the planned spending has impacted the projects across various sectors. It added the infrastructure sector was allocated Rs656 billion in the budget. The Rs27.4 billion was utilised during April 2025. Within this, the water subsector disbursements amounted to Rs19.7 billion till April, equivalent to 15.45% of its annual allocation of Rs127.6 billion.

The transport and communication sector received the largest yearly allocation of Rs271.6 billion but the expenditure remained low.

Despite thin fiscal space, the government was still adding either new projects or upward revising the cost of the already approved schemes. The report showed that in April alone, a total of 19 development projects were considered worth nearly Rs2 trillion. The key reason behind higher approval cost was the multiple fold increase in the cost of Dasu hydropower project.

Of these, 10 projects fell within the CDWP’s financial approval authority, which is chaired by the Deputy Chairman Planning Commission. Nine projects exceeding the financial threshold were recommended to the Executive Committee of the National Economic Council (ECNEC) for final approval.

The report stated that these projects would generate 20,108 direct jobs and 100,690 indirect jobs. The water sector is claimed to contribute the highest share of employment opportunities, reflecting the labour intensive nature of infrastructure development.

In the domain of digital security and infrastructure, the CDWP granted in-principle approval to the “Gwadar Safe City Project”, to bolster public safety and surveillance capabilities in the strategically significant Gwadar region.

The CDWP granted an in-principle recommendation for the revised “Dasu Hydropower Project at a staggering cost of Rs1.74 trillion, according to the report.

The Planning Ministry said that it is a strategically significant federal initiative, as the project is a cornerstone of Pakistan’s energy security strategy, aimed at delivering low-cost, renewable hydroelectric power to support sustainable economic growth and reduce dependence on imported fuels.