Govt May Shelve Rs3 Trillion Development Projects Amid Funding Constraints, Says Ahsan Iqbal

PSDP 2026-27

Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal has warned that the government may be forced to shelve development projects worth nearly Rs3 trillion in the upcoming fiscal year 2026-27 due to severe budgetary constraints.

Speaking at the Annual Plan Coordination Committee (APCC) meeting in Islamabad, Iqbal said that various ministries had submitted development project demands totaling Rs4.097 trillion, while the Ministry of Finance had allocated only Rs1.126 trillion under the Public Sector Development Programme (PSDP).

“Against a total demand of Rs4.097 trillion from different ministries, the Ministry of Finance has allocated only Rs1.126 trillion. This means there is an unmet demand of nearly Rs3 trillion,” he said.

The minister noted that projects worth approximately Rs3 trillion would either be rejected or remain unapproved due to the funding shortfall.

“We will have to selectively allocate only Rs1.126 trillion out of demands exceeding Rs4 trillion. This is a very unpleasant task,” he remarked.

The APCC meeting was convened to finalize recommendations for the federal development budget and annual economic plan for FY2026-27. The committee also reviewed the utilization and performance of development spending during the current fiscal year.

Highlighting the financial limitations facing the Planning Ministry, Iqbal said development allocations must remain within the funding envelope provided by the Finance Ministry.

“One of the biggest dilemmas facing the Ministry of Planning is that we are being forced to make allocations within shrinking development budgets,” he said.

Providing a breakdown of the PSDP allocation, the minister said Rs125 billion has been earmarked for the N-25 highway project. After deducting this amount, only Rs1.001 trillion remains available, which he noted is equivalent to the PSDP allocation in 2018.

He further said that coalition partners had sought projects worth Rs87 billion, while an additional Rs100 billion has been allocated for development projects in Balochistan. Another Rs153 billion has been earmarked for Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and the merged districts.

Iqbal also pointed out that Rs70 billion has been allocated for projects aimed at achieving the Sustainable Development Goals (SDGs).

After accounting for these commitments, only about Rs591 billion remains available, he said.

The minister explained that the government must also provide local currency financing, or “rupee cover,” for foreign-funded projects supported by institutions such as the World Bank and the Asian Development Bank. Although the initial demand for rupee cover stood at Rs832 billion, it was reduced to Rs426 billion following consultations with relevant ministries.

“After accommodating the rupee cover requirement, only Rs165 billion remains in the entire PSDP,” he said.

Iqbal added that when the Rs180 billion carry-forward impact of last year’s development budget cuts is taken into account, the PSDP effectively falls into a negative balance of Rs15 billion.

“Practically speaking, this is the situation in which we are operating. There is not much development, and this is not a happy state for any nation,” he said.

“The first reality we must acknowledge is that there is virtually no fiscal space available for a new project,” the minister concluded. – ERMD

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