The federal government has approved a national development programme amounting to Rs4.264 trillion for the fiscal year 2026-27. Provinces will receive almost three-quarters of this allocation, highlighting their significant role in the upcoming development agenda. Planning Minister Ahsan Iqbal described the Rs87 billion allocated for coalition partners’ projects as the “cost of a coalition government.”
The Annual Plan Coordination Committee (APCC), chaired by Iqbal, recommended the development budget for final approval by the National Economic Council (NEC), which is set to convene on Wednesday under Prime Minister Shehbaz Sharif. The prime minister has also instructed the finance ministry to seek an additional Rs200 billion fiscal space for the federal Public Sector Development Programme (PSDP), currently proposed at Rs1.126 trillion.
Addressing the media following the APCC meeting, Iqbal explained that the federal development budget shrinks considerably once fixed allocations to various sectors and projects are accounted for. He added that ministries had requested over Rs4.1 trillion for development activities, with at least Rs2.9 trillion needed solely to complete ongoing projects.
In a significant development regarding coalition projects, the APCC proposed a federal PSDP of Rs1.126 trillion, which includes Rs267 billion in foreign assistance, marking a 35 percent increase over the revised allocation for the current fiscal year. Nevertheless, Iqbal expressed dissatisfaction with the programme’s size, stating it remains inadequate to cover the requirements of ongoing schemes.
He emphasized that Rs87 billion has been earmarked for coalition partners’ projects, a figure he referred to as the “cost of a coalition government.” Additionally, Rs70 billion has been reserved for small-scale development initiatives proposed by treasury lawmakers, with each National Assembly member entitled to up to Rs500 million for local projects.
Despite these allocations, the finance ministry is hesitant to expand the PSDP further due to fiscal limitations and obligations under the International Monetary Fund (IMF) programme. The government may attempt to create additional fiscal space by either raising revenue targets for the Federal Board of Revenue or cutting expenditures in other areas.
Iqbal highlighted that the total cost to complete ongoing federal projects has escalated to over Rs10.8 trillion. He warned that at the current funding levels, it could take more than ten years to finish these projects, even without launching new schemes.
Provincial annual development plans worth Rs3.138 trillion were also approved by the APCC, including Rs660 billion in foreign funding. Punjab is allocated Rs1.45 trillion for development projects next year, reflecting a seven percent increase from the current fiscal year. Meanwhile, Sindh’s allocation has been reduced to Rs816 billion. Khyber Pakhtunkhwa plans to spend Rs564 billion, and Balochistan will receive Rs308 billion for development activities.
Notably, water security was identified as a critical national challenge, yet the sector received far less funding than needed. While development requirements for water were estimated at Rs970 billion, the proposed allocation ranges between Rs140 billion and Rs179 billion. Among major infrastructure projects, Rs25 billion each has been allocated for the Dasu and Diamer-Bhasha dams, with Rs39 billion set aside for the Mohmand Dam.
The National Highway Authority, which requested Rs1.4 trillion for the next fiscal year, is expected to receive only Rs264 billion. The Sukkur-Hyderabad Motorway project has been allocated Rs20 billion against a demand of Rs122 billion.
Iqbal pointed out that most development projects continue to suffer from significant cost and time overruns. Foreign-funded schemes are also facing difficulties due to insufficient rupee cover allocations. He added that the Planning Commission is under increasing pressure as shrinking fiscal space clashes with growing development demands across various sectors.
