Shadow of IMF looms over development kitty

• Allocations for nearly all sectors slashed, except for road-building projects and parliamentarians’ schemes; funding for food, water, energy and social sectors curtailed
• Govt allocates Rs880bn for the public sector development programme, down 20pc from current year
• Provinces to pitch in Rs2.80tr under annual plan to boost uplift spending
• Development plan prioritises Bhasha Dam, Rs120bn Balochistan highway
• Ahsan Iqbal says more than 100 projects worth Rs1tr to face cuts

ISLAMABAD: Under the tight control of the International Monetary Fund (IMF), next year’s federal development programme cuts allocations for almost all sectors, barring a rise in road building schemes and no changes to parliamentarians’ schemes.

Despite this, the Annual Planning Coordination Committee (APCC) cleared the national development programme worth a record Rs4.083 trillion, aided by Punjab and Sindh, showing greater financial muscle than the Centre which is pauperised by greater financial devolution, debt servicing, and security needs.

Based on this spending, the government set next year’s growth target at 4.2pc, supported by a 4.4pc target in agriculture output, 4.3pc in industry, and 4pc in the services sector, and an inflation rate at 7.5pc.

Minister for Planning and Development Ahsan Iqbal, who presided over the meeting, did not mince words about the unprecedented fiscal constraints and asked the provincial representatives to convince their leadership not to seek federal funds anymore, given their fattened kitties.

He said Pakistan faced some limitations with the IMF programme and thus the challenge ahead was to leverage the limited resources to achieve maximum returns from each project to satisfy goals and objectives outlined in the national economic transformation plan, 5Es based five-year plan, and the “Uraan Pakistan Programme”.

The provinces, however, indicated that they may not be able to provide cash surpluses they committed to with the Centre and the IMF under the national fiscal pact, given the over Rs1tr revenue shortfall by the FBR and resultant decline in their share.

Given the constraints, the APCC decided to put a complete ban on the approval of development schemes by the departmental development working parties (DDWPs) of various ministries and divisions until the conclusion of the IMF programme.

“Therefore, policy decision regarding moratorium on approval of DDWP level projects till completion of IMF programme so that focus may be made towards national level mega and foreign funded projects,” the planning ministry said, adding, “This will ensure financial discipline, reduce throw forward and focus on critical national level projects, particularly in water and transport sectors.”

Thus, the government allocated Rs880bn for the public sector development programme (PSDP) for next year, down 20pc compared to the current year’s revised allocation of Rs1.1tr and 37pc lower than the current year’s original budget allocation of Rs1.4tr. Yet, the government pitched the PSDP at Rs1tr after also including Rs120bn for the N-25 highway in Balochistan to be generated through an additional petroleum levy imposed by the prime minister last month.

Lower allocations

But despite these challenges, the government has earmarked Rs50bn for parliamentarians’ schemes, unchanged from the current year’s Rs50bn. Likewise, the allocation for merged districts would also remain unchanged at Rs70bn. The transport and communication sector is the only sector where the allocations have been increased for next year to Rs332bn against Rs268bn during the current year.

All other sectors, including special areas, like Azad Kashmir and Gilgit-Baltistan, would be handicapped by lower allocations. The infrastructure sector would get only Rs644bn next year against Rs661bn during the current year. Energy sector’s allocations would reduce to Rs144bn next year from Rs169bn this year, while the water sector allocation would fall to Rs109bn next year from Rs135bn this year despite aggressive Indian moves. The allocations for physical planning and housing would plunge by 34pc to Rs59bn next year from Rs89bn. The social sector would also face major fiscal tightening as it would get only Rs150bn next year compared to Rs200bn this year, down by a quarter.

The share of special areas – AJK and GB – has been reduced by 16pc to Rs63bn from Rs75bn during current year. The allocations for science and technology would also be down to Rs53bn next year from Rs62bn this year while governance-related projects would plunge by almost half to Rs9bn from Rs17bn.

Production sectors would get only Rs11bn next year compared to Rs15bn and the major loser would be the food and agriculture whose allocation would plunge to just Rs3bn from Rs8bn.

The four provinces would allocate about Rs2.795 trillion. This included Rs1.188tr in Punjab, about Rs888bn from Sindh, which would further jack it up to Rs1tr, followed by Rs440bn annual development plan of Khyber Pakhtunkhwa and Rs280bn of Balochistan.

Federal state-owned entities would together invest about Rs288bn next year, taking the total development spending to about Rs4.083tr, which may further go up as provinces come up with their final budgets. The consolidated Rs4.083tr development outlay is almost 21pc higher than current year, mainly because of higher share of the provinces.

Constrained fiscal space

The planning minister emphasised that despite constrained fiscal space and competing demands, the government was fully committed to sustaining development momentum through strategic realignment of resources, performance-based planning, and increased coordination with provinces. He reiterated that the government’s vision is to steer Pakistan towards becoming a $1 trillion economy by 2035 and $3 trillion by 2047.

As of May 31, Rs1.036tr had been authorised and Rs596 billion utilised. A total of 1,071 projects were included in the PSDP, with a cumulative approved cost of Rs13.427tr. Throw-forward liabilities stood at Rs10.216tr, prompting a strong push for project rationalisation.

The Rs1tr PSDP includes Rs270bn foreign aid with priority to Diamer-Bhasha Dam and the launch of Hyderabad–Sukkur Motorway in FY 2025–26 in line with political commitments.

Regarding projects on low priority that could be frozen or shut down, the minister said the government has identified 118 projects worth Rs1,000bn that need to be placed on low priority or capped to save resources, reported Dawn.com.

Published in Dawn, June 3rd, 2025