ISLAMABAD: Ahsan Iqbal said on Monday that the federal government may be forced to shelve development projects worth nearly Rs3 trillion in fiscal year 2026-27 due to severe budget constraints and limited fiscal space.
Speaking at the Annual Plan Coordination Committee meeting in Islamabad, Iqbal revealed that project demands from various ministries had reached Rs4.097 trillion, while the Ministry of Finance allocated only Rs1.126 trillion under the Public Sector Development Programme (PSDP).
Rs3 Trillion Funding Gap Leaves Little Room for New Projects
“Against a total demand of Rs4.097 trillion from different ministries, only Rs1.126 trillion has been allocated,” Iqbal said, adding that nearly Rs3 trillion worth of proposed projects may remain unapproved.
He described the process of deciding which projects to fund as “a very unpleasant task,” noting that the Planning Ministry must work within a shrinking development budget despite rising demands from across the country.
According to him, once key commitments are deducted, only limited funds remain available for fresh spending.
Major Commitments Reduce Available PSDP Funds
Iqbal said Rs125 billion from the PSDP has already been reserved for the N-25 highway project. Additional allocations include around Rs100 billion for projects in Balochistan, Rs153 billion for Azad Jammu and Kashmir, Gilgit-Baltistan and merged districts, and Rs70 billion for Sustainable Development Goals-related initiatives.
He further explained that Pakistan also needs local rupee funding to support foreign-assisted development projects backed by institutions such as the World Bank and Asian Development Bank.
After accounting for rupee cover requirements and the carry-forward effect of previous cuts, Iqbal said the PSDP effectively falls into a negative balance.
“Virtually No Fiscal Space” for New Projects
The planning minister said the current financial situation leaves almost no room to launch new federal development projects in FY27.
“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.
He added that the first reality policymakers must accept is that there is “virtually no fiscal space available” for new projects under the upcoming federal development budget.
