Pakistan aims to allocate Rs. 1.126 trillion for its federal Public Sector Development Program (PSDP) in fiscal year 2026-27, with transportation, communications, water resources and energy projects receiving the largest share of development spending, according to official planning documents.
The proposed development outlay is due to be presented for consideration by the Annual Plan Coordination Committee (APCC) as part of the government’s annual development and economic planning process.
According to official documents, the government plans to earmark Rs. 408 billion for transport and communications projects, the largest component of the federal development program. Water resources projects are expected to receive Rs. 140 billion, while energy sector schemes are likely to be allocated Rs. 135 billion.
The social sector is projected to receive Rs. 187 billion during the next fiscal year, reflecting the government’s focus on health, education and human development initiatives. Meanwhile, Rs. 53 billion is expected to be allocated for science and technology projects. The documents further show that Rs. 10.2 billion has been proposed for governance-related projects during FY2026-27.
On the macroeconomic front, the government has set a gross domestic product (GDP) growth target of 4% for the upcoming fiscal year, slightly above the estimated growth achieved during the current year.
Sector-wise, agriculture is expected to grow by 3.8% in FY2026-27, while industrial output is anticipated to expand by 4%. The services sector, which accounts for the largest share of the economy, has been assigned a growth target of 4.2%, according to the Planning Commission.
The Planning Commission’s assessment indicates that Pakistan’s economy recorded GDP growth of 3.7% during the outgoing fiscal year. However, the growth rate fell short of the government’s original target of 4.2% for FY2025-26, the documents showed.
The proposed development allocations and economic targets are expected to form the basis of the federal government’s annual development strategy and budget framework for the next fiscal year, which will be finalized following consultations among federal ministries and provincial governments.
The APCC meeting would review the proposed PSDP and macroeconomic framework before forwarding its recommendations for approval at the National Economic Council, the country’s highest economic policymaking body.
Debt servicing
Addressing the APCC meeting, Planning Minister Ahsan Iqbal lamented that the federal development budget had remained largely stagnant for the past eight years because a growing share of government resources was utilized for debt servicing.
He said the country’s fiscal constraints were making it increasingly difficult for the federal government to finance development projects and complete ongoing schemes. “A major portion of budgetary resources is being spent on debt repayments,” he said, noting Pakistan currently requires around Rs. 10 trillion to complete ongoing development projects.
“The situation has reached a point where it is becoming increasingly difficult for the federal government to continue financing less important development projects,” he said, noting the federal development budget has remained at around Rs. 1 trillion for the past eight years, effectively unchanged from its 2018 level. In contrast, provincial development spending has expanded significantly during the same period.
“Over the last eight years, provincial development budgets have increased from around Rs. 1 trillion to Rs. 3 trillion,” he said, describing the growing disparity between federal and provincial development allocations as a major challenge.
Iqbal dubbed as unfortunate the federal government’s shrinking development envelope despite growing infrastructure and public investment needs. He said the center intends to prioritize key projects in Balochistan in the upcoming budget to the tune of Rs. 100 billion. Of this amount, Rs. 25 billion is proposed for the upgrading and construction of the N-25 highway, a major transportation corridor linking several districts of the province.
The minister said the government intends to focus on development schemes worth Rs. 87 billion associated with its coalition partners as part of efforts to support regional development priorities.
On development financing for Pakistan’s administered regions, Iqbal said the federal government plans to allocate Rs. 153 billion for Azad Jammu and Kashmir and Gilgit-Baltistan in the upcoming budget. He said both regions should receive a share under the National Finance Commission (NFC) framework, noting the federal government currently provides all their funding from its share.
The APCC meeting, per a statement, reviewed development priorities and resource allocations ahead of the presentation of the federal budget for fiscal year 2026-27, which is expected later this week. The committee’s recommendations will be forwarded to the National Economic Council for final approval.