Development spending exceeds budget by Rs92bn

Pakistan’s federal development spending exceeded the revised allocation by Rs92 billion during the fiscal year 2025-26,

Pakistan’s federal development spending exceeded the revised allocation by Rs92 billion during the fiscal year 2025-26, creating fresh concerns over financial management and the government’s commitments under the International Monetary Fund (IMF) programme.

The Public Sector Development Programme (PSDP) recorded total spending of Rs912 billion, despite the revised limit being set at Rs820 billion. The higher expenditure was mainly linked to additional spending by several ministries beyond their approved allocations.

The government had earlier reduced the development budget by Rs180 billion to control expenses and protect the primary budget surplus target agreed with the IMF. Despite these measures, spending increased in the final days of the financial year.

Officials said foreign-funded projects contributed significantly to the higher expenditure. Foreign loans accounted for Rs244 billion, making up nearly one-fourth of the total development spending.

The additional spending came at a time when Pakistan was working to achieve a primary surplus target of 2.6% of GDP under its IMF agreement. The increased expenses may create challenges for maintaining fiscal discipline.

The Power Division recorded major overspending, spending Rs122 billion against its revised allocation of Rs73 billion. The Water Resources Division also exceeded its limit, with spending rising to Rs137 billion against the approved amount of Rs102 billion.

The National Highway Authority remained within its revised budget after receiving a major cut in its allocation. It spent the entire Rs182 billion approved for development projects.

The Federal Board of Revenue spent Rs14.8 billion on development activities, exceeding its allocation by Rs2.6 billion. The Railways Division also recorded higher spending of Rs35 billion, partly supported by funding related to the Thar coal project.

A large portion of the total expenditure was recorded in the final month of the fiscal year. Around Rs382 billion was spent in June alone, raising questions about the timing and monitoring of government expenditures.

Pakistan is facing a major funding gap for ongoing development projects. Officials estimate that around Rs11 trillion is required to complete existing schemes, while delays could further increase project costs.

Development spending on provincial projects and special regions reached Rs191 billion. This included Rs50 billion for merged districts of Khyber-Pakhtunkhwa and Rs66.5 billion for Azad Kashmir and Gilgit-Baltistan.