Public Sector Development

The Federal Government’s Public Sector Development Programme (PSDP) serves as a catalyst to spur socio-economic development through prudent investment in the priority sectors through financing and implementation of viable projects and programmes sponsored by various Ministries/Divisions. PSDP investment as such is leveraged on the upgradation and modernization of physical and social infrastructure by creating an enabling environment to crowd in the private sector and foreign direct investment to achieve the targeted growth in selected sectors of the national economy. It plays a pivotal role in advancing environmental sustainability, ensuring inclusive and balanced regional development.

PSDP 2026-27, formulated and prepared by the Planning Commission, Ministry of Planning, Development & Special Initiatives, formed part of the heavy load of documents made public at the time of the federal budget for financial year 2026-27, the third by the incumbent largest coalition federal government headed by Prime Minister Muhammad Shehbaz Sharif. The PSDP document, however, was available on the Ministry’s website only after some delay, with no explanation for the inordinate delay forthcoming.

Owing to fiscal constraints, allocation of limited resources has been geared up towards high-impact sectors aligned with the National Economic Transformation Plan (URAAN Pakistan). In addition, the provinces, public sector corporations, national and local authorities, and State-Owned Enterprises (SOEs) also mobilize self-generated resources for undertaking development activities in respective areas and sectors in the country.

Principles which guided formulation of PSDP FY 2026-27 included protection of strategic/high-impact projects with adequate allocation; infrastructure received over 65 percent of PSDP resources as a federal subject; provision of sufficient rupee cover to foreign-aided projects; equal priority given to social sectors, science and technology (S&T), information technology (IT), governance, production, climate resilience and flood reconstruction, etc.; projects with 80 percent-plus progress focused on for early completion; priority given to fast-moving projects for completion within the next 2-3 years; adequate special allocations provided for Gilgit-Baltistan, Azad Jammu & Kashmir (AJ&K), and merged districts of Khyber Pakhtunkhwa; no token allocation given to avoid further throw-forward and cost escalation; restriction on new projects except those aligned with the National Economic Transformation Plan (URAAN Pakistan); provincial projects discouraged except in least-developed areas as per policy approved by the National Economic Council (NEC); rationalization and pruning of slow-moving and non-performing projects; innovative modes of financing projects on a Public-Private Partnership (PPP)/Build-Own-Transfer (BoT) basis explored; priority funding to Executive Committee of National Economic Council (ECNEC) and Central Development Working Party (CDWP)-approved projects ensured; a moratorium enforced on approval of new projects by Departmental Development Working Party (DDWP); and new and provincial-nature projects duly discouraged.

Before going any further, it may be mentioned here that PSDP has been prepared under fiscal constraints, with a focus on fiscal discipline, prioritization of development spending, completion of high-impact ongoing projects and reduction of throw-forward. Initially, the Federal Ministries/Divisions had requested Rs 4.1 trillion for 1,254 projects, including 764 ongoing and 490 new/unbudgeted projects. Of these, ongoing projects alone required Rs 3.3 trillion. After consultations, the Planning, Development & Special Initiatives Ministry assessed a minimum of Rs 2.0 trillion for PSDP 2026-27. However, due to prevailing and persistent fiscal constraints, the Finance Division initially indicated Rs 1,126 billion for the PSDP for the new financial year, but this was further reduced to finally approve an overall size of the PSDP at Rs 1,000 billion, which was only one-fourth of the funds demanded by the Ministries/Divisions, thereby creating a challenging position for the Planning, Development & Special Initiatives Ministry.

Challenges confronting PSDP 2026 implementation, as identified, include: Throw-forward of Rs 10 trillion may require ten years to manage at the current rate of PSDP, provided no revision in the cost of ongoing projects and no new project is added; the PSDP is 5 percent of the total federal outlay and 0.6 percent of Gross Domestic Product (GDP) in FY 2025-26, as compared to 20 percent of the budget and 2.6 percent of GDP in FY 2017-18; within the given Indicative Budget Ceiling (IBC), it was difficult to cater for demands of mega projects and rupee cover of Rs 426 billion indicated by External Affairs Division (EAD) to honour the international obligations; mid-course cuts on PSDP further built up throw-forward/liabilities and delayed completion of projects; chronic issues of cost/time overruns, as over 90 percent of projects faced cost/time overruns due to multiple issues, including thin spending allocations; AJ&K, Gilgit-Baltistan and Newly Merged Districts’ development requirements were a federal responsibility; and incursion of provincial/small projects affected the core national-level projects.

How these challenges are squarely met by the federal ministries concerned will be of great interest as well as concern to be noticed and observed during the implementation of the PSDP 2026-27, which was already in the third month of its execution/implementation by 36 Ministries/Divisions of the Federal Government. Better keep the fingers crossed and pray for something good and positive to finally emerge by the time FY 2026-27 ends, hopefully on a positive and result-oriented note.