Budget FY26: Govt eyes lean Rs1tn PSDP amid Rs3tn ministry requests

The federal government plans to allocate Rs1 trillion for development spending in fiscal year 2025-26, well short of the Rs3 trillion requested by ministries, official documents show. 

The Finance Ministry initially set an indicative budget ceiling of Rs921 billion, which was later raised to Rs1 trillion.

A significant portion of the proposed spending is expected to go to the Cabinet Division, which has been allocated Rs50.33 billion.

The government also plans to allocate Rs1.10 billion to the Board of Investment to support efforts aimed at attracting new investments into the country.

To address environmental concerns, Rs2.78 billion has been proposed for the Ministry of Climate Change. The Commerce Division is set to receive Rs400 million, while the Communications Division is expected to get Rs200 million.

The Defence Division has been allocated Rs11.55 billion, and Rs1.78 billion has been proposed for the Defence Production Division. The Establishment Division is likely to receive Rs495 million.

These allocations are part of the Public Sector Development Programme (PSDP), which the government uses to support infrastructure, reforms, and key public services. The full budget will be presented to parliament later this month for approval.

The News reported on Monday that against a total downward revised allocation of development outlay of Rs1.096 trillion, the federal government has so far utilised only 54% funds (Rs0.593 trillion) in the first 11 months of the outgoing fiscal year.

The controversial SDGs Achievement Programme for parliamentarians, meant for only treasury benches, utilised 71% funds equivalent to Rs35 billion against the revised allocation of Rs48 billion in the outgoing fiscal year.

With only one month left, it is yet to be seen how much funding is going to be utilised in the outgoing fiscal year.

It must be noted that development spending was originally set at Rs1.4 trillion for the PSDP, including Public-Private Partnership projects, but it was revised downward twice — first to Rs1.25 trillion, and then to Rs1.096 trillion, according to The News.

The federal budget for the next fiscal year is shaping up to be a reform-heavy, International Monetary Fund (IMF) -guided document aimed at stabilising the economy while striking a delicate balance between fiscal consolidation and targeted relief.

The budget will be presented by Finance Minister Muhammad Aurangzeb in the National Assembly on June 10, if there are no further delays. It was previously scheduled for June 2, but the date was pushed ahead after talks with the IMF on tax relief hit snags.

Ahead of the budget, analysts at Topline Securities and Arif Habib Limited forecast the government will maintain its track record of primary balance improvements, aiming for a 1.6% share of GDP this year.

Pakistan and the IMF are edging closer to an agreement on proposed tax relief for the salaried class in the upcoming 2025–26 federal budget, The News reported on Sunday.

However, meeting the ambitious revenue target of Rs14.2 trillion will pose a significant challenge, particularly in light of the widening shortfall against the revised tax collection goal of Rs12.33 trillion for the current fiscal year.