Development Spending Share Declines as Fiscal Pressures Reshape Budget Priorities

Pakistan’s share of development spending under the Public Sector Development Program (PSDP) has declined significantly over the past several years, reflecting growing fiscal challenges and changing budget priorities.

Speaking at the Annual Plan Coordination Committee (APCC) meeting, Planning Minister Ahsan Iqbal stated that the PSDP’s share of the federal budget decreased from 19.6 percent in FY2017-18 to 4.0 percent in FY2025-26.

According to the minister, the reduction in development allocations is linked to rising debt servicing costs, economic stabilization measures, and various external economic challenges that have affected available fiscal resources.

He noted that budgetary constraints have required adjustments in development spending, while resources have also been allocated to address energy sector obligations and broader economic management needs.

Ahsan Iqbal emphasized the importance of maintaining long-term investment in infrastructure and economic growth despite fiscal limitations. He said Pakistan needs to strengthen exports, improve competitiveness, and increase domestic resource generation to support sustainable economic development.

The minister described development spending as an important component of the country’s future growth strategy and highlighted the need for policies that promote productivity and economic resilience.

During the meeting, the APCC reviewed development priorities under the URAAN Pakistan framework and approved a PSDP strategy focused primarily on completing ongoing projects within the available fiscal space.

Officials said the approach aims to maximize the impact of limited development resources while supporting key national priorities.