Projects worth Rs3tn to be rejected as govt faces fiscal constraints: Ahsan Iqbal

Federal Minister for Planning Ahsan Iqbal said that the government may be forced to shelve development projects worth nearly Rs3 trillion in FY27 after receiving project demands of around Rs4 trillion against a Public Sector Development Programme (PSDP) allocation of only Rs1.126 trillion.

 “Against a total demand of Rs4.097 trillion from different ministries, the Ministry of Finance has allocated only Rs1.126 trillion. This means there is an unmet demand of nearly Rs3 trillion,” he said.

Projects worth Rs3 trillion would be rejected or unapproved, he said.  “We will have to selectively allocate only Rs1.126 trillion out of demands exceeding Rs4 trillion. This is a very unpleasant task,” Iqbal said.

The minister made these remarks during the Annual Plan Coordination Committee meeting in Islamabad, which met today to finalise recommendations for the federal development budget and annual economic plan for the fiscal year 2026-27, with the agenda for the session already prepared, sources said.

According to sources, the meeting will consider proposals for the next fiscal year’s development budget while also reviewing the performance and utilisation of the development budget during the current fiscal year.

Development allocations for all federal ministries and divisions will come under detailed examination.

During the presser, Iqbal said that the Ministry of Planning is constrained by the funding envelope provided by the Ministry of Finance, and we must remain within that limit.  “This is one of the biggest dilemmas facing the Ministry of Planning: we are being forced to make allocations within shrinking development budgets.”

On PSDP, the total allocation is Rs1.126 trillion. Out of this, Rs125 billion has been earmarked for the N-25 highway project.

“If you deduct this amount from the total PSDP, only Rs1.001 trillion remains. This is the same number as the PSDP in 2018,” he shared.

Iqbal added that projects worth approximately Rs87 billion were demanded by coalition partners last year. In addition, around Rs100 billion has been earmarked for projects in Balochistan apart from N-25.

Furthermore, Rs153 billion has been allocated for Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and the merged districts.

“Ideally, these funds should come through the NFC mechanism. However, since no consensus has yet been reached on this issue, both their current and development budget allocations of GB and AJK continue to come from the federal government’s share,” he said.

He shared that another Rs70 billion has been earmarked for achieving the Sustainable Development Goals (SDGs).

After accounting for all these commitments, only about Rs591 billion remains available, he said.

In addition, we must provide rupee cover for foreign-funded projects, meaning the local currency funding required for loans obtained from institutions such as the Asian Development Bank, the World Bank, and other multilateral lenders.

“The initial demand for rupee cover amounted to Rs832 billion, but after rationalisation by the Economic Affairs Division (EAD) in consultation with ministries, the figure was reduced to Rs426 billion,” he said.

If we account for this Rs426 billion requirement, only Rs165 billion remains in the entire PSDP. “If we further deduct the Rs180 billion carry-forward impact of last year’s cuts, the PSDP effectively moves into a negative balance of Rs15 billion,” he said.

“Practically speaking, this is the situation in which we are operating. There is not much development, and this is not a happy state for any nation,” said Iqbal.

“The first reality we must acknowledge is that there is virtually no fiscal space available for a new project,” he added.