Foreign-funded PSDP projects: Govt fails to make rupee cover available
- Power Division says that foreign-funded projects—where imported equipment accounts for 60–75% of total cost—are facing difficulties in securing rupee authorisation
The government is struggling to provide timely rupee cover for foreign-funded development projects, risking delays and audit issues. A ministerial committee has been formed to address this critical financing gap.
- Government's struggle with rupee cover for foreign-funded projects.
- Project delays and audit concerns due to financing gaps.
- Ministerial committee addressing foreign-funded project financing issues.
ISLAMABAD: The federal government has yet to provide any concrete assurance regarding the timely provision of rupee cover for billions of rupees worth of foreign-funded projects, despite repeated requests from development partners and executing agencies, sources told Business Recorder.
The Ministry of Planning, Development and Special Initiatives has included dozens of ongoing foreign-funded projects in the proposed Public Sector Development Programme (PSDP) 2026-27. However, their timely execution depends on the availability of rupee cover from the Ministry of Finance (MoF).
Recently, the Power Division informed the National Assembly Standing Committee on Power that foreign-funded projects—where imported equipment accounts for approximately 60-75 percent of total cost—are facing difficulties in securing rupee authorisation, despite the availability of foreign funding.
READ MORE: Power Division seeks NA panel’s help on rupee cover waiver
It was acknowledged that while foreign payments are processed through multilateral agencies, the provision of PSDP rupee cover remains limited, potentially leading to audit concerns and project delays.
Officials noted that a significant portion of payments in such projects is made through third-party arrangements, which do not require rupee cover under PSDP as these payments are externally managed.
To avoid delays and potential audit objections, the Committee recommended that the Finance Division and the Planning Ministry reconsider the requirement of rupee cover for third-party payments in foreign-funded projects. It further suggested granting exemptions for the foreign component and third-party payment arrangements to streamline project execution, minimise delays, and prevent cost escalation—particularly as most of these projects are financed through loans from multilateral institutions, including the World Bank.
According to sources, Prime Minister Shehbaz Sharif has constituted a ministerial committee, headed by Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal, to deliberate on and resolve the issue of rupee cover for foreign-funded projects of national importance under the PSDP.
The committee held its meeting on October 30, 2025. A sub-committee, comprising secretaries of the Planning Ministry, Economic Affairs Division, and Finance Division, was also formed. It has held several meetings with stakeholders and sponsoring ministries, including the Power Division, to address issues related to rupee cover under PSDP, including third-party and direct payments.
The Power Division maintains that the sub-committee’s recommendations will be taken up in the next meeting of the ministerial committee, whenever it is convened.
Copyright Business Recorder, 2026
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