Pakistan govt directs ministries to submit pro-climate budget proposals for FY2026-27

Pakistan government has invited all the federal ministries to submit their budget proposals for the upcoming fiscal year 2026-27 (FY2026-27), with a primary objective to curb the worsening climate change in the country, as European Union (EU) – a major export market for the country – has threatened to restrict imports from domestic producers if they fail to comply with the union’s carbon emission threshold.

Speaking at a panel discussion on ‘Decentralising Climate Action: Unlocking Local Governments’ Role in Climate Finance’ held at the Institute of Business Administration’s (IBA) City Campus in Karachi; IBA, Centre for Business and Economic Research, Director, Prof Lubna Naz said the European Union (EU) – a key export market for Pakistan along with the United Kingdom (UK) and the United States (US) – had given a policy statement in January 2026 that it bound Pakistan’s export sectors to reduce their carbon emissions to a threshold [of 50-ton per-importer per year] including iron and steel, cement, fertilisers, aluminum, electricity, and hydrogen.

“We have heard the EU will bind Pakistan’s textile sector to control its carbon footprints to the threshold by 2027-2030 as well. If it happens, textiles – that are Pakistan’s major exports – may suffer and we will pay a heavy price, as our exports are already struggling [to remain sustainable],” she said and raised questions about what were the government accreditation plans to avoid facing decline in the country’s exports.

Advisor to Finance Minister, Khurram Schehzad said for the first time in the history, the Ministry of Finance had demanded plans from all ministries for the upcoming budget for FY27 as what projects they were considering to roll out to tackle climate issues in the country.

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“We have demanded ministries to submit their budget plans for disaster neutral and green projects. The plans should include details of project expenditures, revenues and financing sides,” he said.

Pakistan remains a leading climate-hit and climate-vulnerable country despite the fact that its contribution to greenhouse gases remains nominal at 0.8% worldwide. “The contribution is, however, increasing by 2% [or 0.016 percentage points] per annum which is notable,” the advisor said.

Agriculture, industries, energy and transports remained major sources of producing carbon emissions, he said.

Schehzad said the 2022 historical floods had increased the level of realisation for the climate emergency at the government level, as the floods internally displaced one-third of the population and gave an economic loss worth $30 billion, equivalent to the size of annual exports and 8% of GDP (gross domestic product).

The advisor said the government had chalked out better plans - now in the enforcement and implementation phase. He dispelled the impression there was a shortage foreign and local financing and there were no sophisticated data sets to fight against global warming. He, however, admitted that the role of communities and local governments was missing in addressing climate issues in Pakistan.

Schehzad said the World Bank had committed $20 billion financing in 10 years [$2 billion a year] for climate projects in Pakistan, the IMF released the first tranche of $200 million out of $1.3 billion under its Resilience and Sustainability Facility (RSF) for climate projects to the country.

Besides, the government has launched a Rs300 billion collateral-free financing programme called ‘Zarkhez-e’ that is targeted to enable 750,000 farmers to access finance, technology and purchase of climate-resilient seeds.

Schehzad further said the Ministry of Climate had set up a Management Information System (MIS) system to provide sophisticated data sets on climate change.

SUPARCO’s (Pakistan Space and Upper Atmosphere Research Commission) sophisticated system is already working in the country.

“The data centre has land information data, glacier melting, flooding and raining data sets. It has the data like when did a stone move on the earth last time and suggests when it will move again in future.

“The data sets will suggest in which projects the funds will be invested in the country,” he added.

‘Local governments’ role is the missing link’

Climate Action Center (CAC), Director, Yasir Husain Darya said there was a total disconnect among federal, provincial, and local governments to design and run climate projects successfully.

“Most of the climate projects were designed at federal government level. The federal government gave its commitment to global financers in projects. Such commitments were not discussed with provincial governments before going to the financers, nor were they shared with them later on.”

More importantly, “the role of local governments, communities, union councils (UCs), districts and towns is absolutely missing from the project that is a must to make the projects successful,” he said.

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Climate Finance Expert Ali Tauqeer Sheikh said he had reviewed some 68 national policies approved after the 18th Amendment, but none of them – except for the water policy and one another policy – mentioned climate change and related challenges.

“The government approved around 58 projects in the fiscal year 2024-25 (July 1, 2024, to June 30, 2025), but almost none of them – without exception – complied with the PC-1 Rules 2024 designed to mitigate updated climate risks. Instead, the projects relied on outdated templates from 2005, 2013, and 2019.”

Transparency International Pakistan’s official Kashif Ali proposed to amend the country’s Constitution to have a separate chapter on local governments to enable its role in climate projects at the grace root level like there were chapters on federal government and provincial governments in the Constitution.

Nutrition Expert Naveed Bhutto said global warming was affecting agricultural output, including wheat production, while also reducing the nutritional content of food, contributing to malnutrition, stunting and growing food insecurity in the country.