The federal government has implemented a substantial reduction in the Public Sector Development Programme (PSDP), cutting the budget by Rs172.8 billion to a new total of Rs837.16 billion. This strategic move is aimed at managing escalating fiscal pressures and ensuring the country meets the primary surplus targets established under the current agreement with the International Monetary Fund (IMF). Officials indicate that these austerity measures were executed in two distinct phases, starting with a Rs100 billion reduction in March, followed by an additional Rs73 billion cut. This brings the total spending significantly below the original Rs1 trillion allocation that was initially sanctioned by the National Assembly for the current fiscal year.
The Ministry of Finance has formally updated the Planning Ministry regarding the revised figures, marking the second downward revision this year after an earlier adjustment to Rs900 billion. Among the sectors most impacted by these cuts, the National Highway Authority (NHA) saw the largest single reduction of Rs38 billion. Other critical areas did not escape the fiscal tightening, with water sector projects facing a Rs23 billion cut and provincial schemes reduced by Rs22.5 billion. These adjustments reflect the government’s difficult balancing act between maintaining essential infrastructure development and adhering to the strict fiscal discipline required by international lenders to maintain economic stability.
Under the newly revised framework, a total of Rs201.283 billion has been set aside for provinces and special areas. This includes specific allocations of Rs67.975 billion for special regions, with Azad Kashmir receiving Rs37.3 billion and Gilgit-Baltistan allocated Rs30.671 billion. Furthermore, Rs54.185 billion has been designated for the merged districts of Khyber Pakhtunkhwa. Education and health services also saw their envelopes defined within the tighter budget, as the Higher Education Commission was allocated Rs34.9 billion, while the Federal Education and Professional Training Division received Rs26.6 billion. National Health Services were allocated a more modest Rs11.6 billion, highlighting the constrained nature of the current development landscape.
Various other ministries have had their development potential curtailed as the government prioritizes debt sustainability. The Ministry of Information Technology is set to receive Rs18.4 billion, while the Railways and Planning Commission have been allocated Rs18.558 billion and Rs20.4 billion, respectively. Smaller but vital divisions such as Science and Technology, Maritime Affairs, and Industries and Production have seen their funding restricted to lower single-digit billions. Notably, the Cabinet Division’s allocation for Sustainable Development Goals remains a significant portion of the budget at Rs63.2 billion, suggesting that certain grassroots development initiatives remain a priority despite the overarching cuts.
Despite these revised figures, actual utilization of development funds has remained sluggish throughout the first nine months of the fiscal year. Only Rs409 billion has been spent so far, representing just 41% of the original billion-rupee target. The NHA, for instance, has utilized only Rs73 billion of its revised Rs185 billion budget, while the Power Division has spent Rs41 billion against an allocation of Rs75 billion. While certain projects, such as parliamentarians’ schemes and Balochistan flood rehabilitation, have been protected from these reductions, the overall slowdown in spending is a clear indicator of the government’s focus on maintaining a primary surplus target of 2.6% of GDP. Whether these drastic measures will be sufficient to satisfy external assessments remains to be seen as the fiscal year draws to a close.
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