CPI-based inflation has been projected at 7.5% in coming fiscal year

Citing fiscal constraints under the IMF conditions as the major stumbling blocks, the Annual Plan Coordination Committee (APCC) Monday approved the national development outlay of Rs4.083 trillion for the upcoming budget.
The federal development outlay has been envisaged at Rs1 trillion, while the provincial development budget exceeds by 180 percent and is proposed at Rs2.8 trillion. The government has explicitly cited fiscal constraints imposed under the IMF conditions for restricting the Center to allocate increased resources for development and deleted 118 projects from the PSDP list. However, the Sustainable Development Goals (SDGs) Achievement Program (SAP) for parliamentarians belonging to the treasury benches secured a bloc allocation of Rs50 billion in the coming budget against the same level of funding in the outgoing financial year.
The committee also approved the macroeconomic framework and envisaged a GDP growth rate of 4.2 percent in the coming fiscal year against the provisional growth rate of 2.68 percent for the outgoing financial year. The CPI-based inflation has been projected at 7.5 percent in the coming fiscal year.
The provincial Annual Development Plans (ADPs) of all provinces envisage at Rs2.8 trillion for the next budget. The National Economic Council (NEC) is scheduled to meet on Thursday (June 5) under the Chairmanship of Prime Minister Shehbaz Sharif to approve the macroeconomic framework and national development outlay of Rs4.08 trillion for the upcoming budget.
Keeping in view the financial constraints, the APCC has recommended four policy decisions to the NEC, including Finance Division should not deduct at source the Cash Development Loan (CDL) dues from the PSDP release. b) Reiterate the policy on financing of provincial nature projects to process as per policy approved by NEC to abolish gradually, c) Moratorium may be imposed on approval of Departmental Development Working Party (DDWP) level till completion of IMF Programme.
The sponsoring ministry/division concerned may take up approval of such projects through the CDWP in the compelling conditions with full justification d) discourage diversion of development funds to non-development side during currency of the fiscal year.
The APCC was chaired by Minister for Planning Ahsan Iqbal and participated by the Balochistan chief minister virtually, two ministers from Sindh, KP finance minister and a senior official of planning from Punjab.
The committee recommended to the NEC overall national development outlay of Rs4,083 billion for FY2025-26 including Federal PSDP at Rs1,000 billion including foreign aid of Rs270 billion, ministry/divisions allocations of Rs756 billion, corporations Rs244 billion, provincial ADPs at Rs2,795 billion including foreign aid of Rs.802 billion and SOEs development at Rs288 billion.
The federal PSDP envisages proposed allocation of Rs644 billion for infrastructure in 2025-26 against revised allocation of Rs661 billion for the outgoing fiscal. Out of Rs644 billion for infrastructure, the government proposed Rs144 billion for energy projects, transport & communication Rs332 billion, water Rs109 billion and physical planning and housing Rs59 billion.
For social sector, the proposed allocation envisages Rs150 billion in the coming budget against Rs200 billion for the outgoing fiscal year. The allocation for health reduced from Rs35 billion to Rs22 billion and Higher Education Commission (HEC) from Rs83 billion to Rs63 billion in the coming budget.
For special areas including GB and AJK, the development budget was reduced to Rs63 billion in the coming fiscal year against Rs75 billion. The merged districts allocation stood at the same level of Rs70 billion in the coming budget against same levels in the last fiscal year.
The allocation for Science & Information Technology was proposed at Rs53 billion in the next fiscal year against Rs62 billion in the outgoing fiscal, governance allocation proposed at Rs9 billion, food and agriculture allocation reduced to Rs3 billion in the next fiscal against Rs8 billion in the outgoing financial year and industries allocation increased to Rs8 billion in the next budget.
The government conceded in its working paper tabled before the APCC that the PSDP 2024-25 constituted only 5.8% of total budget outlay and 0.6% of GDP. The PC-I for 90% of the ongoing projects has been revised with time and cost over-runs. At the current throw-forward of Rs10,212 billion and PSDP’s size of Rs1,000 billion, the existing project portfolio would take more than 10 years to complete.
The demand for rupee cover by the sponsors has increased to Rs1052 billion. Less fiscal space for core and high impact projects due to limited resources, inclusion of provincial nature & small projects at the cost of strategic projects, thin spread allocations cause cost and time over run and completion of projects under defunct Pak PWD (Rs60 billion throw-forward).
In the course correction measures, the APCC recommended for PSDP 2025-26 projects with high impact focused on completion within 3-4 years, foreign funded and core/ high impact projects assigned priority for financing, ECNEC / CDWP approved projects assigned priority over DDWP approved projects for fund allocation, moratorium on approval of DDWP level new projects in PSDP for next 2 years and no new provincial project except in least developed districts.
Following the APCC meeting, Sindh Minister Syed Nasir Shah told reporters that the commitments made by the Center for increased funding in the PSDP was not fulfilled and some key projects were transferred on the public private partnership (PPP) mode.
KP Finance Minister Muzammil Aslam in a news conference at the KP House, Islamabad said the provincial government was going to secure less resources of Rs165-170 billion from the Center. He said some important projects funded by the Center were deleted from the PSDP list.
He cited examples and stated that the cost of Chashma Right Bank Canal ran into billions of rupees but the federal government allocated just Rs100 million. He also highlighted the pension bomb ticking up and touching to unsustainable levels.
The provincial government, he said, had already kick-started pension reforms from 2022 but the Center and larger provinces would have to implement the pension reforms. Interacting with the media following the Annual Plan Coordination Committee (APCC) meeting, emphasized that despite constrained fiscal space and competing demands, the government was fully committed to sustaining the development momentum through strategic realignment of resources, performance-based planning, and increased coordination with provinces.
He reiterated that the government’s vision was to steer Pakistan towards becoming a $1 trillion economy by 2035 and $3 trillion by 2047.
“Thanks to our disciplined fiscal management and policy reforms, we posted a primary surplus of 3.0 percent of GDP during July-March 2024-25, as compared to 1.5% in the corresponding period last year, while investor confidence strengthened as a result of our agreements with the IMF and an upgraded credit rating,” he said.
Although the GDP growth came in at 2.7 percent, below our expectations, we saw encouraging signs of recovery, particularly in the industrial sector, which grew by 4.8 percent, is a clear sign that targeted energy and infrastructure initiatives have begun to pay off.
The services sector, which continued its upward trend with 2.9 percent growth, has made notable gains in information and communication, finance, and public administration reflecting a gradual but consistent revival in economic activity.
“We have successfully narrowed the fiscal deficit and recorded a current account surplus, thanks to strong remittance inflows and disciplined fiscal management. Looking ahead, we expect the economy to grow by 4.2 percent in the coming year, driven by a rebound in agriculture and manufacturing, and supported by stable policies and a stronger external sector.”
The participants were briefed on the implementation status of the current PSDP. The original national development outlay approved by the National Economic Council (NEC) stood at Rs3,792.3 billion, including
• Rs1,400 billion – Federal PSDP
• Rs2,095.4 billion – Provincial ADPs
• Rs196.9 billion – State-Owned Enterprises
Due to fiscal adjustments, the federal PSDP was revised to Rs1,100 billion. As of May 31, 2025, Rs1,036 billion had been authorized and Rs596 billion utilized.
A total of 1,071 projects were included, with a cumulative approved cost of Rs13,427 billion. Throw-forward liabilities stood at Rs10,216 billion, prompting a strong push for project rationalization.
The minister informed the media that following comprehensive performance reviews, over 118 non-performing or redundant projects — mainly approved at the DDWP level — had been recommended for capping or closure, potentially saving Rs1,000 billion. Moreover, Rs84 billion was re-appropriated to fast-moving projects and Rs80 billion reallocated through TSGs for national priorities such as tube well solarization in Balochistan.
The Finance Division, in consultation with the IMF, has set an Indicative Budget Ceiling of Rs1,000 billion for the federal PSDP 2025–26, including Rs270 billion in foreign aid. The proposed portfolio includes 1,120 projects, with a strong focus on high-impact, ongoing, and near-completion schemes. Key highlights:
• Diamer Bhasha Dam given top priority for water security
• Hyderabad–Sukkur Motorway to be launched in FY 2025–26
• Rs. 250 billion allocated to Balochistan, the highest provincial share
Sectoral Allocations Include:
• Rs644 billion – Infrastructure (Rs332 billion for transport, Rs144 billion for energy)
• Rs.150 billion – Social Sectors (Rs63 billion for education, Rs22 billion for health)
• Rs70 billion – Merged districts of KP
• Rs63 billion – AJK and GB
• Rs53 billion – Science & IT
• Rs9 billion – Governance
• Rs11 billion – Agriculture, food, and industry
• Rs288 billion – SOE development plans (WAPDA, NTDC, OGDCL, etc.)
Ahsan Iqbal acknowledged that the recent escalation along the eastern border following the May 7, 2025 events had increased defense expenditures and placed further strain on the development budget. However, he emphasized the government’s commitment to maintaining a careful balance, stating:
“A strong nation while needs strong defence — it also requires investment in the health, education, technology and economic empowerment of its people.”
APP adds: Prime Minister Shehbaz Sharif Monday said the government was determined to making the country a stable global economy through sustainable institutional reforms.
Chairing a review meeting on the FBR affairs here, the prime minister directed the hiring of internationally renowned companies for third-party validation of ongoing initiatives and reforms in the FBR.
He said institutional reforms were progressing rapidly across all sectors, adding that all government institutions were working tirelessly to eliminate corruption and address other deficiencies, such as a lack of transparency.
The recent positive economic indicators are a clear proof of correct government policies, the prime minister added.
Expressing satisfaction over the recent performance of the faceless customs assessment system, the prime minister highlighted that reforms such as the faceless customs assessment system were yielding promising results in maintaining transparency.
“God willing, we will succeed in our struggle to make Pakistan economically stable,” the prime minister added. The prime minister was briefed on the recent performance of the faceless customs assessment system and progress on reforms in Pakistan Revenue Automation Limited (PRAL).
The implementation of the faceless customs assessment system has led to an overall increase in revenue and a significant reduction in customs clearance time, according to the briefing. The reform process in PRAL is progressing rapidly, the meeting was informed.
The meeting was also informed that a simplified digital tax return system for the general public will be implemented soon, and efforts were underway to introduce the digital tax return system in Urdu and other local languages for the convenience of ordinary users.
Minister for Law and Justice Azam Nazeer Tarar, Minister for Information and Broadcasting Attaullah Tarar, Chairman FBR, and senior officials from relevant institutions attended the meeting.
Reference Link:- https://www.thenews.com.pk/print/1317941-budget-2025-26-rs1tr-envisaged-for-development-amid-fiscal-crunch-by-mehtab-haider