Pakistan’s federal development budget has been reduced by Rs173 billion amid pressure from the International Monetary Fund and the economic impact of ongoing Middle East tensions, officials said on Wednesday.
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According to the Ministry of Planning, the Public Sector Development Programme (PSDP) has been cut from Rs1,000 billion to Rs837 billion in two phases. An initial reduction of Rs100 billion was followed by an additional Rs73 billion cut as fiscal constraints intensified.
Officials stated that the decision was taken to align with IMF conditions under Pakistan’s ongoing financial programme, while external pressures, including rising energy costs linked to regional instability, further strained government finances.
The largest reduction has been made in infrastructure development, with road construction funds slashed by Rs38 billion. Water sector projects have also been significantly affected, with a decrease of Rs23 billion, while provincial development schemes have seen a cut of Rs22.5 billion.
Despite the reductions, most projects under the Planning Ministry and those backed by members of parliament have been retained, indicating a focus on continuing priority initiatives.
Sources revealed that although more than Rs1,000 billion had originally been allocated for development spending in the current fiscal year, only around 41 percent of the budget has been utilised during the first nine months. This underutilisation has also contributed to the downward revision.
Economic experts say the cuts reflect the government’s effort to maintain fiscal discipline and meet external financing requirements, even as growth-related spending faces constraints.
The move comes at a time when Pakistan is navigating economic challenges, including inflationary pressures and external account vulnerabilities, while seeking to stabilise its economy through structural reforms and international financial support.
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The revised development budget is expected to impact the pace of infrastructure and public sector projects in the coming months.