• NEC approves plan with consensus as govt eyes 4.2 per cent growth in next fiscal year
• Centre to finance projects worth Rs1 trillion amid 29pc PSDP cut, provincial allocations to fund the rest
• Sindh, KP ‘unhappy’ with exclusion of projects from federal budget
• Premier, all CMs to meet today on Indian moves against Pakistan’s water
ISLAMABAD: Fuelled by a 22pc increase in provincial allocations, the National Economic Council (NEC) on Wednesday approved with consensus a record Rs4.22 trillion national development outlay for the next fiscal year to upgrade growth rate to 4.2pc from 2.7 this year, despite an IMF-decreed 29pc cut in the public sector development programme (PSDP) compared to the current year.
The provincial expansionary stance is expected to come under the International Monetary Fund’s watch, which has been pushing for greater provincial cash surpluses to support the federal government in delivering a healthy amount for debt servicing, besides effective taxation of the agriculture income under a new national fiscal pact.
The meeting of the NEC — the country’s highest economic decision-making forum — was moved up by a day so that the prime minister, who chaired the meeting, could travel abroad. All provincial chief ministers, the deputy prime minister, and federal ministers for planning, finance and information were present. PM’s adviser Rana Sanaullah also attended the meeting.
The meeting also decided that the PM and all CMs would meet on Thursday morning for a special meeting in light of India’s move to disrupt Pakistan’s water share. They will ponder a strategy to safeguard Pakistan’s water resources.
The development portfolio includes Rs1tr from PSDP, Rs2.869 trillion from the provincial annual development plans (ADPs), and Rs355bn for separate projects by the state-owned enterprises (SOEs) through their resources.
Technically speaking, the Centre has allocated Rs880bn for the PSDP, down 20pc when compared to the current year’s revised allocation of Rs1.1tr and 37pc lower than the original allocation of Rs1.4tr. Yet, the government pitched the PSDP at Rs1tr after including Rs120bn to be generated through a petroleum levy imposed by the prime minister last month to finance projects in Balochistan.
The provincial share for next year has gone up by 22pc from Rs2.358tr. The provinces had pitched Rs2.795tr ADPs two days ago at the meeting of the Annual Plan Coordination Committee (APCC), but revised it to Rs2.869tr for the next year.
Punjab leads charge
The next year’s development plan is led by Punjab with a record Rs1.204tr, 20pc higher than the Centre, up 10.6pc compared to the current year’s Rs1.089tr. This is the first time a federating unit has exceeded the federal allocation, showing enhanced financial muscle of the provinces. Sindh trailed just behind the Centre with Rs967bn allocation, a healthy 27pc increase from its current year’s Rs705bn development fund. Punjab and Sindh enhanced their allocations by Rs16bn and Rs80bn respectively over what they had reported to the APCC on Monday.
Khyber Pakhtunkhwa announced to invest Rs417bn in development next year, showing a massive 33pc increase over the current year’s allocation of Rs313bn. It had reported Rs440bn ADP in APCC but scaled down by Rs23bn. Balochistan, mostly dependent on the federal support, would announce Rs281bn development plan, up 12pc over the current year’s Rs252bn. Likewise, estimates for SOE’s projects were also jacked up to Rs355bn from Rs288bn two days ago.
Sources said despite their own heavy allocations, the Sindh and KP chief ministers complained over exclusion of their projects from the federal budget, while the Balochistan chief minister thanked the Centre for giving special attention to the restive province. KP chief minister’s adviser on finance Muzammil Aslam, however, appreciated the centre’s limitations in the given circumstances.
The cash-strapped government, however, did not forget protecting allocations for coalition partners’ parliamentarians scheme at Rs50bn and also enhanced funds for PML-N’s trademark road-building projects.
All other sectors, including special areas like Azad Kashmir and Gilgit-Baltistan, would be handicapped by lower allocations, as all sectors, including energy, food, and water, faced funding constraints.
Based on these spending plans, the government set next year’s growth target at 4.2pc, supported by 4.4pc target in agriculture output, 4.3pc in industry and 4pc in the services sector, and an inflation rate at 7.5pc.
It set the target for national savings at 14.3pc of GDP in FY 2025-26, slightly higher than the current year’s 14.1pc and total investment of 14.7pc of GDP, up from 13.8pc in FY 2024-25. This reflects a narrowing saving investment gap to be financed through modest external inflows.
Public investment is projected to increase from 2.9pc to 3.2p; similarly, private investment is also projected to rise from 9.1pc of GDP to 9.8pc. Fiscal and monetary policies will aim for consolidation and stability, with an expected inflation of 7.5pc due to the low base effect and risk of ongoing trade tensions and domestic tariff rationalisation measures.
The agriculture growth will be supported by a recovery in important crops (6.7pc) and cotton ginning (7pc), as well as robust performance in livestock. The industrial sector is expected to benefit from a significant revival in LSM with 3.5pc growth, the planning ministry said, with 3pc growth in mining and quarrying, “alongside sustained growth momentum in construction and energy, gas and water supply”.
The services sector, which forms the largest share of GDP, is set to grow by 4pc, underpinned by stronger performance in wholesale and retail trade, transport, storage & communications, financial services and real estate.
Published in Dawn, June 5th, 2025
