Public financing for development is in a crisis. Almost every bilateral lender is cutting aid. Government spending is falling in two-thirds of African countries as they grapple with debt. Noting also that only 17 per cent of the Sustainable Development Goals targets are on track to be met by their original end date of 2030, analysts at The Economist say the biggest idea in development financing has turned out to be wishful thinking.
The trends in centralised development financing in Pakistan are somewhat similar, as the State Bank of Pakistan’s data shows that the central government’s total stock of domestic and external liabilities hit an all-time high level of Rs74.94 trillion by the end of April 2025 compared to Rs68.91tr as of June 2024.
Salvaged by a 22pc increase in provincial allocation, the National Economic Council last week approved a record Rs4.22tr national development outlay for the next fiscal year to upgrade the growth rate to 4.2pc from 2.7pc this year. The development portfolio includes Rs1tr federal spending against Rs2.87tr from the provincial annual development plans (ADPs) and Rs355 billion for separate projects by the state-owned enterprises through their resources. The provincial share for next year rose by 22pc from Rs2.36tr. The provinces had pitched Rs2.79tr ADPs at the Annual Plan Coordination Committee (APCC) meeting but revised it to Rs2.87tr for the next year.
Essentially, the centre allocated Rs880bn for the PSDP, down 20pc compared to the current year’s revised allocation of Rs1.1tr and 37pc lower than the original allocation of Rs1.4tr. Currently, 1,071 development projects with a total cost of Rs13.4tr are under implementation. These projects require an additional Rs10.2tr to be completed. The planning ministry estimates it would take more than a decade to implement them.
Provinces display their financial muscle as, for the first time, a federating unit exceeds the federal allocation
Federal Minister for Planning Ahsan Iqbal recently stated his ministry had identified 183 slow-moving or problematic projects that should be capped or closed by June 2025. “By capping or closing these projects, around Rs1tr could be saved, freeing up Rs100bn immediately for fast-moving projects.”
Given the constraints, the APCC decided to put a complete ban on the approval of development schemes by the departmental development working parties of various ministries and divisions until the conclusion of the IMF programme.
Before the APCC meeting, media reports said the Ministry of Finance aims to provide up to Rs952bn for the PSDP, while the Ministry of Planning has received proposals from various ministries and divisions for allocation of a massive Rs2.9tr for the PSDP. The planning minister requested an allocation of Rs1.65tr,
According to media reports, the federal allocations for nearly all sectors have been slashed, except for road building projects and parliamentarians’ schemes; funding for food, water, energy and social sectors has been curtailed.
However, a fresh approach is being adopted by the Centre for Economic Research of Pakistan (CERP) and Princeton University researchers to develop a long-term energy transition planning framework under a project titled ‘Pakistan’s Transition Roadmap’. CERP President Maroof A. Syed said that the project wasn’t about imposing ideas; rather, it was about co-creating a roadmap that respected Pakistan’s “unique challenges while exploring practical opportunities for cleaner, more affordable energy”.
“The initiative would provide Pakistan with practical, evidence-based guidance on how to equitably move from reliance on expensive, imported fossil fuels to cleaner, more affordable energy sources aligned with economic growth and development goals,” Mr Syed further explained.
In a meeting with officials in Peshawar, PM Shehbaz Sharif also asked the authorities to remove any hurdles in the completion of the Diamer Bhasha Dam, saying that the country’s self-reliance was linked to affordable electricity and agriculture, which requires increased water storage and efficient water use.
Next year’s development plan costs a record Rs1.2tr, 20pc higher than the centre and up 10.6pc compared to the current year’s Rs1.09tr
The changing role of the centre and the provinces in development spending is more of a transformational nature. The next year’s development plan, led by Punjab, costs a record Rs1.2tr, 20pc higher than the centre and up 10.6pc compared to the current year’s Rs1.09tr.
To quote this newspaper’s analytical report, “This is the first time a federating unit has exceeded the federal allocation, showing the enhanced financial muscle of the provinces. Sindh trailed just behind the centre with a 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.”
Moreover, Khyber Pakhtunkhwa’s (KP) Rs417bn development plan for next year is a massive 33pc increase over the current year’s allocation of Rs313bn. It had reported a Rs440bn ADP in APCC but was later scaled down by Rs23bn. Finally, Balochistan, mostly dependent on the federal support, would announce Rs281bn development plan, up 12pc over the current year’s Rs252bn.
Published in Dawn, The Business and Finance Weekly, June 10th, 2025
