By Farooq Awan
 Pakistan’s development spending has failed to keep pace with the expansion of the federal budget and the overall economy over the past decade, raising concerns about the country’s capacity to finance infrastructure and development priorities. According to a presentation prepared for the Annual Plan Coordination Committee (APCC), the share of the Public Sector Development Programme (PSDP) in both the federal budget and gross domestic product (GDP) has declined significantly despite substantial growth in government revenues and economic output.

Official figures show that the federal budget increased from Rs3.2 trillion in FY2012-13 to Rs17.57 trillion in FY2025-26. During the same period, Pakistan’s GDP expanded from Rs25.04 trillion to Rs129.57 trillion. However, PSDP allocations have not grown at the same pace. The development programme stood at Rs360 billion in FY2012-13 and reached Rs1 trillion in FY2025-26. The presentation reveals that PSDP accounted for 11.2% of the federal budget in FY2012-13. The ratio gradually increased to a peak of 19.6% in FY2017-18 when development spending received its largest share of budgetary resources during the period under review.

Since then, the trend has reversed. PSDP’s share of the budget fell to 13.6% in FY2018-19 and 10% in FY2019-20. It declined further to 7.7% in FY2022-23 and 6.6% in FY2023-24 before dropping to 4.8% in FY2025-26. A similar pattern is visible when development spending is measured against the size of the economy. PSDP represented around 1.4% of GDP in FY2012-13 and climbed to 2.6% in FY2017-18. However, the ratio subsequently declined and now stands at approximately 0.65% of GDP in FY2025-26.

The presentation includes an extrapolation exercise based on FY2017-18 ratios. It shows that if PSDP had maintained its peak share of 19.6% of the federal budget, the development programme would have been substantially larger than its current size. Likewise, maintaining PSDP at 2.6% of GDP would have generated significantly greater development resources than those currently available.

The document suggests that while fiscal pressures have constrained development spending, project commitments have continued to rise. As a result, the federal development portfolio now carries a throw-forward of Rs10.818 trillion, reflecting the amount required to complete ongoing projects.

According to the presentation, ongoing projects alone require Rs3.377 trillion in FY2026-27, whereas the Indicative Budget Ceiling communicated by the Finance Division is Rs1.126 trillion. The figures highlight the widening gap between Pakistan’s development requirements and the resources allocated for public-sector investment. The presentation underscores the challenge facing policymakers as they seek to balance fiscal consolidation objectives with the need to finance infrastructure, water, transport, technology and social-sector projects critical to long-term economic growth.

Credit: INP-WealthPk