The federal government has initiated a dialogue with provinces to reduce funding for provincial development projects and devolved responsibilities in compliance with IMF commitments due to rising interest payments.
As per reports, the government is under pressure from international lending agencies, particularly the World Bank, to stop financing provincial projects and devolved responsibilities, which could save over Rs700 billion.
Pakistan aims to achieve a primary surplus of 0.4 percent of GDP, equivalent to approximately Rs400 billion, by having provinces return Rs600 billion in cash surpluses to the federal government.
Federal Finance Minister Dr Shamshad Akhtar emphasized the potential for optimizing public expenditure arrangements between federal and provincial governments to enhance the efficiency and effectiveness of public spending. She urged provinces to prioritize and expedite the implementation of projects under the public sector development programs (PSDP).
The federal government also plans to reduce its public sector development program by Rs200 billion to 250 billion by rationalizing ongoing projects, including curtailing financial support for projects in their initial stages or for political reasons.
Provinces were recommended to expedite the prioritization of various projects funded by the federal government that fall under provincial subjects following the devolution of power.