The federal government’s development spending slowed to Rs115 billion in the first five months of the fiscal year due to fiscal constraints, significantly lower than the Rs376 billion authorised under the Public Sector Development Programme (PSDP) for 2024-25.
The Ministry of Planning authorised substantial expenditures between July and November, but actual spending accounted for just 10% of the downward-revised annual development budget.Â
The slow pace reflects limited resources, project delays, and capacity constraints, while the government attempts to meet the primary surplus target set under its IMF agreement. The Federal Board of Revenue (FBR) missed its tax collection target by Rs341 billion during the same period, further exacerbating fiscal pressure.
Despite the shortfall, the government last week approved 15 development projects worth Rs422.7 billion. While some of these projects will be funded by the provinces, others have been added to the federal portfolio, breaching commitments under the IMF-guided National Fiscal Pact. Under this pact, the federal government is required to reduce its footprint on projects within provincial domains.
One such project is the revision of costs for the extension of the KLM Start Point to Saggian Road and Main Ravi Bridge at Rs12.1 billion. The project primarily benefits Punjab and does not fall under the national domain. Similarly, the construction of the Mangi Dam and its water conveyance system was approved at a revised cost of Rs19 billion, to be jointly funded by federal and provincial governments.
Low development spending has also affected foreign exchange reserves due to reduced foreign lending. The government had projected Rs220 billion in foreign loans for development projects this fiscal year, but actual utilisation reached only Rs5.2 billion in the first five and a half months.
Spending in special areas and provinces was also impacted. Against an annual allocation of Rs223 billion, only Rs42 billion has been spent so far. This includes Rs17.7 billion on projects in Azad Jammu & Kashmir and Gilgit-Baltistan, Rs15.8 billion on merged districts in Khyber-Pakhtunkhwa, and Rs8.7 billion on projects located in other provinces.
As of December 10, 2024, total development spending reached Rs130 billion, reflecting a decline of over 13% compared to the same period last year.
