Rs100 billion cut from development budget to finance fuel subsidies

The federal government has slashed Rs100 billion from the Public Sector Development Programme (PSDP) to cover fuel subsidies, officials confirmed Wednesday. According to a report by The Express Tribune

The National Highway Authority faced the largest reduction at Rs22.3 billion, followed by Rs12.9 billion from water sector projects and Rs10.2 billion in provincial schemes. Other major cuts include Rs9.1 billion from the Power Division, Rs7 billion from Sustainable Development Goals-linked projects, and smaller reductions across defense, education, higher education, housing, science and technology, interior, railways, health, and FBR budgets.

The move comes after the Ministry of Petroleum requested Rs71 billion to clear outstanding subsidies with the Oil and Gas Regulatory Authority (OGRA) for March 14-27. The government is providing Rs176 per litre subsidy for diesel and Rs78 per litre for petrol, though levies and import duties largely offset relief.

Planning Minister Ahsan Iqbal said the cuts reflect the government’s reliance on PSDP as “the easiest prey” rather than raising revenues or using IMF-contingency funds. He criticised the decision for inflating future development costs.

The approved PSDP for FY26 was Rs1 trillion, half of ministries’ requests, with an additional Rs495 billion sought during mid-term review. Officials said contingency funds of Rs389 billion earmarked for unforeseen events had mostly been used to offset FBR shortfalls, leaving development budgets vulnerable.