NEC approves Rs3.2 trillion national uplift plan as provinces agree Rs920 billion grant for Centre

The National Economic Council (NEC) on Wednesday approved a Rs3.2 trillion overall national development programme for FY2026-27 after three provinces agreed to freeze their development spending at current-year levels and provide Rs920 billion in grants to the federal government.

The meeting, chaired by Prime Minister Shehbaz Sharif, approved a Rs1 trillion Public Sector Development Programme (PSDP) and provincial Annual Development Programmes (ADPs) worth Rs2.218 trillion.

The approved development envelope is Rs1.05 trillion, or 25%, lower than the outlays earlier endorsed by the Annual Plan Coordination Committee (APCC). The federal PSDP was also reduced by Rs126 billion from the level previously approved by the APCC.

The prime minister informed IMF Managing Director Kristalina Georgieva about the new fiscal arrangement. According to Shehbaz Sharif, the IMF chief appreciated Pakistan's efforts to address its financing requirements.

Speaking after the meeting, Planning Minister Ahsan Iqbal said the provinces had agreed to maintain development spending at this fiscal year's actual levels, resulting in provincial development budgets that are Rs920 billion lower than the amounts initially proposed for the next fiscal year.

According to the arrangement, provinces will provide Rs920 billion in grants to the federal government during FY2026-27. The federal government had sought Rs1.2 trillion from the provinces to help finance increased defence requirements and water-sector projects.

Iqbal said the mechanism for transferring the funds and their accounting treatment was being finalised by the Ministry of Finance. He added that the arrangement would depend on the Federal Board of Revenue (FBR) achieving its FY2026-27 tax collection target of Rs15.264 trillion.

Government officials said the grants would help maintain the primary budget surplus target of 2% of GDP agreed with the International Monetary Fund (IMF), while avoiding changes to the National Finance Commission (NFC) revenue-sharing formula.

Under the revised provincial allocations, Punjab's development budget has been set at Rs749 billion, down Rs701 billion from the amount approved by the APCC. Sindh's allocation stands at Rs706 billion, Rs110 billion lower than previously proposed.

Khyber Pakhtunkhwa's development budget has been fixed at Rs455 billion, a reduction of Rs109 billion, while Balochistan's allocation remains unchanged at Rs308 billion.

Chief ministers of Sindh, Khyber Pakhtunkhwa and Balochistan attended the meeting. Punjab Chief Minister Maryam Nawaz did not participate as she was recovering from a recent medical procedure, according to the prime minister.