Pakistan’s economy is expected to continue its recovery journey in the upcoming fiscal year, with the government projecting economic growth of 3.7% in FY2025-26. However, despite the positive outlook, authorities are grappling with a significant challenge: limited financial resources against a growing list of development priorities.
Speaking at the Annual Plan Coordination Committee (APCC) meeting, Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal outlined the government’s economic targets and highlighted the difficult decisions that lie ahead in preparing the Public Sector Development Programmed (PSDP) for FY2026-27.
Development Demands Far Exceed Available Funds
The government’s development budget is under considerable pressure. Various ministries, departments, and coalition partners have collectively requested funding of more than Rs4 trillion for ongoing and proposed projects. However, the available allocation for the PSDP stands at only Rs1.126 trillion.
This large funding gap means that many projects may not receive financial support in the coming fiscal year. Policymakers will be forced to prioritize a limited number of initiatives while postponing or shelving others.
According to officials, development demands currently exceed available resources by nearly Rs3 trillion, making it impossible to accommodate every proposal.
Focus on Completing Existing Projects
The planning ministry has emphasized that completing ongoing projects will remain the government’s top priority. Pakistan’s federal development portfolio already carries a substantial backlog of unfinished schemes, requiring around Rs10 trillion in future funding commitments.
In addition to thousands of ongoing projects, ministries have proposed hundreds of new development schemes. Given the current fiscal situation, authorities believe it would be more practical to focus on projects that are already underway rather than launching a large number of new initiatives.
The government argues that completing existing projects can deliver quicker economic and social benefits while reducing future financial liabilities.
Key Areas Already Claiming Major Funding
A significant portion of the development budget has already been earmarked for strategic national priorities.
Among the largest allocations is funding for the N-25 Highway project in Balochistan, which the government considers a critical infrastructure initiative. Additional funds have been reserved for coalition partner projects, development schemes in Balochistan, and programmers for Azad Jammu and Kashmir, Gilgit-Baltistan, and the merged districts.
Resources have also been set aside for projects linked to the Sustainable Development Goals (SDGs) and for meeting Pakistan’s obligations under foreign-funded development programmers supported by international financial institutions.
These commitments leave limited fiscal space for new projects.
Economic Recovery Continues
Despite the budgetary constraints, the government remains optimistic about Pakistan’s economic trajectory. The projected GDP growth rate of 3.7% reflects expectations of improving economic activity, stronger investor confidence, and gradual stabilization after a challenging period marked by inflation, external financing pressures, and fiscal adjustments.
Officials believe that sustained economic growth will eventually create more room for development spending and public investment.
However, experts note that maintaining growth momentum will require careful fiscal management, increased productivity, and continued reforms aimed at strengthening the country’s economic foundations.
Balancing Ambition with Reality
Pakistan’s development needs remain substantial, ranging from infrastructure and energy projects to education, healthcare, and social welfare initiatives. Yet limited financial resources mean that difficult choices are unavoidable.
The government’s challenge is to strike a balance between ambitious development goals and fiscal discipline. By focusing on high-impact projects and completing ongoing schemes, policymakers hope to maximize public benefits while staying within budgetary limits.
As preparations for the next fiscal year’s budget continue, the debate over development priorities is expected to intensify. The decisions made today will play a crucial role in shaping Pakistan’s economic growth, infrastructure development, and public services in the years ahead.