Govt allocates Rs1 trillion for development projects in FY26 budget amid tight cuts

The federal government has decided to allocate Rs1 trillion for the Public Sector Development Programme (PSDP) in the 2025–26 budget, trimming down ministries’ original demand of Rs3 trillion. According to official documents, the Finance Ministry initially suggested a budget ceiling of Rs921 billion but later increased it to a round figure of Rs1 trillion.

As part of this allocation, the Cabinet Division is set to receive the largest share—Rs50.33 billion—while the Ministry of Climate Change will get Rs2.78 billion to tackle growing environmental issues. The Board of Investment has been earmarked Rs1.10 billion to enhance foreign investment opportunities, and the Commerce Division is expected to receive Rs400 million.

Moreover, Rs11.55 billion has been reserved for the Defence Division, while the Defence Production Division will receive Rs1.78 billion. The Establishment Division is set to get Rs495 million. Other departments, such as the Communications Division, are also included in the allocations, with Rs200 million marked for infrastructure-related work.

These funds are part of the PSDP, which aims to support public infrastructure, reforms, and essential services. However, concerns remain as the government only utilised 54% (Rs593 billion) of the previous year’s revised PSDP allocation of Rs1.096 trillion within 11 months, according to The News.

Furthermore, the Sustainable Development Goals (SDGs) Achievement Programme—meant mainly for treasury lawmakers—utilised Rs35 billion of its Rs48 billion revised allocation, reflecting a 71% utilisation rate. With only a month remaining in the current fiscal year, it’s unclear how much more will be spent.

The upcoming budget, scheduled for presentation on June 10 by Finance Minister Muhammad Aurangzeb, is expected to focus heavily on economic reforms and IMF recommendations. However, reaching the ambitious tax revenue target of Rs14.2 trillion remains a major challenge, especially as the current collection falls short of the revised Rs12.33 trillion goal.