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Pakistan to Present FY 2025-26 Budget with Significant Cuts to Development Projects
The Federal Government announces the presentation of the FY 2025-26 budget on June 2, reducing the development budget by 16%. This cut could result in the closure of 200 ongoing projects.
ND
by News Desk
2025-05-09
Pakistan to Present FY 2025-26 Budget with Significant Cuts to Development Projects

The federal government has announced that the budget for the fiscal year 2025-26 will be presented on June 2, with major reductions in the development budget. Federal Minister for Planning Ahsan Iqbal revealed that the development budget for the upcoming fiscal year has been reduced by 16 percent, amounting to Rs 921 billion, down from Rs 1.1 trillion allocated in the current fiscal year. This cut is expected to lead to the closure of 200 ongoing development projects.

During a press conference, Ahsan Iqbal explained that the Ministry of Finance had set a development budget ceiling (IBC) of Rs 921 billion for the next fiscal year, far lower than the Rs 2.9 trillion proposed by the Planning Commission. The decision comes after pressure from international financial institutions, especially the IMF, which required budget cuts as part of Pakistan's ongoing fiscal adjustments.

Challenges Faced by the Development Budget

Minister Iqbal also noted that the funds allocated for important projects, such as the Diamer Bhasha Dam and Dasu Hydropower Project, are insufficient to meet the increasing costs. The Diamer Bhasha Dam project’s cost has ballooned from Rs 480 billion to Rs 1.5 trillion, while the Dasu Hydropower Project has similarly seen a rise in costs from Rs 500 billion to Rs 1.7 trillion.

As a result of the development budget cuts, several projects, including provincial initiatives, are expected to be significantly delayed, and some may be terminated. The government has already indicated that about 200 slow-moving projects will be closed to reallocate funds to more critical initiatives.

Appeals for Increased Funding

Ahsan Iqbal also made it clear that the Planning Commission would appeal to the Prime Minister to approve at least Rs 1.6 trillion for foreign-aided projects to ensure sufficient funding for key infrastructure and development projects. He emphasized that the shortage of resources and a poor tax-to-GDP ratio are major hurdles in boosting the development budget.

Coordination with Provinces

The federal government will hold a meeting with provincial representatives on May 23 to finalize the development program for the next fiscal year. The National Economic Council (NEC) is expected to approve the development program and set economic targets for the upcoming fiscal year by May 26 or 27.

Focus on Economic Growth

The upcoming budget is expected to focus on employment generation, as part of the government’s "Udan Pakistan" program, which is projected to create 120,000 direct and indirect job opportunities through approved projects. The government is also focusing on export-based sustainable development, with an emphasis on vocational training for youth, and promoting public-private partnerships for industrial growth.

Prime Minister's Consultation on the Budget

Prime Minister Shehbaz Sharif held consultations with businessmen and private sector experts to finalize the budget, emphasizing the government’s priority to reduce the financial burden on the poor and middle class while promoting economic prosperity. During the meeting, the Prime Minister stressed the importance of industrial development, increased production, and job creation through vocational training programs.

Sectoral Reforms

The government is also focusing on the power sector reforms, with the aim to reduce electricity prices for industries, thus helping promote industrial production and economic growth.

Looking Ahead

As Pakistan faces critical economic challenges, the FY 2025-26 budget will be a pivotal moment for balancing fiscal responsibility with development goals. With cuts to the development budget, the focus will shift toward prioritizing essential projects while managing fiscal constraints.

 
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