By Staff Reporter
ISLAMABAD: The government and its vast network of implementing agencies spent barely half of the country’s original development budget in the first 11 months of the current fiscal year, a performance that was worse than the prior year even as Islamabad labored to stay within targets set by the International Monetary Fund and confronted a fresh round of emergency spending reallocation triggered by the US-Israeli attack on Iran, Dawn newspaper reported on Wednesday.
The Ministry of Planning and Development reported that total utilisation under the Public Sector Development Programme reached Rs529.8 billion through the end of May, equivalent to 52.4% of the originally budgeted Rs1.01 trillion for FY2025-26. The figure undershot even last year’s middling result, when the government drew down 54% of its development envelope — Rs596 billion against an allocation of Rs1.1 trillion — over the same period.
The numbers expose an uncomfortable truth that has defined Pakistani fiscal governance for years: money sanctioned is not money spent. By May 31, ministries and divisions had formally authorised disbursements of Rs835.6 billion, virtually the entire revised allocation of Rs837.16 billion — yet only Rs529.8 billion had actually moved. The gap between authorisation and execution reflects what officials acknowledge is a structural weakness in the state’s capacity to absorb and deploy capital.
A budget already cut before it was tested
The original allocation never stood a chance of being spent in full. After the Iran episode sent petroleum prices surging globally, Islamabad slashed Rs173 billion from the PSDP envelope to finance fuel subsidies, cutting the effective budget to Rs837 billion. When measured against that reduced figure, the utilisation rate improves to 63% — a politically more convenient number, though one that obscures how much less was available in the first place. Funding earmarked for special regions including Azad Jammu and Kashmir and Gilgit-Baltistan was cut by Rs52 billion as part of the same exercise.
The Finance Ministry had entered the year with a release strategy designed to smooth spending and protect fiscal targets: 15% in the first quarter, 20% in the second, 25% in the third, and the remaining 40% in the final quarter. Under that schedule, cumulative PSDP spending should have reached at least Rs878 billion — 87% of the original allocation — by end of May. Even calibrated against the reduced Rs837 billion envelope, utilisation should have hit roughly Rs730 billion. The actual figure of Rs529.8 billion fell Rs200 billion short of that floor.
Roads and power sector lag; education holds up
The shortfalls were distributed unevenly across the state’s sprawling development apparatus. All 33 federal ministries combined spent Rs391 billion in 11 months, or 68% of their revised Rs577 billion allocation — a mediocre result, though better than the headline.
The drag came disproportionately from Pakistan’s two largest infrastructure institutions. The National Highway Authority, responsible for the country’s road network, spent only Rs85 billion against a revised budget of Rs185 billion, a utilisation rate of 46%. The power sector drew down Rs53.7 billion of its Rs75 billion allocation, reaching 73.5%. Together the two consumed barely 53.5% of their combined revised allocation of Rs260 billion. The water sector — critical for a country that ranks among the world’s most water-stressed — deployed Rs69.9 billion, or 65%, of its Rs106.6 billion allotment.
The higher education sector and the Ministry of Federal Education and Professional Training were among the brighter spots, spending 80% and 78% of their revised allocations respectively. Pakistan Railways and the Planning Commission each utilised 75% of their Rs20 billion budgets.
The laggards were stark. The National Health Services sector spent only Rs3.9 billion of its Rs11.6 billion budget — a 33% draw-down rate that stands as among the worst in the portfolio. The Information Technology Division was similarly constrained, deploying Rs4.9 billion against a Rs16.5 billion allocation for a utilisation rate of 30%.
Parliamentarians’ schemes: fast money, political logic
Buried within the PSDP data is one programme that ran markedly ahead of the rest: the Sustainable Development Goals Achievement Programme, the parliamentary constituency fund known informally as SAP. Disbursements to lawmakers’ schemes began only after the first five months of the fiscal year, yet the Planning Commission had authorised Rs63.2 billion — nearly the full revised annual allocation — by end of May, of which Rs44 billion, or 70%, had actually been spent. That the programme executed roughly 70% of its budget within approximately four months made it the fastest-deployed component of the entire PSDP, a pace that reflects the political salience of keeping parliamentarians supplied with discretionary project funds.
By contrast, special regions — Azad Kashmir and Gilgit-Baltistan — which typically benefit from development transfers as part of the constitutional compact, spent only Rs153.9 billion, or 62% of their annual Rs249.2 billion allocation, even after that envelope had already been trimmed by Rs52 billion for petroleum subsidies.
Foreign-funded projects and structural constraints
The PSDP portfolio included 86 foreign-funded projects with a combined project cost of Rs4.2 trillion. Of these, 25 were entirely financed from abroad while the remaining 61 relied on local counterpart financing. A rupee cover of Rs229 billion was allocated for these projects in FY26, representing a significant portion of the overall envelope and one where slow execution carries the added cost of foregone concessional financing.
The Planning Commission operates on a system of one-line releases to sponsoring ministries aligned with quarterly ceilings set by the Finance Division. Principal accounting officers are empowered to release and sanction funds across both foreign-aid and local components on a project-by-project basis — an architecture that places significant discretion at the ministry level and, critics argue, disperses accountability for implementation failure.
Structural rot, not just fiscal mechanics
Officials at the planning ministry have in the past pointed to resource constraints and weak institutional implementation capacity as the primary explanations for the persistent gap between authorisation and actual expenditure. The data for FY26 supports that framing but also complicates it: the Planning Commission authorised Rs835.6 billion against a revised envelope of Rs837 billion, meaning the pipeline of formally approved spending was essentially complete. The bottleneck sits downstream, in the capacity of executing agencies to convert sanctioned funds into physical works.
Pakistan’s development spending record has long reflected a paradox: a country chronically short of public infrastructure, water systems, transport networks and health facilities consistently fails to spend the money it does allocate for building them. The FY26 numbers suggest that paradox remains unresolved — and that cutting the budget further to cover oil subsidies triggered by a distant conflict adds another layer of contingency to an already unreliable development machine.
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