The federal government has proposed an allocation of Rs 1 trillion for the Public Sector Development Programme (PSDP) for fiscal year 2026-27. This amount is Rs 126 billion (11 percent) lower than the Rs 1.126 trillion initially recommended by the Annual Plan Coordination Committee (APCC) for the upcoming fiscal year.
Budget Cuts and New Initiatives
In the proposed development budget for FY 2026-27, the government has imposed cuts on the budgets of Water Resources, provinces and special areas, and the Merged Districts of Khyber Pakhtunkhwa. It has proposed an allocation of Rs 1 billion for a new initiative under the China Pakistan Economic Corridor 2.0 (CPEC 2.0).
The APCC had initially recommended Rs 1.126 trillion for the PSDP, but the National Economic Council approved Rs 1 trillion as the federal development outlay.
Foreign and Local Funding Components
Out of the recommended PSDP allocation of Rs 1 trillion, the foreign exchange component is 25.5 percent, or Rs 255 billion, while the remaining Rs 745 billion will be financed through local funds. In the original PSDP for FY 2025-26, the share of foreign funding was 22.9 percent (Rs 229 billion), with Rs 771 billion locally funded. For the upcoming fiscal year 2026-27, the share of foreign funding in the PSDP has increased to 25.5 percent (Rs 255 billion).
Breakdown of Allocations
An allocation of Rs 682.485 billion has been proposed for ministries and divisions in the upcoming PSDP. Rs 312.515 billion has been recommended for corporations, including the National Highway Authority (NHA) and NTDC/PEPCO. Rs 4 billion has been proposed for project liabilities, and Rs 1 billion for new initiatives under CPEC 2.0. A total of 699 ongoing and new projects have been included in the upcoming PSDP for FY 2026-27, compared to 795 schemes in the PSDP 2025-26.
Provinces and Special Areas
The total proposed allocations for provinces and special areas are Rs 233.386 billion, which is almost Rs 20 billion less than the Rs 253.23 billion originally approved for the ongoing PSDP. However, this is higher than the revised allocations of Rs 195.483 billion for the ongoing fiscal year.
- Merged Districts of Khyber Pakhtunkhwa: Rs 56.076 billion has been proposed, which is Rs 9 billion less than the original allocation of Rs 65.444 billion during the ongoing fiscal year, but Rs 6 billion more than the revised PSDP of Rs 50.385 billion.
- Provincial Projects: An allocation of Rs 88.286 billion has been proposed, which is around Rs 17 billion less than the original allocation of Rs 105.786 billion, but Rs 11 billion up from the revised Rs 77 billion during the ongoing fiscal year.
- Special Areas (AJK and GB): An allocation of Rs 89.023 billion has been proposed for the upcoming fiscal year, which is around Rs 7 billion higher than the original allocation of Rs 82 billion and Rs 22 billion up from the revised Rs 67 billion during the ongoing fiscal year.
Water Resources Division
The allocation for the Water Resources Division has been proposed at Rs 103.086 billion, which is Rs 76 billion less than the APCC recommendation of Rs 179 billion for the upcoming fiscal year, and Rs 30 billion less than the original allocation of Rs 133.424 billion during the ongoing fiscal year.
Corporations
For corporations (including NHA and NTDC/PEPCO), Rs 312.515 billion has been recommended. This includes a foreign exchange component of Rs 135.858 billion and a local component of Rs 176.657 billion. Within corporations, an allocation of Rs 224.510 billion has been proposed for NHA and Rs 88 billion for NTDC/PEPCO.
