Pakistan has significantly reduced its federal development budget by Rs173 billion, citing pressure from the International Monetary Fund (IMF) and the economic fallout of ongoing tensions in the Middle East.
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According to officials from the Ministry of Planning, the Public Sector Development Programme (PSDP) has been cut from Rs1,000 billion to Rs837 billion. The reduction was implemented in two phases, with Rs100 billion slashed initially, followed by an additional Rs73 billion cut.
Authorities said the move was necessary to meet IMF conditions under Pakistan’s ongoing financial programme, while external shocks — particularly rising uncertainty linked to the Middle East conflict — further strained fiscal space.
The largest cuts were made in infrastructure-related sectors. Funding for road construction projects was reduced by Rs38 billion, while water sector allocations declined by Rs23 billion. Provincial development schemes also saw a reduction of Rs22.5 billion.
Despite the cuts, most projects under the Ministry of Planning and parliamentarians’ development schemes have been retained.
Officials noted that although over Rs1,000 billion had originally been allocated for development spending in the current fiscal year, only 41 per cent of the budget has been utilised during the first nine months.
The reductions highlight growing fiscal challenges as Pakistan balances IMF commitments with rising external economic pressures.
