Finance Ministry Cuts Proposed PSDP Allocation for FY27

The Ministry of Finance has proposed an indicative allocation ceiling of ₨1.126 trillion for the Public Sector Development Programme (PSDP) for fiscal year 2026-27, substantially lower than the ₨2.9 trillion development budget requested by the Ministry of Planning for ongoing and proposed infrastructure and public sector projects, according to The News.

Planning Minister Ahsan Iqbal confirmed that the Finance Ministry had formally communicated the proposed budgetary limit for the upcoming PSDP against the significantly larger funding demand submitted by the Planning Ministry.

Officials disclosed that various ministries, divisions, and government departments collectively sought nearly ₨4 trillion in development expenditures for FY27. However, the Finance Ministry reportedly expressed its inability to accommodate such extensive allocations due to prevailing fiscal pressures and budgetary constraints.

According to sources, the Planning Commission subsequently instructed federal ministries and departments to reassess, rationalise, and prioritise their financial requirements, particularly focusing on the completion of ongoing development schemes.

Officials further stated that the Finance Ministry had already revised downward the PSDP allocation for the current fiscal year 2025-26 to ₨820 billion from the originally approved ₨1 trillion development outlay.

The reduction reportedly included an initial cut of ₨170 billion, followed by an additional downward adjustment of ₨10 billion during the fiscal year.

Sources indicated that the Annual Plan Coordination Committee, comprising representatives from federal ministries and provincial governments, is scheduled to convene on May 20 to finalise recommendations concerning the macroeconomic framework and development expenditure strategy for the forthcoming federal budget.

The National Economic Council is expected to meet on May 22 under the chairmanship of Prime Minister Shehbaz Sharif ahead of his anticipated official visit to China.

The federal government has tentatively proposed June 1 for the presentation of the FY27 budget; however, officials suggested that the announcement may be deferred by several days and could instead take place on June 5.