Pakistan Initiates Formulation of PSDP 2025-26 with Focus on High-Priority, Impactful Projects

ISLAMABAD: The Ministry of Planning, Development, and Special Initiatives has begun the process of formulating the Public Sector Development Programme (PSDP) for 2025-26, along with projections for 2026-27 and 2027-28.

Ministries, divisions, and agencies have been instructed to review and finalize their development plans, prioritizing projects that align with the government’s economic strategy under the “Uraan Pakistan” initiative.

The ministry emphasized that ongoing projects should be evaluated for priority, ensuring their relevance to national development objectives. The current throw-forward stands at Rs10 trillion, which is ten times the current PSDP allocation, assuming no new projects are added.

The proportion of PSDP relative to GDP has decreased from 1.7% in FY 2013-14 to 0.6% in FY 2024-25, impacting the execution of key national projects.

For ongoing projects, the government will prioritize those with more than 80% of the expenditure completed to ensure their completion in FY 2025-26. Ministries must allocate funds according to the annual phasing outlined in the approved PC-I.

New projects will only be considered if funding space permits, and no additional allocations will be made for projects that have already been fully funded in PSDP 2024-25. Foreign-aided projects will require the Economic Affairs Division (EAD) to provide confirmed foreign aid estimates to ensure smooth execution and uninterrupted foreign exchange flows.

For provincial projects, funding will be focused on the least-developed districts, as approved by the National Economic Council (NEC). Provinces are required to ensure adequate funding for SDG-related projects and cost-shared initiatives. Federal contributions to these projects will be considered in calculating the throw-forward.

New projects will be prioritized based on their value, early completion potential, and impact on the PSDP. The focus will be on projects that enhance exports, productivity, competitiveness, digital infrastructure, industrial growth, agro-industry, the blue economy, R&D, and climate change mitigation.

All PC-Is for new projects must be submitted on iPAS by March 31, 2025, and projects lacking feasibility studies (PC-II) will not be considered.

For Public-Private Partnership (PPP) projects, PSDP funds will be used as equity or to cover a viability gap. Only 10% of the FY 2025-26 development budget will be allocated to new projects, in accordance with NEC guidelines.

The Petroleum Division will manage gas projects within a 5 km radius, with funding sourced from the Finance Division or CSR contributions from oil and gas companies.

The Planning Ministry has instructed Principal Accounting Officers to ensure the appointment of full-time Project Directors for development initiatives and to establish monitoring indicators to avoid delays and cost overruns. PSDP 2025-26 will also incorporate climate-sensitive budgeting (C-PIMA) and gender budgeting to align with Pakistan’s environmental goals.

Ministries and divisions must submit one-page summaries outlining the strategic impact of their proposed projects, focusing on exports, productivity, job creation, private sector growth, and poverty reduction. The government aims to optimize PSDP resources to ensure efficient spending and promote sustainable economic development.