Key Points:
- Federal PSDP spending reaches 111% of the allocation.
- Development expenditure totals US$3.25 billion in FY26.
- Water, railways and power sectors record major overspending.
- Spending surge reverses months of fiscal restraint.
ISLAMABAD: Pakistan’s federal government spent Rs916 billion on development projects in FY2025-26, exceeding its original budget by 11.6% as it stepped up investment in water, railways and power infrastructure despite fiscal constraints under an IMF-backed reform programme.
Analysts say the end-of-year spending surge highlights the government’s efforts to complete priority projects despite tight fiscal conditions and commitments under the International Monetary Fund-supported reform programme.
The country spent 111.6 per cent of the amount allocated at the start of the year, according to official ministry-wise expenditure data of the financial year ended June 30 2026.
The federal PSDP was initially allocated Rs 820.513 billion (US$2.91 billion), with Rs 820.496 billion authorised for release.
Actual spending exceeded the allocation by approximately Rs 95.5 billion (US$339 million), underscoring a late surge in development outlays after months of subdued expenditure amid fiscal constraints.
The latest figures mark a sharp turnaround from most of FY26, when monthly updates from the Planning Commission consistently showed PSDP utilisation lagging behind the approved release schedule as the government sought to maintain fiscal discipline under its economic reform programme.
Federal ministries accounted for Rs 611.105 billion (US$2.17 billion) in development spending against an allocation of Rs 565.138 billion. Meanwhile, state-owned corporations spent Rs 304.916 billion (US$1.08 billion) compared with a combined allocation of Rs 255.375 billion.
Provinces receive the largest development funds
Among federal ministries, the Provinces and Special Areas sector received the largest allocation of Rs 195.383 billion (US$693 million) and utilised Rs 192.559 billion (US$683 million).
The Water Resources Division emerged as one of the biggest overspenders, spending Rs 137.49 billion (US$488 million) against an allocation of Rs 101.64 billion (US$360 million).
The Cabinet Division spent Rs 59.43 billion (US$211 million) out of its allocated Rs 63.237 billion. Similarly, the Higher Education Commission (HEC) utilised its entire allocation virtually, spending Rs 34.897 billion (US$124 million) against Rs 34.906 billion budgeted.
The Federal Education and Professional Training Division marginally exceeded its allocation, spending Rs 27.043 billion (US$96 million) compared with Rs 26.81 billion.
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The Railways Division recorded one of the sharpest increases in spending, with expenditure rising to Rs 35.143 billion (US$125 million) against an allocation of Rs 18.559 billion (US$66 million). The Revenue Division spent Rs 14.813 billion (US$53 million), surpassing its allocation of Rs 12.214 billion.
Among corporations, the National Highway Authority (NHA) largely remained within its budget, spending Rs 182.361 billion (US$647 million) against an allocation of Rs 182.233 billion.
In contrast, the Power Division’s entities, including the National Transmission and Despatch Company (NTDC) and Pakistan Electric Power Company (PEPCO), spent Rs 122.555 billion (US$435 million). Power utilities spent substantially higher than their combined allocation of Rs 73.142 billion (US$259 million), accounting for the majority of corporate-sector overspending.
The increase in development expenditure coincides with Pakistan accelerating infrastructure investment and supporting economic growth after recording gross domestic product (GDP) growth of 3.7 per cent in FY2025-26.
