Water Resources Division is the biggest beneficiary with Rs103.80b, followed by Rs88b proposed for Power Division
ISLAMABAD:
Ahead of the presentation of the federal budget for the financial year 2026-27, the government on Friday proposed a Rs1 trillion Federal Public Sector Development Program (PSDP) as part of the wider Rs17.5 trillion budget, according to official budget documents.
Under the proposed PSDP, Rs682.48 billion has been allocated to federal ministries and departments, while the National Highway Authority (NHA) is set to receive Rs224.51 billion.
The Water Resources Division is the largest recipient among federal entities with a proposed allocation of Rs 103.8 billion. Power Division (NTDC/PEPCO) follows with Rs88 billion, while Cabinet Division has been allocated more than Rs64.8 billion.
Higher Education Commission (HEC) is proposed to receive Rs46 billion, followed by Railways Division with Rs40.65 billion and Federal Education and Professional Training Division with Rs36.31 billion.
A total of Rs233.33 billion has been earmarked for provinces and special areas, including Rs56.7 billion for the merged districts and Rs85.02 billion for Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (GB).
The Information Technology and Telecommunication Department is to receive Rs19.58 billion, while Rs16.06 billion has been allocated to the National Health Services Division. Interior Division has been allocated Rs 21.82 billion and Rs 1 billion has been earmarked for new projects under CPEC 2.0.
The federal PSDP is proposed at Rs1 trillion, while development expenditure by state-owned enterprises is estimated at Rs2.218 trillion, bringing the total national development program to Rs3.669 trillion.
Planning Minister Ahsan Iqbal has said that no new development projects will be initiated during the next financial year, except those related to defense and internal security.
Financial targets for FY2026-27
According to official documents, the government has set a gross domestic product (GDP) growth target of 4% for FY2026-27, while inflation is expected to be 8.2%.
The service sector is expected to grow by 4.2%, industry by 4% and agriculture by 3.8%. Within agriculture, major crops are expected to grow by 3.6%, while other crops are expected to register growth of 4.2%.
The government has projected a total investment of 15% of GDP and national savings of 14.3%. Fixed investments are targeted at 13.3%, while private sector investments are expected to reach 10.3%.
Among agricultural sub-sectors, cotton ginning is expected to grow by 2.5%, livestock by 3.9%, forestry by 3.2% and fisheries by 1.5%.
Manufacturing growth is targeted at 5.8%, including growth of 4.5% in large-scale production and 7.2% in small-scale production.
Other sectoral targets include 1.1% growth in electricity, gas and water supply, 2.2% in construction, 4.2% in wholesale and retail trade and 3.7% in transport and communication. The information and communication sector is expected to grow by 7.7%.
Financial and insurance services are expected to grow by 4.5%, while growth has been projected at 3.5% for real estate, 3.6% for education and 4.3% for human health and social work.
Federal budget
The government is set to unveil a massive consolidated budget of Rs 17.5 trillion (about $61 billion) for the 2026-2027 financial year on Friday (today) to meet strict austerity conditions set by the International Monetary Fund.
The high spending plan balances fiscal austerity and the IMF’s structural directives, while introducing relief measures for the poorest citizens and modest wage increases for government employees. The budget comes as a large part of the population continues to feel the effects of the war between Iran and the United States, with no signs that the conflict is easing.
The government will propose measures to raise revenue and cut spending, while protecting the country’s poorest.
Under pressure to meet austerity conditions from the International Monetary Fund, Finance Minister Muhammad Aurangzeb will unveil a delayed Rs17.5 trillion spending plan.
Read also: The government reveals a budget of 17.5 tr
The budget had been formulated keeping in mind the existing challenges faced by the economy on the national and international fronts.
In addition to financial management, revenue mobilization, measures for economic stabilization and growth, reduction in non-development expenditure, job creation and people-friendly policies for the country’s socio-economic prosperity will be included in the budget.
The burden of higher fuel and power costs and taxes will largely fall on formally registered businesses and wage earners, as politically powerful sectors such as agriculture, retail and real estate remain difficult to tax, experts say.
Policymakers must contend not only with the terms of the latest IMF bailout, but also an overall impact of the US-Israeli war against Iran – a conflict Islamabad has sought to mediate.
The rise in oil prices triggered by the war has driven Pakistan’s inflation back into double digits, just as the economy appeared to be finding its footing.
Business confidence was the lowest in May since S&P started its manufacturing survey last year, while input costs hit a 21-month high and employment fell for a second month.
Read more: Economy shows resilience amid Iran war fallout
The central bank raised interest rates by one percentage point in April, its first increase in nearly three years. The government is pressuring the Federal Tax Agency to raise next year’s tax collections to 37% above the target for this year – which the agency stands to miss.
The extensive informal economy keeps much of Pakistan’s cash out of reach of the FBR: Only 1.3% of Pakistanis filed returns showing taxable income last year, and only 7.7% of adults have a debit or credit card.
The number of taxpayers has increased, but the income has not kept up. Corporate tax rates are already high by global standards, while raising income tax would crush purchasing power, which is still recovering from two years of inflation.
The budget is expected to protect the poorest citizens by giving them cash transfers. The government has not accounted for the one-week delay in submitting the budget.
