Pakistan's FY27 PSDP may cross Rs1.1tr, infrastructure to dominate

June 01, 2026 (MLN): Pakistan's federal Public Sector Development Programme (PSDP) for the upcoming fiscal year 2026-27 appears set to be proposed at Rs1,126tr, with infrastructure emerging as the dominant spending priority.

According to well-informed sources privy to ongoing budget deliberations, the proposed PSDP marks a significant jump from the revised allocation of Rs837.2bn in the current fiscal year 2025-26, and could reflect the government's intent to accelerate capital spending ahead of the June 5 budget announcement.

The figures, however, may yet be subject to revision before formal presentation. The document notes that individual Indicative Budget Ceilings (IBCs) were worked out keeping in view fiscal space and sectoral priorities, with Ministries and Divisions having demanded an additional Rs2.4 trillion over and above the indicated ceilings.

To bridge the gap between demand and supply of funds, Priorities Committee meetings were reportedly held with major Ministries and Divisions on May 30, 2026, wherein project-wise allocations were reviewed considering rupee cover and important project requirements.

New projects with token allocation, particularly unapproved ones, were discouraged in line with the Public Finance Management (PFM) Act, with project-wise allocations attempted to be adjusted within the overall PSDP size of Rs1.126tr as per national priorities.

Infrastructure is set to receive the lion's share of development funds at Rs730bn, or roughly 65% of the total proposed PSDP. Within the sector, Transport and Communication leads with Rs409bn, followed by Water at Rs140bn and Energy at Rs136bn. Physical Planning and Housing has been allocated Rs45bn.

The Social sector is proposed to receive Rs187bn, comprising Education including HEC at Rs78bn, SDGs Achievement Programme at Rs70bn, Health and Nutrition at Rs24bn, and other social sectors at Rs14.4bn.

Special Areas covering Azad Jammu and Kashmir and Gilgit-Baltistan have been allocated Rs79bn, while Merged Districts are proposed to receive Rs66bn, reflecting continued federal commitment to bringing less-developed regions in line with the rest of the country.

It was noted that Rs54bn, or 5% of the total, has been set aside for AJ&K, GB and Newly Merged Districts of Khyber Pakhtunkhwa.

Science and IT has been allocated Rs44bn representing 6% of the total, Governance Rs10bn at 7%, and the Production sector Rs9bn at almost 1% of the proposed PSDP.

Table: Sector-wise PSDP 2025-26 and Proposed PSDP 2026-27 (Rs. in billion)

On the provincial side, total Annual Development Programme (ADP) outlays across all four provinces are estimated at Rs3.138tr for FY2026-27, up from a revised Rs3.062tr in the current year.

Punjab leads with Rs1.45tr, followed by Sindh at Rs816bn, Khyber Pakhtunkhwa at Rs564bn, and Balochistan at Rs308bn. The provincial figures include both local and foreign aid components, with Punjab's foreign aid portion estimated at Rs144bn and Sindh's at Rs296bn.

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