The Water Resources Division is the biggest beneficiary with Rs 103.8 billion, followed by Rs 88 billion proposed for the Power Division.
ISLAMABAD:
Ahead of the presentation of the federal budget for fiscal year 2026-27, the government on Friday proposed a Rs 1 trillion Federal Public Sector Development Program (PSDP) as part of the broader Rs 17.5 trillion budget, according to official budget documents.
Under the proposed PSDP, Rs 682.48 billion have been allocated to federal ministries and divisions, while the National Highways Authority (NHA) will receive Rs 224.51 billion.
The Water Resources Division is the largest recipient among federal entities, with a proposed allocation of Rs 103.8 billion. The Power Division (NTDC/PEPCO) is next with Rs 88 billion, while the Cabinet Division has been allocated more than Rs 64.8 billion.
The Higher Education Commission (HEC) is proposed to receive Rs 46 billion, followed by the Railway Division with Rs 40.65 billion and the Federal Vocational Education and Training Division with Rs 36.31 billion.
A total of Rs 233.33 billion has been allocated to the provinces and special areas, including Rs 56.7 billion for the merged districts and Rs 85.02 billion for Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (GB).
The Information Technology and Telecommunication Division will receive Rs 19.58 billion, while Rs 16.06 billion has been allocated to the National Health Services Division. The Home Division has been allocated Rs 21.82 billion and Rs 1 billion has been allocated for new projects under CPEC 2.0.
The federal PSDP is proposed at Rp 1 trillion, while development spending by state-owned enterprises is estimated at Rp 2,218 trillion, bringing the overall national development program to Rp 3,669 trillion.
Planning Minister Ahsan Iqbal has said that no new development projects will be started during the next fiscal year, except those related to defense and internal security.
Economic Goals for Fiscal Year 2026-27
According to official documents, the government has set a gross domestic product (GDP) growth target of 4% for fiscal years 2026-27, while inflation is projected at 8.2%.
The services 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 record growth of 4.2%.
The government has projected an overall investment of 15% of GDP and national savings of 14.3%. Fixed investment is expected to reach 13.3%, while private sector investment is expected to reach 10.3%.
Among agricultural subsectors, cotton ginning is expected to grow by 2.5%, livestock by 3.9%, forestry by 3.2% and fishing by 1.5%.
The manufacturing sector growth target is 5.8%, including 4.5% growth in the large-scale manufacturing sector and 7.2% growth in the small-scale manufacturing sector.
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 communications. The information and communications sector is expected to grow by 7.7%.
Financial and insurance services are expected to expand by 4.5%, while growth of 3.5% has been projected for real estate, 3.6% for education and 4.3% for human health and social work activities.
federal budget
The government will on Friday (today) unveil a huge consolidated budget of Rs 17.5 trillion (approximately $61 billion) for fiscal year 2026-27 to meet the International Monetary Fund’s strict austerity conditions.
The high-risk spending plan balances fiscal tightening and structural directives from the IMF while introducing relief measures for the poorest citizens and modest wage increases for government workers. The budget comes at a time when much 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 increase revenues and cut spending while protecting the country’s poorest.
Under pressure from the International Monetary Fund to meet austerity conditions, Finance Minister Muhammad Aurangzeb will present to the National Assembly a delayed 17.5 trillion rupees ($61 billion) spending plan for the fiscal year starting next month.
Also read: Government to release budget of Rp 17.5 trillion
The budget had been formulated keeping in mind the challenges faced by the economy on the national and international fronts.
Apart from fiscal management, the budget would include revenue mobilization, measures for economic stabilization and growth, reduction of non-development expenditure, job creation and people-friendly policies for socio-economic prosperity of the country.
The burden of higher fuel and energy costs and taxes will fall heavily on formally registered businesses and salaried workers as politically powerful sectors such as agriculture, retail and real estate remain difficult to tax, experts say.
Authorities must deal not only with the conditions of the latest IMF bailout package, but also with the enormous impact of the US-Israel war against Iran, a conflict in which Islamabad has sought to mediate.
The war-induced surge in oil prices has pushed 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 began 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 fallout from war with Iran
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 Board of Revenue to increase next year’s tax collection to 37% above this year’s target, something the agency will not meet.
Pakistan’s vast unofficial economy keeps much of Pakistan’s cash out of the 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 income has not kept pace. Corporate tax rates are already high by global standards, while raising the income tax would crush purchasing power still recovering from two years of inflation.
The budget is expected to protect the poorest citizens by providing them with cash transfers. The government has not explained the week-long delay in presenting the budget.
