ISLAMABAD:The National Economic Council (NEC) on Wednesday sanctioned a massive national development outlay of Rs3.9 trillion, amid calls from some provinces to revisit the National Finance Commission (NFC) Award and reopen discussions on agriculture income tax with the International Monetary Fund (IMF).The approved Public Sector Development Programme (PSDP) for 2025–26 highlights the government’s political priorities, particularly increased spending on road infrastructure and projects in Sindh, while slashing allocations for key sectors such as space research, atomic energy, health, and education.Chaired by Prime Minister Shehbaz Sharif, the NEC set GDP growth target at 4.2% and inflation at 7.5% for the upcoming fiscal year. The NEC, a constitutional forum, is responsible for approving Pakistan’s macroeconomic and development strategies.The council raised concerns over rapid population growth, noting that this year’s economic growth rate barely kept pace with population increase. To support development goals, the NEC approved Rs1 trillion for the federal PSDP and Rs2.9 trillion for provincial annual development plans. However, this combined Rs3.9 trillion spending is seen as fiscally unrealistic, reflecting more on political maneuvering than economic prudence.Despite initial plans to allocate Rs50 billion for parliamentarian-led discretionary projects, the NEC raised the amount to Rs70 billion. Similarly, federal development funding for provinces was increased from Rs93.4 billion to Rs106 billion, while allocations for health, education, and energy were slashed:Higher Education Commission (HEC): Cut to Rs39.4 billionMinistry of Health: Reduced to Rs14.3 billionPower Sector: Slashed from Rs104 billion to Rs90 billionWater Projects: Increased to Rs133 billion from Rs119 billionSUPARCO (Space Program): Reduced drastically from Rs24.2 billion to Rs5.4 billionPakistan Atomic Energy Commission: Cut to just Rs781 million from Rs4.7 billionThe budget was finalized by a high-level committee including Deputy PM Ishaq Dar and PM’s political advisor Rana Sanaullah Khan. Sources point out that increased federal funding for provincial projects contradicts IMF conditions to reduce such expenses.During the NEC session, members flagged the meager 0.6% growth in agriculture and urged structural policy reforms, including reduction in input costs. Sindh representatives specifically called for revisiting the issue of agricultural income tax with the IMF. While new agri-tax laws have been passed by provinces, they remain unenforced, and it remains unclear whether the Finance Ministry will broach the matter with the IMF.The Khyber Pakhtunkhwa (K-P) government also raised concerns over delays in NFC Award renegotiations, particularly in light of the FATA merger. Prime Minister Shehbaz Sharif pledged to convene the NFC meeting in August. However, the development allocation for K-P merged districts was reduced to Rs65.4 billion from Rs70 billion approved earlier this week.The Punjab government voiced objections over high taxation on agricultural machinery.The NEC approved Rs2.86 trillion in development spending by the four provinces:Punjab: Rs1.2 trillionSindh: Rs995 billionK-P: Rs417 billionBalochistan: Rs280 billionThis provincial spending is roughly Rs860 billion more than what the IMF has planned, raising concerns that either these allocations won’t be fully spent or the IMF’s fiscal surplus target will be missed.The NEC also reviewed the implementation of the current year’s PSDP, noting underutilization of funds, and endorsed the publication of the 13th Five-Year Plan (2024–29). The URAAN Pakistan Implementation Framework, part of a broader economic vision launched on December 31, 2024, was also formally approved.According to economic targets for FY2025–26:Exports: Projected at $35.3 billionRemittances: Expected to exceed $39.4 billionImports: Estimated at $65.2 billionCurrent Account Deficit: Forecast at $2.1 billionCurrently, Pakistan is implementing 1,071 development projects worth Rs13.4 trillion, but an additional Rs10.2 trillion is required to complete them — a process expected to take over a decade.The Five-Year Plan aims for balanced regional development, export-led growth, SME expansion, social protection, human capital enhancement, knowledge economy transition, and climate resilience.
