- NEC to Approve Development Program on May 26 or 27
- 200 Ongoing Projects Likely to Be Closed
- Ahsan Iqbal Says Adequate Allocations Cannot Be Made for Key Initiatives
ISLAMABAD: The federal government has confirmed that the budget for the next fiscal year will be presented on June 2, with the development allocation facing a 16% reduction to Rs921 billion. This cut is expected to lead to the closure of approximately 200 ongoing development projects.
Planning Minister Ahsan Iqbal shared this update during a press conference, revealing that the Ministry of Finance had set the indicative budget ceiling (IBC) at Rs921 billion, significantly lower than the Rs2.9 trillion requested by the Planning Commission based on the requirements of various ministries for development projects. The new allocation is also about 16% less than the revised Rs1.1 trillion allocated this year, which had already been reduced following guidance from the International Monetary Fund (IMF) from the original Rs1.4 trillion approved by parliament for the 2024-25 federal budget.
The minister expressed his intention to challenge the IBC set by the finance ministry and will urge the prime minister to allocate at least Rs1.6 trillion to cover foreign-funded projects adequately.
Iqbal also introduced the Planning Ministry’s Monthly Development Update for May 2025, a new initiative similar to the Ministry of Finance’s economic outlook.
Progress on the Current Year’s Development Budget
In response to a question, the minister stated that authorizations for the disbursement of nearly Rs900 billion from the current year’s Rs1.1 trillion PSDP had been issued. He hoped that these authorizations would increase in May and June. However, he acknowledged the finance division’s constraints in terms of resource allocation, which depend on raising the tax-to-GDP ratio to expand the development budget.
The Annual Plan Coordination Committee is scheduled to meet on May 23 to finalize next year’s development program in consultation with the provinces, Azad Jammu and Kashmir, and Gilgit-Baltistan.
NEC Meeting to Approve Development Program
Meanwhile, the National Economic Council (NEC) is expected to convene on May 26 or 27 to approve the development program and macroeconomic targets for the upcoming fiscal year. The federal budget will be presented on June 2, according to the minister.
Iqbal lamented that, while Rs2.9 trillion had been requested for the next fiscal year’s development budget, the finance ministry had only allocated Rs921 billion, which is about Rs178 billion less than this year’s amount.
“This reduction is concerning,” he said. “It will impact the inflow of foreign exchange as well. To support foreign-funded projects, we will need Rs700 billion for rupee coverage in the next development budget. Without sufficient coverage, we won’t be able to utilize the foreign exchange component effectively.”
Iqbal emphasized that the reduced IBC would make it difficult to allocate funds for important projects, leading to delays and cost escalations. He noted that the number of provincial projects in the PSDP would be cut, and around 200 slow-moving projects would be closed.
Irregularities in Key Projects
Iqbal also highlighted cost escalations in major projects. The Diamer-Bhasha Dam, for instance, saw its cost rise from Rs480 billion to Rs1.5 trillion due to delays, while the Dasu Hydropower Project’s cost increased from Rs500 billion to Rs1.7 trillion.
The minister criticized the implementation of the Dasu Hydropower Project, noting that key positions like project director and CFO were not filled, and it was managed by Wapda’s own staff. He also pointed out that contracts for road construction in the project area were awarded in dollars, leading to irregularities.
Similarly, he raised concerns about the Neelum-Jhelum Hydropower Project, where the contractor was mobilized before the consultant, which he described as a serious irregularity. He shared his surprise when he learned that the CFO of the project had a Master’s in Geography.
Iqbal said that the report from the International Marine Corps on the failure of the Neelum-Jhelum Hydropower Project was still awaited.
Suggestions for WAPDA’s Future Leadership
In response to a question about the appointment of a civilian as Wapda chairman, the minister suggested that a civilian hydrology expert with international recognition should be appointed to the position and stated that he would recommend this to the prime minister.
Iqbal reiterated that funding priorities under the next PSDP would align with the government’s Uraan Pakistan program, which focuses on job creation and economic development. He stated that projects approved under Uraan are expected to generate 120,000 direct and indirect jobs.
