Islamabad, Jan 17 (.) Development spending in Pakistan remained sharply subdued during the first half of the current fiscal year, even as the economy is projected to grow by 3.5% in 2026, driven by the continued implementation of the IMF reform programme.
Several factors contribute to the slowdown in Pakistan’s economic growth.
These include, Political Instability: Frequent changes in government and political uncertainty discourage investment and disrupt economic policies.
Energy Crisis: Shortages in electricity and gas supply hamper industrial production and increase costs.
High Inflation: Rising prices reduce consumer purchasing power and increase the cost of doing business.
Fiscal Deficit and Debt: Large budget deficits and increasing public debt limit government spending on development.
Security Concerns: Internal security issues affect investor confidence and tourism.
Official figures released by the Ministry of Planning show that only PKR156.27 billion (about $560 million) was spent between July and December on development programmes, out of a total Public Sector Development Programme (PSDP) allocation of PKR685.9 billion (around $2.45 billion) for ministries and divisions.
This weak pace of public investment has contributed to sluggish growth at a time when private sector activity is also under strain.
An exception to the broader slowdown has been the Sustainable Development Goals Achievement Programme (SAP), which provides discretionary development funds to parliamentarians.
Of the PKR70.2 billion (roughly $250 million) allocated under SAP, about PKR30 billion ($107 million) was utilised in the first six months. As per economists, with the current pace, the SAP is expected to be fully exhausted by the end of the fiscal year, standing out among more than 800 PSDP schemes that are otherwise lagging far behind schedule.
Economists warn that the slowdown in public sector investment is exacerbating the broader economic slowdown.
Traditionally, public spending has acted as a counter-cyclical tool, stimulating demand when private investment weakens. This time, both public and private investment have slowed simultaneously, deepening the drag on growth.
Business leaders have complained that weak demand is worsening their financial pressures, with declining electricity consumption cited as one indicator—alongside the rapid shift toward rooftop solar, which is also cutting grid demand.
Barely 20% of total development funds were utilised in six months.
With the remaining 80% left for the second half of the year, analysts warn of a familiar risk: a rush to spend before the fiscal year ends, potentially compromising the quality, efficiency and oversight of development expenditure.
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