Introduction: Development Spending Lagging Behind Expectations
In a concerning development for Pakistan’s economic and infrastructural progress, the federal government has so far spent only Rs424 billion, which accounts for less than 40 percent of the revised Public Sector Development Programme (PSDP) budget. This underspending, documented up to mid-April 2025, has led to significant cash flow problems and delays in hundreds of important projects across the country, affecting not only federal schemes but also provincial and special region projects.
The shortfall is impacting essential development efforts in key areas, including the merged districts of Khyber Pakhtunkhwa (KP), Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and initiatives under organizations such as Suparco (the Pakistan Space and Upper Atmosphere Research Commission).
Official Data: Analyzing the Numbers
According to official figures released by the Planning Commission, development spending between July 2024 and mid-April 2025 amounted to Rs424 billion, or approximately 39 percent of the allocated funds for the fiscal year. This figure is alarmingly low, considering that the financial year is nearing its end in June.
Despite the government’s claims of improved monthly spending, the cumulative expenditure paints a bleak picture of project progress and financial management.
Government Response: Minister Ahsan Iqbal Defends Performance
When questioned about the slow pace of development expenditures, Federal Minister for Planning and Development Ahsan Iqbal acknowledged the shortfall but emphasized that there has been noticeable improvement compared to the previous fiscal year.
Minister Iqbal pointed out that:
- The government has spent Rs102 billion more than what was spent in the same period last year.
- In March 2025 alone, development expenditures increased by Rs27 billion, showing a spike in monthly disbursements.
Despite these increases, the overall execution rate remains low, and many planned projects continue to suffer from funding shortages and stalled progress.
Impact of Under-Spending: Projects in Limbo
The underutilization of development funds is having a ripple effect across multiple sectors:
- Provincial projects linked to health, education, infrastructure, and social welfare are facing severe delays.
- Critical initiatives in merged districts of KP, a region already grappling with security and economic challenges, are particularly affected.
- Strategic programs in Azad Jammu and Kashmir and Gilgit-Baltistan—both geopolitically sensitive regions—have also been slowed.
- Research and technology projects under Suparco are experiencing funding shortfalls, potentially hampering Pakistan’s progress in space technology and satellite development.
These delays not only disrupt planned timelines but also escalate project costs, compromise service delivery, and erode public trust in government initiatives.
Why Is Development Spending Important?
Development expenditure is crucial for:
- Boosting economic growth by creating jobs and improving infrastructure.
- Alleviating poverty by expanding access to healthcare, education, and basic utilities.
- Enhancing regional equity, especially in historically marginalized areas like South Punjab, Balochistan, and merged districts of KP.
- Attracting private investment by building better roads, energy infrastructure, and digital connectivity.
When the government fails to spend the allocated development budget efficiently, it stalls socio-economic progress and misses critical growth opportunities.
Comparison with Previous Years: A Pattern of Chronic Underspending
Pakistan has a long history of underutilizing development budgets, primarily due to:
- Political instability leading to administrative disruptions.
- Bureaucratic inefficiencies delaying project approvals and disbursements.
- Funding constraints resulting from lower-than-expected revenue collections.
- Changes in government priorities, especially around election periods.
While the current administration has increased monthly spending compared to last year, the historical pattern suggests that late-year disbursement rushes rarely result in quality development outcomes.
New Policy Development: Petroleum Levy Act Amendment
In an apparently unrelated but significant fiscal move, Prime Minister Shehbaz Sharif on Tuesday signed a presidential ordinance amending the Petroleum Levy Act. Within hours of the Senate’s session closing, the government sharply increased the petroleum levy rate on petrol to Rs78 per liter.
Analysts view this move as an attempt to:
- Boost government revenues amid fiscal deficits.
- Meet International Monetary Fund (IMF) targets, which often require revenue enhancements.
- Compensate for lower-than-expected development spending by increasing non-tax revenues.
However, such sudden fiscal changes could have adverse impacts, including:
- Rising inflation, as higher fuel prices translate into costlier transportation and goods.
- Public backlash, particularly from low and middle-income groups already grappling with economic pressures.
Key Challenges Facing Development Spending
Several systemic challenges continue to hinder effective development budget utilization in Pakistan:
- Late releases of funds by the Ministry of Finance.
- Slow procurement processes that delay project initiation.
- Capacity constraints in government departments to plan and execute projects.
- Political interference, resulting in skewed project prioritization.
- Security issues, especially in areas like Balochistan and Khyber Pakhtunkhwa, causing disruptions to project implementation.
Way Forward: Recommendations for Improvement
To address these persistent issues, experts recommend:
- Early release of funds to ensure projects can begin on time.
- Streamlining approval processes to reduce bureaucratic red tape.
- Strengthening project monitoring to ensure timely completion and prevent wastage.
- Prioritizing critical infrastructure and human development projects over politically motivated schemes.
- Enhancing transparency and accountability in fund utilization to build public trust.
Unless decisive reforms are undertaken, the cycle of under-spending and development delays is likely to continue, undermining Pakistan’s economic potential.
Conclusion: A Critical Moment for Development and Fiscal Stability
The revelation that less than 40 percent of the revised development budget has been spent so far in the fiscal year 2024–2025 is a significant setback for Pakistan’s growth ambitions. While the federal government, under the leadership of Prime Minister Shehbaz Sharif and Planning Minister Ahsan Iqbal, claims some progress compared to previous years, the overall situation remains far from satisfactory.
With only a few months left in the fiscal year, it remains to be seen whether an accelerated spending push can salvage some of the pending projects. However, rushed end-of-year disbursements often lead to poor quality work and ineffective outcomes.
At a time when Pakistan needs robust infrastructure, inclusive development, and sustainable economic growth, better planning, efficient fund utilization, and transparent governance have never been more critical.
