PSDP 2025-26, projections for 2026-27 and 2027-28: Ministry initiates process
ISLAMABAD: The Ministry of Planning, Development, and Special Initiatives has initiated the process of PSDP 2025-26 formulation and its projections for 2026-27 and 2027-28 and directed ministries/divisions/agencies to deliberate and prepare their respective development portfolios.
According to the Ministry of Planning, the PSDP-2025-26 and projections for 2026-27 and 2027-28, presently, the throw-forward is around Rs10 trillion, which is 10 times the current rate of PSDP allocation provided no new project is added and there is no revision of ongoing projects in the development portfolio.
For ongoing projects, federal ministries/divisions and provincial governments should thoroughly scrutinise, in order of priority, their respective approved portfolios to determine whether the development projects fall under the overall development objectives of the government.
The Public Sector Development Programme (PSDP) aims to enhance the overall productivity and competitiveness of the economy, which can lead to sustained economic growth and improved living standards. However, the effectiveness of PSDP is undermined by its insufficient size, which does not meet the country’s development needs and results in thin spreading of allocation by the ministries/divisions, which in turn causes accumulation of throw forward. Presently, the throw-forward is around Rs 10 trillion, which is 10 times the current rate of PSDP allocation, provided no new project is added and there is no revision of ongoing projects in the development portfolio. Similarly, the size of PSDP, in terms of percent of GDP, has also reduced to half, from 1.7 per cent of GDP in FY 2013-14 to almost 0.6 per cent of GDP in FY 2024-25. Unprecedented inflation and currency devaluation witnessed in the country during the last few years have further reduced the real value of PSDP, and the progress on national-level projects of greater economic benefits remained below the desired level. Therefore, there is a need to rationalise the PSDP portfolio with a view to having greater allocative efficiency and limiting its scope to financing the federal subjects only.
The process of PSDP 2025-26 formulation and its projections for 2026-27 and 2027-28 has been initiated to enable the sponsoring ministries/divisions/agencies to deliberate and prepare their respective development portfolios as per the timelines in line with “Uraan Pakistan”.
About ongoing projects, priority should be accorded to the allocation of development funds for core ongoing projects and those in line with the implementation of the strategic transformation plan of “Uraan Pakistan”. Priority should be accorded to projects with 80 per cent plus expenditure in all sectors with the aim of completing them during FY2025-26. Ministries/Divisions should first ensure allocation to ongoing projects according to the annual phasing given in the approved PC-I and to new projects if space is available. No further allocation for the projects where full funding has been allocated in PSDP 2024-25. DDWP-level approved projects will only be considered for financing in PSDP 2025-26 after ensuring the funding requirements of CDWP/ECNEC-level projects of national importance.
About foreign-aided projects, the Economic Affairs Division (EAD) will provide firmed-up foreign aid estimates to be disbursed during FY2025-26, with a further two years’ projection in consultation with all ministries and stakeholders. Ministries/Divisions should prioritise and allocate adequate rupee cover to the foreign-funded projects within IBC for the smooth execution of foreign-funded projects and uninterrupted inflow of foreign exchange and to honour international obligations. The cost of the projects to be financed through foreign aid as a rupee cover should be reflected separately with the source (donor name), amount with currency, and equivalence in Pakistani rupees.
About provincial nature projects, provincial nature projects may not be considered for approval/financing except those in the least developed districts as approved by the NEC. To honour international obligations on SDGs by 2030, the provinces should ensure adequate funding for SDGs targets related to devolved subjects through respective ADPs. Provincial governments should ensure counterpart funding of cost-shared projects in respective ADPs.
In case of schemes being financed on a cost-sharing basis between the federal and provincial governments or with any other agency, the cost, expenditure, and proposed allocations should be clearly indicated separately, wherever applicable. Only the federal share of the cost would be used to ascertain the exact level of throw-forward at the time of considering allocations against the federal share in PSDP.
About new projects, priority should be given to high-value and early-completion projects by optimising limited PSDP resources (inputs) to produce maximum outputs (high-visible impact projects), which contribute to outcomes and eventually to development goals/SDGs. New projects should have a particular focus on supporting exports, enhancing productivity, fostering competitiveness, deepening and spreading digital infrastructure, innovation-driven enterprises, industrial development, agro industry and seed development, the blue economy, science & technology, R&D, and innovation reforms. All PC-Is of new projects have to be uploaded on iPAS till 31st March 2025.
Projects without a PC-II/feasibility certificate, wherever applicable, will not be considered for funding. New approved projects that fall under the federal subjects and mitigate the adverse effects of climate change would be encouraged for PSDP allocation.
PPP Projects: Priority will be given to PPP-approved projects, where PSDP funding is either used as equity or as a viability gap.
Only 10 per cent of the allocated development budget for FY2025-26 would be considered for allocation to new projects, with a particular focus on supporting exports, enhancing productivity, fostering competitiveness, deepening and spreading digital infrastructure, innovation-driven enterprises, industrial development, agro industry and seed development, the blue economy, science & technology, R&D, and innovation reforms in accordance with NEC guidelines.
Principal Accounting Officers should ensure the placement of full-time Project Directors as per applicable guidelines and put in place qualitative/quantitative monitoring indicators to avoid time and cost overruns. PSDP 2025-26 should have a special focus on mitigating climate change (green budgeting), especially in the context of Pakistan’s C-PIMA and other initiatives, including gender budgeting.
Petroleum Division to ensure implementation of gas schemes under 05 km radius as directed by CDWP and obtain required funds from the Finance Division outside PSDP or oil and gas exploring companies through CSR.
Ministries/Divisions are also requested to provide a one-page write-up on the PSDP strategy, pertaining to the respective sector/ministry/division covering, among others, benefits from the proposed investment, boosting the exports, productivity, job creation, supporting role to stimulate private sector investment, and impact on poverty alleviation. The proposal may contain information as to how the proposed portfolio would assist in achieving balanced regional development.
Copyright Business Recorder, 2025
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