Budget 2026–27: Government Assures IMF of Allocating Up to 10% Funds for Development Projects

ISLAMABAD: The federal government has assured the International Monetary Fund that up to 10 percent of funds in the upcoming 2026–27 federal budget will be allocated for development projects, sources said.
An IMF review mission is expected to visit Pakistan next month for final consultations on budget preparations. During the visit, detailed discussions will be held on key economic targets for the next fiscal year.
Officials said that major indicators including the overall budget size, GDP growth target, tax collection goals, fiscal deficit, Public Sector Development Programme, tax-to-GDP ratio, and debt servicing will be finalized in line with IMF benchmarks.
Sources further revealed that unnecessary tax exemptions will be reduced in the upcoming budget, with all fiscal targets aligned with commitments made to the IMF.
The government is also reviewing budget proposals submitted by the Federation of Pakistan Chambers of Commerce and Industry, chambers of commerce, trader associations, and other stakeholders. Work is underway to finalize the draft budget based on these recommendations.
Despite the commitment to allocate up to 10 percent for new development projects, financial constraints are likely to keep the development budget limited. The Ministry of Finance has reportedly rejected a proposal to allocate Rs3 trillion for PSDP.
According to sources, more than 300 new development projects have been proposed by various ministries and divisions, with a combined estimated cost of Rs7 trillion. However, the government plans to prioritize the completion of ongoing projects in the next fiscal year.
Efforts are being made to ensure efficient utilization of funds allocated under PSDP. In the current fiscal year 2025–26, Rs1 trillion was allocated for development projects. Out of over 1,100 projects with a total estimated cost exceeding Rs13 trillion, more than Rs450 billion has been spent from July to April, while the throw-forward of PSDP projects stands at around Rs1 trillion.