The federal government’s target of Rs4.1 trillion for national development expenditure in the upcoming fiscal year presents a sobering reality: Islamabad’s share in driving long-term economic growth continues to diminish amid an unrelenting resource crunch. With provinces shouldering Rs2.8 trillion of the development burden — over two-thirds of the total — the federal contribution has shrunk to a mere Rs1 trillion, just 21.4% of the total planned spending.
While the enhanced fiscal autonomy granted to provinces under the 18th Amendment justifies their increased responsibility in development expenditure, this shift cannot entirely absolve the federal government of its essential role in national infrastructure. Provinces have, over the years, consistently increased their development allocations and, more importantly, generated annual cash surpluses to assist the federal government in managing fiscal deficits — often under IMF directives.
However, certain critical responsibilities remain squarely with the centre, particularly those involving large-scale, cross-provincial infrastructure projects such as highways, energy corridors, and national logistics. These projects are beyond the scope of individual provinces and require significant federal commitment and coordination.
The sharp decline in federal development spending is attributed to several structural issues: the need to maintain a primary budget surplus for debt sustainability, a dismal tax-to-GDP ratio, and weakening inflows of foreign investment and aid. While fulfilling IMF conditions may be unavoidable in the short term, sacrificing development to meet fiscal benchmarks is a long-term economic risk. Pakistan cannot afford to underinvest in infrastructure if it aims to achieve sustainable growth, generate employment, and reduce regional disparities.
The solution lies not in reallocating existing resources but in expanding the fiscal pie. This requires bold structural reforms to boost tax revenue, including broadening the tax base and improving compliance, especially among the affluent and under-taxed sectors. Moreover, wasteful current expenditures — particularly political spending disguised as development funds for lawmakers — must be reined in. Funds should be directed toward completing ongoing projects rather than launching new, vote-driven schemes that often stall midway and contribute to cost overruns and corruption.
Pakistan’s annual infrastructure investment remains at a paltry 2–3% of GDP, far below the regional requirement of at least 10%. Beyond increasing budgetary allocations, the government must create a robust policy framework to attract private sector financing through banks and capital markets. A sustainable, transparent investment ecosystem can draw the resources needed for new infrastructure projects and alleviate pressure on public coffers.
The federal and provincial governments must now work in sync — not just to spend more, but to spend smarter. Only through efficient, targeted, and corruption-free development spending can Pakistan hope to build a future-ready economy.
While the enhanced fiscal autonomy granted to provinces under the 18th Amendment justifies their increased responsibility in development expenditure, this shift cannot entirely absolve the federal government of its essential role in national infrastructure. Provinces have, over the years, consistently increased their development allocations and, more importantly, generated annual cash surpluses to assist the federal government in managing fiscal deficits — often under IMF directives.
However, certain critical responsibilities remain squarely with the centre, particularly those involving large-scale, cross-provincial infrastructure projects such as highways, energy corridors, and national logistics. These projects are beyond the scope of individual provinces and require significant federal commitment and coordination.
The sharp decline in federal development spending is attributed to several structural issues: the need to maintain a primary budget surplus for debt sustainability, a dismal tax-to-GDP ratio, and weakening inflows of foreign investment and aid. While fulfilling IMF conditions may be unavoidable in the short term, sacrificing development to meet fiscal benchmarks is a long-term economic risk. Pakistan cannot afford to underinvest in infrastructure if it aims to achieve sustainable growth, generate employment, and reduce regional disparities.
The solution lies not in reallocating existing resources but in expanding the fiscal pie. This requires bold structural reforms to boost tax revenue, including broadening the tax base and improving compliance, especially among the affluent and under-taxed sectors. Moreover, wasteful current expenditures — particularly political spending disguised as development funds for lawmakers — must be reined in. Funds should be directed toward completing ongoing projects rather than launching new, vote-driven schemes that often stall midway and contribute to cost overruns and corruption.
Pakistan’s annual infrastructure investment remains at a paltry 2–3% of GDP, far below the regional requirement of at least 10%. Beyond increasing budgetary allocations, the government must create a robust policy framework to attract private sector financing through banks and capital markets. A sustainable, transparent investment ecosystem can draw the resources needed for new infrastructure projects and alleviate pressure on public coffers.
The federal and provincial governments must now work in sync — not just to spend more, but to spend smarter. Only through efficient, targeted, and corruption-free development spending can Pakistan hope to build a future-ready economy.
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