ISLAMABAD — The government of Pakistan has reduced the current fiscal year’s development budget by 10%, trimming the Public Sector Development Programme (PSDP) from Rs1,000 billion to Rs900 billion, with the savings earmarked for austerity measures and fuel subsidies, The News reported on Thursday.
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The decision comes amid rising global oil prices triggered by geopolitical tensions. Over the last two weeks, the government has maintained petrol and diesel prices through subsidies but had to increase the cost of Hi-Octane fuel and kerosene. Officials say the reallocation of funds is necessary to absorb these price shocks and ensure fuel affordability for consumers.
Out of an initially earmarked Rs390 billion for contingency measures, some funds were used for building Daanish Schools, while the remainder is being redirected toward energy subsidies. The exact amount still available remains unclear, and authorities are reportedly considering a “smart lockdown” to manage potential supply disruptions and price spikes.
According to the Ministry of Planning, Development, and Special Initiatives, Rs68 billion was cut from ministry and division allocations, while Rs32 billion was slashed from the budgets of public corporations. The Ministry of Finance formally communicated the Rs100 billion PSDP reduction to the Ministry of Planning, representing the 10% cut across the board.
Minister for Planning Ahsan Iqbal confirmed the adjustment, noting that ministries and departments have been instructed to reduce their development budgets proportionally. The PSDP had originally allocated Rs685.9 billion to ministries and divisions, including a local component of Rs583 billion and Rs102 billion for foreign projects. Corporations, including the National Highway Authority (NHA) and the Power Sector Corporation, were allocated Rs314 billion.
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During the first eight months of the fiscal year (July–February), ministries had utilised Rs254.55 billion, while corporations spent Rs106.7 billion, bringing total PSDP utilisation to Rs361.2 billion. The remaining funds will now support subsidies and other austerity measures aimed at stabilising the economy.