Islamabad (HRNW)- An agreement has been reached between the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan Peoples Party (PPP) on reductions in federal and provincial development programs (PSDP), paving the way for the approval of the Federal Budget 2026-27.
President Asif Ali Zardari has approved the convening of the National Assembly session at 5:00 PM and the Senate session at 4:00 PM.
According to sources, the federal government has reduced the proposed Public Sector Development Programme (PSDP) by Rs126 billion, bringing it down from Rs1,126 billion. Except for Balochistan, the remaining provinces are also expected to reduce their development expenditures, generating savings of approximately Rs500 billion for strategically important national projects.
Federal Minister for Planning and Development Ahsan Iqbal confirmed that the federal PSDP had been reduced by Rs126 billion.
Sources said the federal government had sought additional financial support from provinces through the divisible pool, including Rs650 billion from Punjab, Rs300 billion from Sindh, Rs180 billion from Khyber Pakhtunkhwa, and Rs110 billion from Balochistan. However, no reduction is expected in Balochistan’s development budget due to its already reduced allocation.
The federal government plans to distribute Rs8,200 billion among provinces from the divisible pool, compared to Rs9,400 billion under the existing formula.
Punjab is expected to reduce its proposed development budget by around Rs150 billion, while Sindh and Khyber Pakhtunkhwa are also reviewing their development spending plans.
According to officials, if provinces contribute an additional Rs350 billion, the federal PSDP could increase from Rs1 trillion to Rs1.4 trillion.
The government plans to allocate Rs335 billion of the additional resources to major water projects, including the Diamer-Bhasha Dam, Mohmand Dam, and Dasu Dam, while the remaining amount would be directed toward projects of strategic and defense importance.
Sources further stated that the government intends to allocate Rs3 trillion for defense spending, although the IMF has indicated support for an allocation of Rs2.665 trillion.
A meeting of the National Economic Council (NEC), chaired by Prime Minister Shehbaz Sharif, is being held to finalize key economic decisions. The meeting will be attended by the four provincial chief ministers, the Prime Minister of Azad Kashmir, and senior government officials.
The government is also considering relief measures in the upcoming budget, including tax relief for the salaried and corporate sectors, possible reductions in turnover taxes, changes to the super tax structure, incentives for exporters, and a proposed increase in salaries and pensions of government employees ranging from 7% to 10%, which could rise further depending on coalition consultations.
In addition, proposals under consideration include taxation on crypto trading gains, withdrawal of certain tax exemptions, and the introduction of new taxes aimed at generating additional revenue.
The economic growth target for the next fiscal year is expected to be 4%, while average inflation is projected at 8.2%.
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