The government has slashed local currency funding for foreign-funded development projects by more than half for fiscal year 2026-27, reducing the allocation from Rs. 537 billion to Rs. 255 billion because of limited financial resources.
The Planning Ministry informed the Senate Standing Committee on Planning, Development and Special Initiatives about the reduction through a team led by Planning Secretary Dr. Tahir Noor.
The committee was told that 98 foreign-funded projects, with a combined estimated cost of Rs. 8.1 trillion, were included in the Public Sector Development Programme (PSDP) for FY27. The projects involve foreign assistance worth Rs. 4.65 trillion.
Against the estimated local funding requirement of Rs. 537 billion, the Economic Affairs Division had proposed Rs. 425 billion after consultations with relevant ministries, government divisions and donor agencies.
However, the National Economic Council approved a total development programme of Rs. 1 trillion on June 10, against a demand of Rs. 2.9 trillion. The allocation for foreign-funded projects was limited to Rs. 255 billion because of fiscal constraints.
Committee Chair Senator Quratulain Marri sought details of projects expected to be completed during the current fiscal year. Planning Ministry officials said most of these projects were expected to reach completion within the year.
The committee called for closer monitoring and timely execution, particularly for projects nearing completion. It also stressed that sufficient local currency funding was necessary to avoid implementation delays.
Members urged the government to ensure transparency, accountability, sound financial management and better coordination with international donor agencies.
The committee also raised concerns over dependence on foreign loans, particularly dollar-denominated borrowing that creates interest payments and repayment obligations.
It stressed the need to make better use of domestic resources and prioritise rupee funding where feasible, while carefully assessing the costs and long-term implications of external financing.
The panel said foreign assistance should be aligned with Pakistan’s fiscal capacity to limit unnecessary dependence on external borrowing.
Sukkur-Hyderabad Motorway to Start Within Months
The committee also reviewed progress on the Sukkur-Hyderabad (M6) Motorway and expressed concern over delays in the project.
Planning Secretary Dr. Tahir Noor told the meeting that construction would begin within months following the availability of $705 million in foreign financing.
Sections I and II are being processed under the public-private partnership model, with the concession award expected in February 2027. The Asian Development Bank has agreed to provide transaction advisory services for these sections.
The Planning Ministry also informed the committee that financing arrangements with international development partners had been secured for the remaining sections.
