FEDERAL development spending is once again being used as a shock absorber for the government’s persistent fiscal stress caused by its failure to broaden the tax net and collect targeted revenue. Though the actual utilisation of the budgeted expenditure for development is expected to speed up towards the end of the fiscal year, the numbers for the first five months of the current fiscal paint a familiar but troubling picture. In other words, with only 9.2pc of the federal development allocation of Rs1tr utilised by November, the state’s promise of development is being deferred in the name of fiscal discipline. The spending is not only modest in absolute terms but also sharply lower than last year’s, underscoring the pressures on the budget despite official claims of economic and fiscal stability.
The government’s explanation that reduced spending by the provinces, special areas and the railways was responsible for low utilisation is totally absurd. It is the centre itself which is throttling not only its own uplift spending but also provincial programmes amid a tax collection shortfall of Rs430bn and failure to control its wasteful current expenditure. The goal is to produce an IMF-mandated primary surplus, which stood at 1.6pc of GDP at the end of the first quarter of the fiscal year. Even the development slowdown could not have helped it show the required primary surplus without State Bank profits and a massive increase in the petroleum development levy. More concerning is the commitment given to the IMF that development expenditure will be postponed to the last quarter of FY26 if revenues continue to lag. This effectively turns development into a residual expenditure. Not just that, the government has also agreed to take additional measures in the second half of the fiscal year to meet the tax target. Postponement of development means depriving people of essential public services and economic infrastructure. It also amounts to delaying growth and job creation, while reinforcing regional disparities and poverty. Our fiscal woes do not have to translate into a development dilemma. The government has enormous room to slash its bloated non-development spending. However, that requires strong political will and a long-term growth policy vision. The incumbent rulers, like their predecessors, have done little to convince the people that they have what it takes to ensure economic stability without compromising budget integrity and growth.
Published in Dawn, December 20th, 2025
