By Ayesha Saba

The government has reduced the size of the Public Sector Development Programme (PSDP) 2025-26 by Rs100 billion amid fiscal constraints and external pressures, reflecting a shift toward tighter expenditure management.

The cut represents a 10% reduction in the federal PSDP for the current fiscal year, according to the Monthly Development Update (April 2026) issued by the Ministry of Planning, Development and Special Initiatives.

The report noted that the adjustment comes in response to evolving economic conditions, including external shocks and the need to maintain fiscal discipline while managing limited financial resources.

It stated that the ongoing Middle East conflict and associated global oil price volatility have intensified fiscal pressures, necessitating austerity measures to contain expenditure.

As part of these measures, the government has introduced a number of steps aimed at reducing spending and conserving resources.

These include work-from-home arrangements, a four-day workweek, reductions in salaries and board fees, and a ban on foreign travel, all intended to strengthen fiscal discipline.

The report highlighted that such measures are designed to manage the impact of external shocks without disrupting essential development activities.

Despite the reduction in overall PSDP size, the government has maintained its focus on prioritizing ongoing and high-impact projects.

The document emphasized that available resources are being directed toward projects that offer the greatest economic and social returns, ensuring continuity in key development initiatives.

It further noted that sectoral adjustments following the PSDP cut are yet to be finalized, indicating that the allocation of reduced resources across sectors will be determined in line with evolving priorities.

The report underlined that fiscal consolidation efforts are being pursued alongside development objectives, with a focus on balancing expenditure control and growth requirements.

The reduction in PSDP size reflects the government’s approach to managing fiscal pressures while sustaining development momentum under constrained conditions.

Overall, the report indicated that the austerity-driven adjustment in development spending is part of a broader strategy to maintain macroeconomic stability in the face of external challenges.

Credit: INP-WealthPk