Here’s a stark reality check: Pakistan’s public development spending is on a downward spiral, while defense outlays are set to soar. But here’s where it gets controversial—is this the right balance for a country grappling with economic challenges and long-term growth needs? The International Monetary Fund (IMF) paints a picture of shifting priorities in its latest projections, and it’s raising eyebrows.
Amid improving fiscal conditions, the IMF forecasts a shrinking Public Sector Development Programme (PSDP) and rising defense spending from the current year through fiscal year 2030. And this is the part most people miss—while interest payments as a share of GDP are stabilizing, they’re doing so at the expense of development initiatives. For instance, interest payments for the last fiscal year (FY25) ended slightly higher than initially estimated, at 7.8% of GDP. This year, the IMF revised its estimate downward to 6.5% due to lower policy rates, with further declines expected to 4.8% by FY30.
In real terms, interest payments are projected to dip slightly to Rs8.225 trillion this year from Rs8.88 trillion in FY25. However, they’ll remain relatively static before rising again to Rs9.3 trillion by FY30. Meanwhile, the national economy is expected to grow, with nominal GDP reaching Rs194 trillion by FY30. Yet, despite these improvements, the PSDP is struggling—both in absolute numbers and as a share of GDP.
Here’s the kicker: The PSDP, originally estimated at 0.9% of GDP in FY25, was slashed to 0.7% to offset revenue shortfalls. Alarmingly, it’s projected to drop further to 0.6% of GDP next year and remain stagnant through FY30. Even in absolute terms, PSDP spending is far below initial estimates, with Rs873 billion allocated this year compared to the original Rs1.065 trillion. While it’s expected to rise to Rs1.2 trillion by FY30, it’s a far cry from what’s needed to fuel sustainable development.
On the flip side, defense spending is making a comeback. After declining from 2.4% of GDP in FY21 to 1.8% in FY24, it’s projected to rise to 2% of GDP this year and stay there until FY30. In absolute terms, the defense budget is on an upward trajectory, jumping from Rs1.3 trillion in FY21 to a projected Rs3.96 trillion in FY30—an 80% increase.
Is this trade-off justified? The government, under IMF guidance, is restructuring the PSDP to improve project selection. However, even the IMF hasn’t been able to curb allocations for parliamentarians’ constituency schemes under the Sustainable Development Goals (SDGs) Achievement Programme (SAP), which has claimed Rs70 billion this year. The finance minister has pledged to cap new project allocations to 10% of the total in the FY27 budget and improve the scorecard-based system for project selection. But will these measures be enough?
Development spending has already taken a hit, with utilization at just 9.2% of the Rs1 trillion annual allocation in the first five months of this fiscal year. Spending of Rs92 billion was 20% lower than the same period last year. The Planning Ministry attributes this to reduced expenditure by provinces, special areas, and the Ministry of Railways.
Here’s a thought-provoking question: As defense spending climbs and development initiatives lag, are we prioritizing short-term security over long-term economic growth? Share your thoughts in the comments—this is a debate worth having.
