Development spending cut as finance ministry tightens project rules

ISLAMABAD: The Ministry of Finance has ordered major reductions in development budgets for provincial development bodies for the 2026-27 fiscal year, as the government moves to contain pressure from a deepening fiscal and economic crisis.

Under the new curbs, development authorities and corporations operating in the six districts of Rawalpindi Division will not be able to launch any major public project during the period from July 1, 2026 to June 30, 2027. Similar restrictions have also been extended to departments including education, forests and health.

Stricter conditions for new schemes

According to the new procedure, no institution will be permitted to send development schemes in draft form. Any department seeking approval for a project must first complete a feasibility study, prepare the PC-I and draw up cost estimates before informing the finance ministry. A project may only be forwarded for final approval after the ministry gives a positive indication on the availability of funds.

All schemes that were submitted without completing this process have been rejected and sent back. The move has triggered concern among development institutions over the additional financial burden involved in preparing technical documentation before any funding assurance is received.

Concerns over implementation costs

An official from a Rawalpindi-based development authority questioned how agencies would manage the upfront expense of preparing feasibility reports, PC-I documents and cost estimates from their own resources, particularly if the proposed project is later turned down.

Estimates indicate that around 450 schemes could be affected by the budget cuts and procedural restrictions, including seven major projects in Rawalpindi Division. As a consequence, all mega projects in Rawalpindi district have been left out of the Annual Development Programme.