The government has cut funding for foreign-funded development projects by more than half, reducing the allocation from Rs. 537 billion to Rs. 255 billion for the current fiscal year due to a shortage of local currency funds.
The decision was reported to the Senate Standing Committee on Planning, Development and Special Initiatives by a team led by Planning Secretary Dr. Tahir Noor.
The committee was informed 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 fiscal year 2026-27. These projects involve foreign assistance of Rs. 4.65 trillion.
Against a requirement of Rs. 537 billion in local currency funding, the Economic Affairs Division had proposed Rs. 425 billion after consulting relevant ministries, government divisions and donor agencies. However, the National Economic Council approved a total PSDP of Rs. 1 trillion on June 10, against an overall demand of Rs. 2.9 trillion, allocating only Rs. 255 billion for foreign-funded projects due to fiscal constraints.
Senator Quratulain Marri, who chaired the meeting, sought details of projects expected to be completed during the current financial year. The planning ministry team said most were expected to be completed within the year.
The committee stressed the need for effective monitoring and timely implementation, particularly for projects nearing completion. It also called for adequate local currency funding to prevent delays and emphasized transparency, accountability, prudent financial management and coordination with donor agencies.
Members also raised concerns about reliance on foreign loans, particularly dollar-denominated financing that carries interest and repayment obligations. The committee said the government should prioritize domestic resources and rupee allocations where possible, while carefully assessing the financial implications of external borrowing.
The panel emphasized balancing foreign assistance with the country’s fiscal capacity and making better use of local resources to reduce unnecessary dependence on external loans.
Sukkur-Hyderabad Motorway
The committee also reviewed progress on the Sukkur-Hyderabad (M6) Motorway and expressed concern over prolonged delays. Planning Secretary Dr. Tahir Noor told the meeting that work on the project 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 targeted for February 2027. The Asian Development Bank has agreed to provide transaction advisory services for these sections.
Financing arrangements with international development partners have also been secured for the remaining sections, according to the Planning Ministry.
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