Experts Warn PSDP Cuts Undermine Long-Term Economic Growth

ISLAMABAD: PMLN government’s policy of cuts in Public Sector Development Programme (PSDP) has given rise to scathing criticism of Prime Minister Shehbaz Sharif’s policy centered on the point that his government was engaging in political favoritism in making the allocations for development projects while ignoring socially important sectors such as water and energy.

The developments and their allocations policy also reflect the regional disparities with Khyber Pakhtunkhwa–a province opposition party in government–clamouring for the implementation of their development projects which have been ignored in the latest Public Sector Development Programme.

Economists and experts have been pointing out that the Planning Ministry itself noted in its documents that PSDP spending has plummeted from 2.6% of GDP in 2018 to just 0.8% in 2025. Experts plead that this “reverse movement” severely undermines the country’s ability to sustain long-term economic growth and job creation.

The latest PSDP reflects the political priorities of the government rather than the economic and developmental priorities of the society, “While critical sectors like water and power saw budget cuts of 28% to 37%, the National Highway Authority (NHA) received a 41% increase, often linked to high-visibility road projects favored by the ruling PML-N”.

Khyber Pakhtunkhwa (KP): The provincial government formally complained that 91 key projects (already 70% complete) were removed from the federal PSDP, which they termed a violation of equitable development.

The PMLN government has a constituency and vote bank which revolves around construction of highways and motorways and particularly inter-city road construction. Experts believe this is how the PMLN as a party has been organized at the organizational level.

The total “throw-forward” which is commonly described as the cost to complete ongoing projects reached a staggering Rs 10.2 trillion by late 2025. Critics argue that starting new projects while underfunding current ones leads to massive cost escalations—estimated at over Rs 1.1 trillion due to delays.

And as the parliament has been non functional for a long period of time, there is no one to oppose or criticize the mismanagement of the government Public Sector Development Programme on such a large scale. This mismanagement has huge financial and social costs which will be endured by the society and not by the government.

Experts point out that the government’s weak hand in dealing with the International Monetary Funds (IMF) is particularly responsible for this bad policy and mismanaged implementation of the Public Sector Development Programme (PSDP). Economists point out that the development budget has been “curtailed” specifically to meet IMF benchmarks, effectively sacrificing future productivity for immediate fiscal stabilization.

PMLN government’s neglect of science and technology is unmatched, “Major cuts were seen in high-tech and strategic sectors, including a 77% cut for SUPARCO and a 96% reduction for the Pakistan Atomic Energy Commission (PAEC), which critics say halts scientific advancement” said an expert.

Some of the experts and economists have pointed out that the government has restructured the PSDP to focus on “high-impact” and foreign-funded projects to manage these constraints. This amounts to politicking at the cost of sound economic policy making, which is unacceptable.