Government Cuts Foreign-Funded Project Portfolio by Over Half Amid Funding Shortage

ISLAMABAD: The government announced on Monday a significant reduction in its foreign-funded project portfolio, slashing it from Rs537 billion to Rs255 billion due to a lack of matching funds in local currency for the current fiscal year.

This decision was conveyed to the Senate Standing Committee on Planning, Development and Special Initiatives by a delegation led by Planning Secretary Dr Tahir Noor. During the meeting, Noor also revealed that construction on the Sukkur-Hyderabad (M6) Motorway is set to commence ‘within months’ now that foreign financing amounting to $705 million has been secured.

The committee, chaired by Senator Quratulain Marri, assessed allocations for foreign-funded development projects under the Public Sector Development Program (PSDP) for 2026–27. It was noted that 98 foreign-funded projects, with a total estimated cost of Rs8.1 trillion, are included in the current fiscal year’s PSDP, which anticipates foreign assistance of Rs4.65 trillion.

In response to a demand for Rs537 billion in rupee cover, the Economic Affairs Division (EAD) proposed Rs425 billion after consultations with relevant ministries, divisions, and donor agencies. However, the National Economic Council (NEC) ultimately approved the PSDP at Rs1 trillion, reflecting the ongoing challenges in securing adequate funding for development initiatives.