KARACHI: Pakistan’s government spent just 10.4 percent of its Rs1 trillion ($3.61 billion) development budget in the first four months of the current fiscal year, according to official data, with economists warning that the slow pace of spending could jeopardize the country’s 4 percent economic growth target.

Planning Ministry data show that the government spent Rs103.9 billion ($375 million) under the Public Sector Development Program (PSDP) during July-October, while spending on the second phase of the multibillion-dollar China-Pakistan Economic Corridor (CPEC) remained zero.

Pakistan’s finance ministry announced a federal budget in June that kept development spending unchanged at Rs1 trillion as Islamabad sought to contain borrowing and meet fiscal targets agreed with the International Monetary Fund (IMF) under its $7 billion loan program.

Economists, however, wonder whether fiscal consolidation was coming at the expense of development spending, potentially weighing on the country’s economic growth.

“IMF encourages fiscal discipline. So focus should be on expenditure curtailment, primarily on reducing current expenditure such as subsidies, markup payments etc. instead of developmental expenditure,” Sana Tawfik, head of research at Karachi-based brokerage firm Arif Habib Limited, told Arab News on Wednesday.

“Theoretically, growth would take a hit, driven by depressed LSM growth.”

LSM, or Large-Scale Manufacturing, depicts the country’s overall industrial production. The government expects the debt-ridden economy to expand 4 percent this fiscal year, compared with 3.65 percent of last year.

Pakistan’s “infrastructure spending remains limited due to fiscal constraints,” Tawfik said. “Much of the government revenue collection is spent in external debt servicing, thereby limiting capital accumulation, which for a country like Pakistan is vital to induce economic growth.”

Debt servicing, or interest payments, is the largest drain on government revenues and is expected to cost Rs8.1 trillion ($29.2 billion) by June 2027, according to budget documents.

Pakistan’s finance adviser Khurram Schehzad did not respond to questions seeking comment about whether the slow uplift spending could weigh on government’s growth ambitions.

The planning ministry, however, said development spending had risen this year.

“Spending this year is ahead of the last two years,” the ministry said in response to questions from Arab News.

It said the government’s development spending rose to Rs103.87 billion ($375 million) in July-October FY27, equivalent to 10.4 percent of the Rs1 trillion ($3.61 billion) budget allocation, compared with Rs76 billion ($274 million), or 7.6 percent of the allocation, in the same period of last year.

In July-October FY2025-26, Pakistan’s spending stood at Rs81.9 billion ($296 million), or about 7.4 percent of total allocation. The government fully utilized its annual PSDP allocations in both FY26 and FY25, it said.

“This year’s spending is therefore 37 percent higher in rupee terms than last year’s, and higher as a share of the allocation than in either of the two previous years,” the planning ministry said.

Asked what special projects the government was working on which triggered the 37 percent hike in development spending, the ministry said the planning and finance divisions had “authorized higher release of Rs412 billion against the admissible ceiling of Rs350 billion in case of few ministries in relaxation of quarterly ceilings.”

The recipient ministries and departments included Water and Power Development Authority, health, education, inter-provincial coordination and others.

“Development spending always picks up later in the year. PSDP spending has a well-known seasonal pattern,” the planning ministry said. “Early in the year, projects are re-authorized, cost estimates are revised and procurement is completed. Spending speeds up in the later quarters.”

“Spending at this stage of the year is therefore normal and better than the previous year,” the planning ministry said.

It said that the PSDP was on track as the government was facing a limited budget and was directing resources to priority projects through adjustment authorized by the National Economic Council (NEC).

“The ministry monitors these projects closely so that they stay on schedule and deliver on time, with value for money and fiscal discipline,” it said. “The PSDP will be used effectively by the end of the fiscal year.”