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Pakistan Budget 2026-27 – Expenditure Breakdown: Where the Money Will Be Spent

The federal expenditure plan for fiscal year 2026-27 is a financial blueprint translating the government's "Strong and Stable" vision into concrete monetary commitments. With a total gross outlay of PKR 18,771 billion, this is one of the most ambitious budgets in Pakistan's history — balancing the weight of inherited debt obligations with strategic investment in infrastructure, human capital, defence, and social protection.

This guide provides a complete, sector-by-sector analysis of where Pakistan's money will be spent in 2026-27. For the revenue and tax side of the budget, read our companion guide on Budget 2026-27 Tax Proposals. For the big picture, see our Complete Budget Overview.

🛡️ National Defence — PKR 3,000 Billion

The single largest sectoral allocation in Budget 2026-27 goes to national defence at PKR 3,000 billion. This is not merely an expense — the budget speech frames it as a direct investment in Pakistan's strategic posture and economic dividends. The success of Operation Banian al-Rusus has not only enhanced security but has made Pakistan's defence industry an active earner of foreign exchange. Countries are now acquiring Pakistani air-defence technologies, turning defence from a fiscal burden into a foreign exchange contributor.

The civil administration — the machinery that implements these plans on the ground — receives PKR 1,071 billion to ensure effective governance across all federal functions.

🏗️ The PSDP — PKR 3,675 Billion for National Development

The Public Sector Development Programme (PSDP), approved by the National Economic Council (NEC), is the government's primary engine for building lasting public assets. The total outlay of PKR 3,675 billion is distributed as follows:

• Federal PSDP: PKR 1,000 billion
• Provincial Development Programmes: PKR 2,224 billion
• State-Owned Enterprises (SOEs): PKR 451 billion

Over 60% of the Federal PSDP is concentrated on transport, communication, water, and energy — the foundational arteries of a productive economy.

🚗 Transport & Logistics — PKR 365+ Billion

Recognising that a modern logistics network is a precondition for trade and industrial growth, more than PKR 365 billion has been committed to upgrading Pakistan's roads, railways, and ports.

Highways

Project	Allocation	Details
N-25 Highway (Quetta–Chaman) Dualization	PKR 100 billion	Critical regional trade and security corridor
M-6 Motorway (Sukkur–Hyderabad)	PKR 30 billion	ADB-partnered industrial-port connectivity

Railways

In a historic milestone, work on the Main Line-1 (ML-I) railway project will commence in the coming fiscal year, with an initial allocation of PKR 25 billion. This project, long delayed, will revolutionise freight and passenger transport across Pakistan's main railway corridor, connecting energy resources to the national transport network.

Ports — PKR 93+ Billion

Over PKR 93 billion has been allocated for port handling facilities at Gwadar and development projects across the provinces, aimed at creating modern transport linkages capable of handling Pakistan's growing trade volumes and the demands of CPEC.

⚡ Energy & Water Security — PKR 219+ Billion

Addressing the twin challenges of power generation and water scarcity is a central pillar of the federal PSDP, with a combined allocation exceeding PKR 219 billion.

Power Sector — PKR 116.2 Billion

Project / Initiative	Allocation
WAPDA Hydropower Projects (9 projects)	PKR 50.2 billion
Hydropower Projects in AJK & GB (8 projects)	PKR 13.1 billion
STATCOM & Grid Modernisation	PKR 10.2 billion
Diamer-Bhasha & Mohmand Dams (own resources)	PKR 158+ billion
SEZ Power Connectivity	Included in sectoral allocation

Water Resources — PKR 103.1 Billion

Project	Allocation
Diamer-Bhasha Dam	PKR 22 billion
Mohmand Dam	PKR 15 billion
K-IV Bulk Water Supply (Karachi)	PKR 10 billion
Other Water Sector Projects	Remaining allocation

The K-IV project is particularly critical, addressing the water crisis in Karachi — Pakistan's commercial capital and one of the world's largest cities. These water investments also serve as direct responses to the devastating climate-related floods that have cost Pakistan billions of dollars in recent years.

🏙️ Urban Planning & Climate-Resilient Housing — PKR 54.6 Billion

By 2035, 55% of Pakistan's population is projected to live in urban areas, contributing over 80% of GDP. Unmanaged urbanisation is one of the most pressing long-term challenges Pakistan faces. The budget commits PKR 54.6 billion for physical planning and housing, covering:

• Construction of 150,000 climate-resistant housing units at federal and provincial levels.
• Preparation of digital master plans for 10 major cities to guide orderly urban growth.
• Improvements in urban water supply and sanitation services.

Combined with the PM's Own Home Program offering mortgages at 5% mark-up, this represents a comprehensive attack on Pakistan's severe housing deficit.

🏥 Health — PKR 46 Billion

A total of PKR 46 billion is allocated for health projects in 2026-27:

• PKR 25.1 billion for population welfare — including critical care, tertiary healthcare, family planning, and immunisation programmes.
• Priority construction of new hospitals and upgrading existing healthcare facilities, particularly in rural and underserved areas, ensuring quality healthcare is not reserved for urban populations alone.

🎓 Education & Youth — PKR 95+ Billion Combined

Human capital development receives substantial funding across multiple streams:

Education / Youth Initiative	Allocation
School & College Education (enrolment, teacher training, digital learning)	PKR 26.3 billion
Daanish Schools (world-class education for underprivileged talent)	PKR 22 billion
Higher Education (research, Pakistan Education & Research Network)	PKR 34.9 billion
NAVTTC — PM's Youth Skills Development Programme	PKR 7.9 billion
AI & Digital Learning Systems in Education	PKR 3.6 billion

The Daanish Schools model — providing world-class residential education to talented but financially disadvantaged children selected from across Pakistan — receives a flagship allocation of PKR 22 billion, embodying the government's commitment to social mobility through education.

🤲 Social Safety Net — PKR 1,169 Billion in Grants

The total grants allocation of PKR 1,169 billion forms the backbone of the government's commitment to protecting the most vulnerable and developing less-advanced regions.

BISP — PKR 838 Billion (17% Increase)

The Benazir Income Support Programme receives approximately PKR 838 billion — a 17% increase from the previous year. Key expansions include:

• Kafaalat Programme: Universalised to reach 12 million families.
• Benazir Nashonuma: Child nutrition support expanded to benefit 9.2 million children — a direct intervention against malnutrition.

Regional Equity Allocations

Region	Federal Development Allocation
Azad Jammu & Kashmir (AJK)	PKR 146 billion
Gilgit-Baltistan (GB)	PKR 88 billion
Merged Districts of KP	PKR 95 billion

These allocations, supplemented by a special Prime Minister's Package, ensure that the development reach of Budget 2026-27 extends to Pakistan's most remote and historically underserved territories.

💸 The Elephant in the Room: PKR 8,054 Billion in Debt Payments

No analysis of Budget 2026-27 expenditure is complete without acknowledging the single largest line item: PKR 8,054 billion in mark-up (interest) payments on Pakistan's accumulated debt. This represents 43% of total gross expenditure and is a stark reminder of the fiscal constraints that past borrowing has imposed on the country's ability to invest in its future.

However, the improving primary balance surplus — from a deficit of 0.7% of GDP to a surplus of 1.6% — indicates that the government is at least no longer adding to the problem. The challenge of debt management remains central to Pakistan's long-term fiscal health.