BUDGET 2025-26: Power, defence divisions top govt spending charts

• 39 departments ‘exceed’ their allocations for FY25; three dozen divisions ‘save’ around Rs2tr
• Massive chunk of money spent on debt servicing and related payments

ISLAMABAD: At least 39 government departments – notably the power and defence divisions – spent more money than they were allocated for the outgoing fiscal year, while around three dozen departments’ funds remained ‘under-utilised’ for various reasons.

Much like last year, the power and defence sectors remained among the biggest spenders, as the former overshot its allocations by Rs129.5bn and the latter by over Rs61bn, under multiple heads.

The defence ministry’s Defence Services Division overspent by nearly Rs59.5bn and the Defence Division spent Rs1.8bn more than the amount set aside for it in the previous budget.

According to budget documents, specifically the voluminous ‘Details of Demands for Grants and Appropriations 2025-26 (Current Expenditure)’ the Defence Division exceeded its allocation under the ‘operating expenses’ and ‘physical assets’ heads. The revised estimate for the ‘physical assets’ rose from Rs730 million to Rs2.5bn.

The Power Division, meanwhile, spent Rs159bn under the ‘investments’ head, even though the budget had not allocated any amount for this purpose. In addition, its operational spending also doubled from Rs215m to Rs466m.

Similarly, the National Health Services division (the secretariat of the federal health ministry) doubled its expenditure in the outgoing year, spending Rs51.9bn against a sanctioned amount of Rs27.8bn – an overrun of over Rs24bn.

One of the main reasons for overshooting its allocated amount were ‘operating expenses’ that rose from Rs13.3bn to Rs35.8bn.

Even though it has failed to meet the revenue target set in the budget, the Federal Board of Revenue (FBR) spent Rs6.57bn more than allocated. Similarly, Pakistan Post also exceeded its allocation by Rs6bn.

Debt servicing

Though the government managed to save Rs1.77 trillion in terms of foreign debt payments, payments under the head of domestic debt rose by almost Rs2.6tr. Around Rs829bn was also saved in interest payments for domestic debt.

In total, the government spent Rs33.85tr to pay off foreign and domestic debts, and their interest, against an allocation of Rs33.84tr, overrunning by a little over Rs4bn. The government had allocated Rs4.98tr for foreign loans, but spent only Rs3.2tr, saving Rs1.7tr under this head. For debt servicing of foreign loans, it spent Rs1tr.

Similarly, Rs29.5bn was paid under the head of short-term foreign credit payment. On the domestic front, the government exceeded its allocation and paid Rs2.6tr more than the sanctioned amount of Rs19tr to pay off domestic lenders. However, Rs829bn was saved on domestic debt servicing, probably on account of a substantial cut in the policy rate.

Under-utilisation of funds

Besides foreign debt payments, where a substantial chunk of money was saved, the Finance Division ‘saved’ Rs216bn under the category of ‘Grants, Subsidies, and Miscellaneous’. The economic affairs ministry also did not spend Rs7.7bn allocated under the ‘miscellaneous’ head.

This inability to spend also affected welfare initiatives, such as poverty alleviation and the housing sector. The Poverty Alleviation and Social Safety Division failed to spend over Rs1.64bn from its allocated amount, despite poverty levels rising as the cost of living grew.

The housing sector did not fare much better: the Naya Pakistan Housing Authority left Rs1.1bn untouched, while the Housing and Works Division of the housing ministry could not spend Rs1bn, even though there is a housing crisis in the federal capital.

In total, the amount saved by the government, including the amount saved on foreign debt payment, was approximately Rs2tr, whereas the departments that exceeded their allocations overspent about Rs2.85tr, including the additional Rs2.6tr used to pay off domestic debt.

Cover for ‘overspending’

It is important to note that these numbers do not include the development expenditure of these departments, and the data is based on information available in the Accountant General Pakistan Revenues’ (AGPR) system as of May 16, 2025.

For departments who have overspent, demands for grants will be tabled before the National Assembly under Article 82 for approval during the budget approvals process.

Article 82(1) refers to expenditure, which is charged upon the Federal Consolidated Fund and may be discussed but not put to a vote. All other grants will be decided by the house under Article 82(2).

Published in Dawn, June 17th, 2025