PAKISTAN’S inability to efficiently utilise allocated development funds is severely hampering our economic progress and climate resilience efforts. With more than $2 billion underspent annually, the country’s absorption capacity has become a critical bottleneck. Instead of reforming archaic processes, we have begun to blame our malaise on the absence of bankable projects.

Multiple documents have addressed the issue of underspending and project implementation delays in Pakistan. Numbers from the Economic Affairs Division show that rolled-over foreign assistance funds doubled from around $1.2bn in 2017-2018 to $2.1bn by 2022-2023. The annual rollover is higher than yearly IMF tranches.

The World Bank Implementation Status Reports flag implementation delays and disbursement challenges. As of 2023-2024, its Pakistan portfolio was $10-11bn, with disbursement rates averaging 15-20 per cent below target for several consecutive years. Its Pakistan Performance and Learning Review has noted slow implementation, with some $1.5-2bn in expected disbursements delayed. World Bank portfolio reviews have indicated that the percentage of projects requiring extensions has increased from 35pc in 2016-2018 to nearly 55pc in 2020-2023.

The ADB’s Pakistan Country Partnership Strategy (2021-2025) has likewise highlighted implementation challenges as requiring attention. Its Country Operations Business Plan shows $800 million in delayed disbursements across infrastructure projects.

Several documents have addressed the issue of underspending and implementation delays.

Several bilateral donors have expressed similar concerns of implementation delay. The EU’s evaluation reports have noted implementation delays affecting their development cooperation portfolio. Country evaluations by the UK’s FCDO, Germany’s GIZ and Japan’s JICA have identified absorption capacity as a recurring challenge. USAID, now closed, in its Pakistan Performance Management Plans documented challenges with timely fund utilisation.

Pakistan’s engagement with the Adaptation Fund, GEF and the Green Climate Fund has been particularly concerning. GCF’s $37m Transforming the Indus Basin with Climate Resilient Agriculture and Water Management project, for example, had disbursed less than 45pc of funds by its original completion timeline. GCF documents have explicitly mentioned absorption capacity as a constraint on scaling up climate finance in Pakistan.

One specific implementation challenge involved delays in establishing appropriate financial mechanisms. For several climate funds, Pakistan has experienced delays averaging six to eight months in simply establishing designated bank accounts with controls and reporting mechanisms.

These delays and absorption capacity issues have affected Pakistan’s competitiveness in accessing climate finance, especially as funds like the GCF increasingly stress implementation track records in their funding decisions. As global climate finance turns more competitive, our history of project delays has become a consideration in funding decisions.

Perilous cycle of emergency repurposing: Pakistan has established a concerning pattern of repurposing underspent development funds for emergency response over the past decade. During the 2010 floods that affected over 20m people, Pakistan redirected some $1.2bn from ongoing development initiatives towards emergency relief. When Covid-19 struck in 2020, Pakistan mobilised around $600m by tapping into underspent development funds across multiple donor portfolios.

After the 2022 floods, this pattern continued to an even greater extent. The BISP became a critical mechanism for delivering cash assistance to affected populations, with significant portions of this emergency response funding coming from repurposing previously allocated but unspent development funds. Around $850m from the World Bank’s portfolio and $500m from ADB’s ongoing projects were redirected towards the flood response.

Perhaps most concerning is that this recurring practice has created perverse incentives. With underspent funds becoming a de facto contingency resource for multiple disaster events, there is reduced urgency to address the underlying absorption capacity issues causing the underspending. This creates a dangerous cycle where development implementation challenges persist, leading to underspending that facilitates emergency response funding, while original development aims remain unaddressed.

This redirection of underspent development funds towards emergency response undermines Pakistan’s broader development agenda. When money intended for education, health, municipal services, infrastructure, or climate resilience is repurposed, it postpones projects that would have addressed the underlying vulnerabilities that make disasters so devastating — increasing vulnerability to future disasters. The practice also erodes the confidence of donors, who end up questioning the value of investing in long-term initiatives in Pakistan.

Throw-forward burden: The term ‘throw-forward’ used by Pakistan’s Planning Commission refers to the accumulated cost of incomplete development projects that have been initiated but remain unfinished, with their unspent costs carried forward into future fiscal years. By early 2024, an IMF report revealed that the federal development portfolio added 244 new projects worth Rs2.26 trillion in FY23 to a backlog of 909 projects costing Rs10.32tr. The backlog included hundreds of incomplete and maladaptive projects across infrastructure, social development and production sectors, with damaging implications for economic growth and public welfare.

This massive throw-forward reflects a chronic pattern of project initiation exceeding completion capacity. Politically motivated infrastructure projects account for the lion’s share. The Planning Commission’s 2023 report on implementation challenges for development projects described underspending as “a structural challenge affecting Pakistan’s development trajectory”. Internal assessments detail how system bottlenecks contribute to chronic underspending. It has expressed a growing concern, noting that the throw-forward has been increasing at a rate that outpaces growth in the annual PSDP allocations. This creates a troubling scenario where even if no new projects were initiated, it would take more than two decades of development budgets just to complete existing projects.

These malpractices add to Pakistan’s mounting debt. Pakistan’s ability to efficiently utilise available funding will be crucial to securing additional resources. Addressing the root causes of implementation delays and building a robust absorption capacity is essential for sustainable development and climate resilience. By undertaking reforms to break the cycle of underspending and emergency repurposing, Pakistan can maximise the impact of international assistance and strengthen its position in the global competition for climate finance.

The writer is a climate change and sustainable development expert.

Published in Dawn, April 24th, 2025