Pakistan to Prioritise Climate-Friendly Projects in Development Plans by 2026

Pakistan to prioritise climate-friendly projects — a major shift in national development strategy — is set to take center stage as the government aligns with the International Monetary Fund (IMF) demands. Beginning with the upcoming federal budget, Pakistan will roll out a transparent and climate-conscious framework for infrastructure planning, giving climate change a decisive weight in project selection.

This new focus is not just policy; it’s tied to international commitments and financial reforms, particularly the carbon levy and budget tagging system enhancements. These changes are poised to transform how Pakistan funds and evaluates large-scale infrastructure development.

IMF Conditions Drive Climate-Focused Reforms

In exchange for continued financial assistance, Pakistan has committed to the IMF to overhaul how infrastructure projects are selected and appraised under the Public Sector Development Programme (PSDP).

Key Commitments Include:

• Publishing Planning Commission (PC-1) forms for all infrastructure projects above Rs7.5 billion.

• Updating project selection criteria to ensure at least 30% weighting is given to climate change considerations.

• Developing a transparent scoring system for project evaluations.

The IMF has encouraged Pakistan to adopt global best practices in climate financing and governance. By embedding these reforms into the PSDP, Pakistan aims to improve climate resilience and sustainability, especially in vulnerable regions.

Transparent Scoring and Public Disclosure

To reinforce accountability and attract green financing, Pakistan will:

• Publicly disclose the scoring of new projects by August 2026.

• Report on project selection methodology and publish project scores approved by CDWP and ECNEC annually.

• Apply explicit protocols for climate screening and mitigation potential.

This move is expected to enhance transparency and boost investor confidence, especially for green bonds and international climate-related funds.

Federal and Provincial Budget Tagging Expansion

The reform agenda also includes an expansion of the federal budget tagging system, which will now:

• Include grants and subsidies in climate-related budget classifications.

• Be extended to provincial governments, ensuring a nationwide alignment in green taxonomy and financial reporting.

• Enable the tagging and tracking of climate-harmful expenditures.

These changes will allow policymakers and auditors to better understand where climate-related funds are being allocated, and where potentially damaging activities are still being financed.

Climate Vulnerability and Mitigation Assessments

Another pivotal reform is the mandatory climate assessment for major infrastructure projects. By August 2027, every new project in the PSDP will be required to:

• Conduct a climate vulnerability assessment.

• Include detailed adaptation and mitigation strategies.

• Align with the national climate change policy and Paris Agreement commitments.

This policy will prevent investments in infrastructure that could be at risk from floods, droughts, or rising temperatures, and instead encourage climate-smart construction.

Conclusion

The decision by Pakistan to prioritise climate-friendly projects marks a critical milestone in the country’s development planning. By aligning with IMF conditions and adopting international best practices, Pakistan is making strides toward greener, more sustainable infrastructure. This policy framework, if effectively implemented, can pave the way for long-term environmental and economic stability.

For readers interested in Pakistan’s broader environmental efforts, check out our article on Pakistan’s Renewable Energy Goals for 2030 and IMF’s Climate Policy Initiatives in South Asia.