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The IMF's second review of Pakistan's $7 billion Extended Fund Facility projects a decline in the Public Sector Development Program (PSDP) from 0.7% of GDP this fiscal year to 0.6% through FY30. PSDP spending is estimated at Rs873 billion this year, expected to rise to about Rs1.2 trillion by FY30.

Defense spending is projected to remain around 2% of GDP, increasing from Rs2.57 trillion this year to nearly Rs4 trillion by the end of the decade. The need for increased defense expenditure is emphasized due to India's aggressive stance, despite past conflicts.

However, the shrinking PSDP raises long-term risks for economic stability. Major investments in infrastructure, education, and health are deemed essential. The involvement of the private sector through public-private partnerships is necessary to revitalize the PSDP and support both defense and development efforts.