Climate budget at a crossroads
Pakistan’s climate budget debate is no longer just about allocations but about whether the country is building a governance system capable of surviving a climate-changed future.
Following the devastating 2022 floods and IMF-backed reforms, Pakistan introduced climate budget tagging, classifying expenditures under adaptation, mitigation and related categories. Yet the key question remains: is climate finance reaching vulnerable communities, or are existing expenditures simply being relabelled as climate spending?
Before 2023, climate finance was fragmented and largely invisible within sectors such as forestry, irrigation, disaster management and donor-funded projects, with no clear mechanism to assess whether spending supported resilience or preparedness. The 2022 floods exposed not only a climate crisis but also serious budgeting and governance failures.
Federal spending patterns remain modest. The Climate Change Division’s development allocation fell from around Rs14 billion in FY2021-22 to Rs9.5 billion in FY2023-24. Environment protection development expenditure declined from Rs6.257 billion in FY2024-25 to Rs2.784 billion in FY2025-26, suggesting climate remains a side department rather than a development priority.
The post-2023 shift came through Climate Budget Tagging. The federal government reports that over 5,000 cost centres are now tagged for climate relevance, with FY2025-26 climate-related allocations equivalent to 6.9% of current expenditure and 8.2% of development expenditure. It also classifies nearly 50% of subsidies, 35% of non-tax revenue and 9.4% of gross revenues as green-linked. Yet these figures require scrutiny because tagging alone does not create real climate resilience. Roads, irrigation schemes, subsidies or energy payments can be labelled climate-relevant without necessarily reducing vulnerability.
At the provincial level, the picture remains even more uneven. Punjab has moved the fastest in climate budgeting by tagging 3% as climate-tagged, partly because it has a stronger fiscal documentation system and has begun integrating climate-related classifications into its budget strategy and development planning. In FY2025-26, Punjab allocated around Rs15 billion for Environment and Climate Change and about Rs25 billion for Forestry, Wildlife and Fisheries.
Punjab’s broader Climate Resilient Punjab Vision reportedly tagged nearly Rs795 billion in development schemes under the adaptation, mitigation and environmental protection categories. But Punjab’s contradiction is visible. The province is tagging climate expenditure while also facing extreme smog, heat stress, groundwater depletion, urban expansion into ecological zones and weak enforcement around floodplains and drainage corridors. Punjab’s budget is therefore not only a story of allocation, but a test of whether climate-tagged spending can stop climate-blind development.
Sindh presents a much sharper warning. It is one of Pakistan’s most climate-exposed provinces, carrying Karachi’s urban heat and drainage crisis, Indus Delta degradation, coastal salinity, drought-prone districts, flood displacement and repeated post-monsoon disease outbreaks. Yet Sindh’s climate spending record has historically been weak.
For over 16 years, Sindh allocated Rs48.8 billion to climate-related budgets but spent only Rs20.2 billion, meaning utilisation was around 41 per cent. Even more strikingly, the Sindh Environment sub-department reportedly spent only Rs336.56 million against allocations of Rs3.419 billion, less than 10 per cent. For a province battered by the 2022 floods, this is not merely a budgetary gap but a governance indictment.
Sindh’s budget books list environment, forest and wildlife, local government, public health engineering, irrigation and rehabilitation heads, but these remain fragmented. After tagging, Sindh must not simply classify more spending as climate-relevant, but it must publish climate-tagged allocations, releases and actual expenditure by departments and districts. Without district-level spending data, climate budgeting in Sindh will remain a Karachi-to-provincial-headquarters exercise while climate impacts continue to be absorbed by Thatta, Badin, Dadu, Larkana, Jacobabad, Sanghar and flood-affected rural communities.
The climate budget story of Khyber Pakhtunkhwa is different. Its climate budget problem is shaped by mountains, forests, floods, GLOFs, landslides, merged districts and river-basin vulnerability. KP has a stronger history of output-based budgeting and has legally moved towards performance-oriented budgeting through the Public Financial Management Act 2022. But climate spending in KP remains scattered across forestry, wildlife, environment, irrigation, public health engineering, disaster management and local development.
KP’s budget strategy documents show the gap between development ambition and execution. For FY2021-22, development expenditure in settled areas was budgeted at Rs271 billion and revised upward to Rs322 billion, while tehsil and district development spending fell sharply from Rs15 billion budgeted to around Rs2 billion revised. In the merged areas, development expenditure was budgeted at Rs100 billion and revised to Rs99 billion, but district-level development fell from Rs2 billion to zero. This is crucial from a climate perspective because adaptation is local by nature. If district development collapses or is not protected, then flood protection, slope stabilisation, local drainage, watershed management, water supply resilience and community preparedness remain unfunded where they matter most.
KP has also begun institutionalising disaster risk financing. Provincial fiscal risk documents now recognise natural disasters as fiscal risks and reference a Disaster Management Plan 2025-2030 alongside a 10-year Disaster Risk Financing Strategy. However, KP now needs climate-tagged execution data showing how much is spent on adaptation, GLOF preparedness, watershed restoration and local disaster risk reduction in high-risk districts. Otherwise, plantation-focused spending will continue to dominate while deeper resilience needs across Swat, Chitral, Dir, Kohistan, Nowshera, Karak, Charsadda and merged districts remain underfunded.
Balochistan is perhaps the most under-discussed climate finance case in Pakistan, despite being one of the most climate-stressed provinces. Its climate reality is defined by drought, water scarcity, groundwater mining, rangeland degradation, flash floods, coastal vulnerability, heat stress and weak institutional capacity.
The FY2025-26 Balochistan White Paper reports total development expenditure of Rs336.576 billion, including a provincial PSDP allocation of Rs249.45 billion. The province also allocated Rs32.328 billion to irrigation, reflecting the importance of water management in an arid province. Most significantly, Balochistan allocated Rs500 million to establish a Balochistan Climate Fund. However, only around 17 per cent of Balochistan’s environment development budget was utilised in FY2024–25, underscoring the province’s chronic implementation and absorptive-capacity challenges despite mounting climate vulnerability.
This provincial picture shows the central flaw in Pakistan’s climate budget architecture. The federal government has begun tagging, but the provinces hold most implementation powers under the 18th Amendment. Water, agriculture, local government, environment, public health, land-use planning, disaster response and district development fall squarely within provincial domains. If climate tagging remains federal, Pakistan will produce elegant national numbers and weak local resilience. The next phase must therefore make climate budget tagging mandatory across all provinces, using a harmonised framework but allowing province-specific vulnerability indicators.
The reforms must also be anchored in the Pakistan Climate Change Act 2017, and accordingly, the Pakistan Climate Change Fund must be notified and operationalised without further delay. Climate-related levies, pollution charges, carbon-related revenues, environmental penalties, green taxes and climate-support levies should be ringfenced into this fund.
Pakistan is already generating substantial revenues through the petroleum levy. So, if a levy is justified in the language of climate, it must not disappear into the general fiscal pool. It must finance mitigation such as investing in EV infrastructure or clean energy transition or adaptation like urban resilience, farmers social protection etc.
Pakistan also needs a tiered accountability system. Climate budgeting should begin with the district-level Annual Development Plans. Every district ADP should identify climate risks, tag relevant schemes, estimate adaptation and mitigation value, and report on releases, expenditure and outcomes. The provincial grants and development approvals should be conditional on performance. Districts that protect floodplains, restore wetlands, improve drainage, reduce heat risk, manage waste, conserve water and meet resilience indicators should receive incentive-based financing. Those that continue climate-blind development should face fiscal penalties and audit scrutiny.
The National Finance Commission must also enter this debate as Pakistan’s fiscal transfer formula needs to move beyond a narrow population-heavy approach and incorporate vulnerability, climate risk and development needs. A revised NFC formula should include climate vulnerability, disaster exposure, ecosystem fragility and adaptation deficit as measurable indicators. Provinces facing recurring floods, droughts, glacial hazards or coastal degradation require predictable fiscal space, not emergency charity.
If Pakistan stops at tagging, climate budgeting will become another spreadsheet reform. The country will report billions in climate-relevant spending while districts continue to drown, heat, dry and erode. The real measure of Pakistan’s climate budget is not the percentage tagged in Islamabad. It is whether a village in Sindh is less flooded, a district in KP is better protected from flash floods, a settlement in Balochistan has secure water and a city in Punjab can breathe.
The writer is an environmental scientist and leads the ecological sustainability and circular economy programme at the Sustainable Development Policy Institute (SDPI), Islamabad.
Disclaimer: The viewpoints expressed in this piece are the writer’s own and don’t necessarily reflect Geo.tv’s editorial policy.
Originally published in The News
