KARACHI: Punjab will account for more than half of the provinces’ financial transfers to the federal government in the fiscal year 2026-27, according to budget documents. It is expected to provide Rs555.69 billion, accounting for nearly 54 per cent of the total projected transfers to the federal government.
Provincial governments are projected to transfer around Rs1.04 trillion to the federal government in the fiscal year 2026-27 under constitutional revenue-sharing arrangements. Sindh is estimated to contribute Rs263.67 billion, while Khyber Pakhtunkhwa’s share is budgeted at Rs157.02 billion and Balochistan’s at Rs58.63 billion.
The federal budget has estimated grants and receipts from provinces under Article 164 of the constitution, which says that a province may make grants for any purpose, even if it is not something they are normally allowed to make laws about. The amount has been included under the government’s extraordinary receipts and represents a significant new source of federal financing.
The provincial grants are set to become the largest component of the federal government’s extraordinary receipts in FY27, contributing more than 97 per cent of the total Rs1.067 trillion projected under the category. Other extraordinary receipts include Rs5 billion in surplus profit from the National Database and Registration Authority (NADRA), Rs800 million from the Pakistan Civil Aviation Authority and Rs25.6 billion in receipts from United Nations military reimbursements.
Finance Minister Muhammad Aurangzeb on Saturday announced that the provinces had provided a grant to the federal government for defence requirements and to create a buffer against the second and third wave impacts of the ongoing Gulf region conflict.
“This arrangement with the provinces has been struck for three years, and it has nothing to do with the National Finance Commission (NFC),” the minister stated during a post-budget press conference at the P Block in the Federal Secretariat on Saturday.
Earlier, the budget presentation in the National Assembly was delayed amid the federal government’s inability to secure provincial consensus on retaining around Rs1.1 trillion to Rs1.2 trillion from provincial NFC shares for strategic and development spending.
The budget document shows that besides the Rs1.04 trillion provincial grants, the government has allocated Rs430 billion to absorb exogenous shocks. The minister also added that consultations with the International Monetary Fund (IMF) are an ongoing process and will continue until the budget is finalised.
Pakistan worries that a prolonged conflict in the Gulf could adversely affect its external sector. The Annual Plan 2026-2027, released on Friday, said a prolonged conflict could disrupt trade with GCC countries, affect exports of goods and services and reduce remittance inflows from more than one million Pakistani workers in the Gulf, which are crucial for Pakistan’s balance of payments.
