ISLAMABAD: Provincial fiscal operations provided significant support to the federal government in improving the overall fiscal situation in the outgoing year.
“The dedicated efforts at the provincial level for effective resource mobilisation and prudent expenditure management triggered higher growth in provincial revenues relative to expenditures,” the Economic Survey of Pakistan 2025-26 acknowledged.
All four provinces collectively achieved the highest-ever surplus of Rs1,636.1 billion in July-March, compared to Rs1 trillion last year. Provincial revenue increased by 12.9pc during the same period.
Sajid Amin Javed, Deputy Executive Director at SDPI, said the Centre was “fair” to urge provinces to share fiscal responsibility, but should lead by example by broadening its own tax net. He noted that since the federal government cannot constitutionally compel provinces to relinquish their NFC share, it has resorted to a “moral language of shared responsibility.”
He stressed that the fiscal relationship between Centre and provinces must be reciprocal. Given that provincial tax collection remains well below par, he recommended revamping the NFC formula to incentivise revenue generation and reduce the weight of population as a distribution criterion. He further cautioned that the current freeze on NFC funds is a temporary measure, and that a lasting solution must be discussed at the 11th NFC meeting.
A former provincial finance minister said the development budgets and SOE expenses of both the Centre and provinces needed “serious review” to create fiscal space and provide the public relief from over-taxation. He pointed to government departments that had become redundant after the 18th Amendment, but continued to burden federal and provincial exchequers. “Just look at the state’s splurge in excess of 65 per cent over the last three years on salary increases and perks and privileges — well above inflation — and its ‘bloated size’ even after the 18th Amendment, while it was tightening the belt of the rest of the population,” he added. By not addressing the fundamental flaws in the economy, this model will remain unsustainable.
Provincial tax collection rises
The provinces own tax collection and development spending are expected to rise by nearly 26pc and 39.6pc respectively during the outgoing financial year, according to the survey.
The size of provincial budgets is estimated at Rs9,913.6 billion in FY2026, up from revised estimates of Rs8,159.9bn in FY2025 — a growth of 21.5pc. Current expenditures are projected to increase by 14.8pc while development spending is expected to rise sharply by 39.6pc. Total revenues were budgeted at Rs10,127.6 billion, showing growth of 17.9pc.
Under the NFC Award, federal transfers to provinces were budgeted at Rs8,206 billion in FY26. In the first three quarters, these rose 10.7pc to Rs5,630.8 billion. Province-wise shares were: Punjab Rs4,076bn, Sindh Rs2,043.8bn, KP Rs1,342.8bn (inclusive of 1pc for war on terror), and Balochistan Rs743.2bn.
Provincial own revenue receipts grew 28.3pc to Rs1,138.2 billion, with tax collection up 25.8pc to Rs860.7 billion and non-tax revenue up 36.7pc to Rs277.5 billion — supported by higher receipts from hydroelectricity profits, mark-up, and other sources. Federal transfers nonetheless remained the dominant source, contributing around 78pc of total provincial revenues.
Mexico ignited their World Cup party with a dominant 2-0 victory over nine-man South Africa on Thursday as the biggest ever edition of the global footballing showpiece kicked off at Mexico City’s iconic Estadio Azteca.
Julian Quinones scored the opening goal of the tournament, and veteran striker Raul Jimenez added a second as the co-hosts’ bid for qualification from Group A got off to a smooth start.
South Africa, meanwhile, never looked like they were spoiling the opening day fiesta, and finished with only nine men after Sphephelo Sithole and Themba Zwane were sent off.
The Mexican-colored red, green and white smoke from pre-game fireworks had barely dissipated before Quinones fired the hosts into the lead on nine minutes, drilling a low shot through the legs of South Africa’s goalkeeper and captain Ronwen Williams.
Mexico’s Raul Jimenez scores a goal during the 2026 World Cup Group A football match between Mexico and South Africa at the Estadio Azteca stadium in Mexico City on June 11, 2026. — AFP
A deafening roar cascaded down from the stands of the Azteca, the footballing cathedral that became the only stadium to host games at three different World Cups.
South Africa coach Hugo Broos had warned his players to be ready for the intimidating atmosphere created by a capacity crowd of 80,824 at the imposing concrete arena.
But South Africa’s players looked to have a bad case of stage fright as Mexico’s fans greeted each completed pass with a raucous chorus of “Ole!” in the opening minutes.
Sithole seemed particularly affected, being caught in possession trying to play out of the back for Quinones’ opening goal. His miserable afternoon ended with a 49th-minute dismissal after bundling over Mexico’s Brian Gutierrez when clean through on goal.
Brazilian referee Wilton Sampaio shows a red card to South African midfielder Themba Zwane during the 2026 World Cup Group A football match between Mexico and South Africa at the Estadio Azteca stadium in Mexico City on June 11, 2026. — AFP
Mexico rammed home their advantage in the 67th minute, with a fine counterattack culminating in Roberto Alvarado crossing for Wolverhampton Wanderers forward Jimenez to nod home at the far post.
It got worse for South Africa in the 84th minute when Zwane was dismissed after a VAR review for flinging an arm into the face of Alvarado.
There was still time for late drama when Mexican defender Cesar Montes was shown a red card for a clumsy challenge on Khulisa Mudau on the edge of the penalty area.
The 48-team tournament is also being hosted by the United States and Canada and will feature 104 games, culminating in the final in New Jersey on July 19.
Shakira and Burna Boy warm up spectators at opening ceremony
Colombian pop icon Shakira and Nigerian singer Burna Boy had the spectators out of their seats in the opening ceremony for the World Cup ahead of the opening clash.
Colombian singer, songwriter and producer Shakira performs during the opening ceremony ahead of the 2026 World Cup Group A football match between Mexico and South Africa at the Estadio Azteca stadium in Mexico City on June 11, 2026. — AFP
Dancers twirled around a giant model of the World Cup trophy while fireworks went off in the historic stadium, which hosted the 1970 and 1986 World Cup finals and has been renovated for this year’s tournament.
In the highlight of the ceremony, Shakira and Burna Boy performed ‘Dai Dai’, the official song of the tournament, bringing roars from the crowd.
J Balvin and Italian tenor Andrea Bocelli were among the other performers before kickoff as the noise levels ramped up.
“It’s already a party in Mexico,” Ingrid Orozco, a 40-year-old supporter, told AFP.
“It’s amazing,” said Gustavo Ramrez, 19.
Artists perform during the opening ceremony ahead of the 2026 World Cup Group A football match between Mexico and South Africa at the Estadio Azteca stadium in Mexico City on June 11, 2026. — AFP
Hours before the World Cup kickoff, the boost to travel and tourism expected from this year’s biggest sporting event has yet to materialise.
For years, the tournament was expected to deliver a windfall for America’s travel industry, now grappling with declining international visitors amid what rights groups describe as a climate of fear.
The swarms of fans that hotels had counted on have yet to arrive, forcing many to cut rates. Flight bookings have slumped as ticket prices have skyrocketed. Expensive match tickets have further stymied demand, and industry analysts say excitement has been muted compared with past World Cups.
The weak start suggests the traditional World Cup travel playbook — typically dependent on international fans willing to travel long distances and spend heavily to follow their teams — is faltering. Instead, the costs, visa hurdles and the logistics of attending matches across 16 host cities in three countries have proved a deterrent.
US travellers, in a country where football is less popular than in Europe, are not filling the gap.
It is “overall a disappointment. There’s no other word that I can say,” said Vijay Dandapani, CEO of the Hotel Association of New York City. The association has cut its forecast for hotel room revenue tied to the World Cup by 60 per cent to roughly $60 million, he said.
The International Federation of Association Football (FIFA) did not immediately respond to a request for comment.
Last-minute demand yet to materialise
Flight bookings from Europe into most host cities for June and July are down 3.8pc on average year-over-year, according to Cirium, even after Europeans had already pulled back from travel to the US last year. Bookings from Europe into New York, host of the July 19 final, have plunged 15.8pc, Cirium said.
FIFA had projected 1.2 million fans would descend on the city, but Dandapani said the New York hotel association is only expecting half a million.
Dandapani said there has been a small uptick in bookings from UK and Norway fans recently, which he called a “positive sign.”
Hotels are hoping for a last-minute surge after the group stage concludes, despite discouraging early data. Average bookings across host cities are up just 0.5pc from a year earlier, according to analytics firm CoStar. Several New York hotels are discounting hotel rooms, said Dandapani, including the New York Hilton Midtown, the city’s largest hotel, which has slashed rates for the tournament in half to $415 per night, compared to advertised rates in December, he said.
Hilton in April said it was seeing strong bookings, driven by New York. The following month, Marriott said, “There obviously is still a lot left to book given that the exact matchups for the latter half of the competition have not yet been decided.”
Hilton declined to comment, while Marriott did not immediately respond to a comment request.
“Some fans are skipping the World Cup altogether,” said Andy Milne, England superfan and author of the book That World Cup Guy.
“Friends of mine are heading to Ibiza to watch every match on TV for a fraction of the price. Others are going to Vegas. It’ll still cost money, but far less than tickets, travel, hotels and transport to the stadiums.”
Even affluent fans, who have buoyed the performance of US travel companies, are waiting for matchups to crystallise or for their teams to advance before committing to travel, luxury sports travel company Roadtrips said.
High ticket costs, visas deter visitors
Fans from more than half the qualified countries need visas to enter the United States, adding cost and uncertainty for travellers already wary of stricter border enforcement.
The Trump administration denied a Somali referee entry over alleged links to “suspected members of terror organisations.”
FIFA’s ticketing practices have also soured some fans. Organisers introduced record-high base prices and, for the first time, dynamic pricing that raised costs as the tournament neared.
FIFA’s decision to allow uncapped resale pricing inflated costs further and drew regulatory scrutiny. The cheapest ticket in host cities like New York and Miami now approaches $1,000, according to TicketData.
Even if ticket prices halve closer to key matches, last-minute demand may remain muted, as overseas fans still face the cost and complexity of booking travel and securing visas on short notice, said Dana Lattouf, CEO of Tickitto, a UK ticket distributor.
Vacation rentals, which allow groups to split costs, are a rare bright spot.
Airbnb told investors in May that the World Cup was on track to be its largest event ever. Data from short-term rental analytics firm AirDNA shows bookings, particularly for budget and economy rentals, are tracking higher in host cities, including Boston and Los Angeles.
Booked average daily rates for rentals across host cities were $218, while travellers looking now would pay about $335 as of June 8, AirDNA said, as hosts raise prices to capture last-minute demand.
There is way more leisure demand in all these cities because of the World Cup. That is unmistakable, said Jamie Lane, chief economist at AirDNA.
THE budget is a tug-of-war between different interest groups. On one hand, there is explicit lobbying by various business groups and industry bodies that commission reports, hold events and engage policymakers.
These organisations, explains Dr Ali Hasanain, associate professor of economics at Lums, also meet political party leaders and bureaucrats in both formal and private settings to communicate their concerns and policy preferences.
This is broadly in line with how businesses operate globally. For example, US President Donald Trump’s top backer in the last election was investor Timothy Mellon, who gave $150 million to Make America Great Again, Inc., followed by Elon Musk, who gave $118.6m.
But while lobbying and formal influence exist everywhere, the distribution of power is far less orderly in Pakistan. No single player is all-powerful, though wealth is concentrated in relatively few hands. Instead, policy becomes outcome of fragmented pressure from multiple directions.
The big boss may be IMF, but Pakistan remains a sovereign nation, not a subject of the Fund
In Pakistan’s case, this fragmentation is further constrained by an external anchor: the IMF. Under successive programmes, Pakistan is required to meet a long list of targets. Yet within those constraints, governments tend to follow the path of least resistance, typically raising taxes on those already in the tax net rather than expanding it. This tendency is reinforced by a deeper structural weakness: the lack of strong feasibility studies for projects. Plans are often undertaken without adequately accounting for inefficiencies, bureaucratic incompetence, weak political leadership and changing political equations, he says.
‘Noise’ from lobbies
On the one hand, there are concentrated lobbies; on the other, there is the politics of visibility, the ‘noise makers’.
Take retailers and wholesalers, for instance. They remain among the country’s most undertaxed sectors and have repeatedly been identified by the IMF as areas requiring reform. Yet, even the latest small trader scheme is less a tax reform than a negotiated settlement.
“Combined together, they can make a lot more noise than your typical person” and therefore can remain broadly outside the tax net, points out Ammar Habib Khan, assistant professor of practice at IBA, Karachi.
He cites solar net metering as another classic example of the power of noise. “There are only about 400,000 net-metering users, but they can make so much noise that the government finds it difficult to make a reasonable decision,” he says.
“Globally, the transition from net metering to net billing is fairly standard. However, policymakers struggle to make that decision because many of the people affected are wealthy, influential and belong to powerful families.”
This creates a second-order distortion in the process: not just who has formal access to power, but who can raise the political cost of change.
The IMF influence equation
Pakistan’s role on the global chessboard is defined by more than just its GDP.
The nuclear-armed state shares borders with Afghanistan, India, Iran and China while also close to Russia and key Gulf chokepoints. It is one the most densely populated countries, and an important part of the Muslim world.
The United States is the largest single member of the IMF, with the highest financial contribution and voting power. The Fund has a lending capacity of roughly $1 trillion. By comparison, what the US economy produces in about a week — roughly $570 billion — exceeds Pakistan’s annual GDP of approximately $452bn.
Against that backdrop, a $7bn IMF programme, staggered over three years and repayable with interest, is small in financial terms but significant in terms of influence. It is a low-cost, high-leverage exposure to a strategically important state.
The big boss may be the IMF, but Pakistan remains a sovereign nation, not a subject of the Fund. As a lender of last resort, the IMF steps in when a country faces a severe financial crisis.
“When the lender comes to collect, whether you pay it off by selling your wife’s jewellery, dipping into your savings, or using your son’s tuition fund is up to you. The lender’s job is to collect,” Dr Hasnain explains, arguing that while the goals may belong to IMF, the mechanisms belong to Pakistan.
WASHINGTON: Rising inflation and persistent energy price pressures have sharpened political divisions in Washington, with Democrats blaming President Donald Trump’s Iran policy and trade agenda for worsening economic conditions for American households.
The latest figures showing inflation at 4.2 per cent in May, compared with wage growth of 3.4pc over the same period, have revived concerns that real incomes are being eroded as the cost of living continues to rise.
Senate Democratic leader Chuck Schumer criticised the administration’s handling of the economy and foreign policy in a sharply worded social media post.
“Another month of Trump’s illegal Iran war, another month of Trump’s tariffs, another month of Republican control of Congress. The result? A new all-time high for Trumpflation,” he wrote.
He also highlighted remarks by economist Heather Long of Navy Federal Credit Union, who warned that inflation was outpacing wages.
“Inflation is so high that it’s erasing all wage gains,” she said. “Inflation: 4.2pc in May for the past year. Wage growth: 3.4pc in May for the past year. Americans are getting squeezed financially.”
Senator Jeanne Shaheen, ranking member of the Senate Foreign Relations and Armed Services Committees, accused President Trump of breaking key campaign promises on war and the economy.
“President Trump promised no new wars. He promised to lower your energy costs and tame inflation,” she said.
“Instead, he started a reckless war with Iran. He’s spiked gas prices. And inflation has soared month after month. He lied, and it’s the American people who are paying the price.”
In the House of Representatives, Democratic leader Hakeem Jeffries described the conflict as a “reckless war of choice,” calling it “Day 100 of the reckless war of choice in Iran” and urging congressional action.
“It’s time for the Republican-controlled Senate to move our war powers resolution,” he said. “So we can end this costly conflict immediately.”
Analysts say the transmission channel between the conflict and US inflation runs primarily through global energy markets, where disruptions in supply expectations can quickly feed into higher fuel costs for American consumers.
Fuel prices are displayed at a gas station on June 9, 2026 in Chicago, Illinois, the US. — AFP
Matthew Kroenig of the Atlantic Council warned that energy markets remain highly sensitive to geopolitical instability. “The energy market is global, and disruptions to supply anywhere result in price spikes in the United States,” he said.
Former US intelligence official Beth Sanner warned that widening regional instability involving Iran, Israel, Gaza, Lebanon and Syria risked complicating diplomatic efforts and sustaining long-term uncertainty across the Middle East.
Beyond the United States, economists note that prolonged instability in global energy markets also carries indirect consequences for import-dependent economies such as Pakistan.
Higher oil prices tend to feed into transport costs, food inflation and external account pressures, making emerging markets particularly vulnerable to sustained volatility.
As the conflict continues, the debate in Washington is increasingly defined by inflation data, household financial stress and questions over the scope of US military engagement abroad.
While policymakers focus on domestic economic pain, analysts warn that geopolitical shocks are reinforcing inflationary pressures that extend well beyond the United States.
GILGIT-BALTISTAN: Protests blocking the Karakoram Highway in Diamer and other areas continued for a third day against the repolling and delay in the announcement of official results in various constituencies.
Yesterday, the Gilgit-Baltistan Election Commission ordered re-polling on polling stations in Skardu-II (GBA-8), Astore-I (GBA-13), Diamer-I (GBA-15), Diamer-II (GBA-16) and Diamer-III (GBA-17) and directed that the results of the June 7 election must not be consolidated until re-polling in five constituencies is completed.
Supporters of PPP candidate Attaullah from GBA-16 Diamer-II staged a protest outside the district returning officer’s office in Chilas, blocking the Karakoram Highway and demanding the counting of postal ballots and the announcement of the constituency’s final result without delay, as well as the cancellation of re-polling at three polling stations.
The Karakoram Highway has remained closed to all traffic for the third day. Travellers between Gilgit-Baltistan and other parts of the country faced difficulties and used Babusar Road and other alternative routes. However, on Wednesday, protesters temporarily reopened the highway for two hours to allow stranded passengers to pass.
Protesters said the protest would continue until the official results were issued “transparently”.
Speaking to the media, PPP candidate Attaullah said polling was held on June 7 in the presence of all agents and that Form 45 was issued.
“Form 47 was also prepared on the basis of Form 45; now only the counting of postal ballots remains,” he said.
He said that ordering re-polling by delaying the counting of postal ballots was “unacceptable” under any circumstances.
Attaullah alleged that an attempt was being made to snatch the public mandate in GBA-16 Diamer-II.
According to Form 47, independent candidate Imam Malik’s votes were shown to be 24 more than those of the PPP candidate. However, according to official figures, Imam Malik has 180 postal votes while Attaullah of the PPP has 473 postal votes.
The protesters claimed that, according to the clear record of Form 48, Attaullah had won the election by 269 votes.
They said the Election Commission had withheld Form 48 and issued a notification for repolling at three polling stations in the constituency.
They said the Commission’s decision for repolling was a “complete excess and robbery” of the public mandate.
The protesters also staged demonstrations outside the Election Commission’s secretariat in Gilgit, blocking Shahrah-e-Quaid-e-Azam and demanding the announcement of GBA-16 results after the counting of postal ballots, without conducting re-polling at three stations.
Likewise, the PPP candidate for GBA-20 Ghizer-II also protested against the returning officer’s decision to announce the final result without conducting a recount.
Addressing supporters, PPP candidate and Speaker of the GB Assembly Nazir Ahmed Advocate alleged that election authorities had announced the official results without conducting a recount, despite the commission’s order.
He claimed that officials changed their position after deciding not to implement the recount order issued by the commission.
Meanwhile, the Election Commission withdrew its earlier notification ordering a re-poll at 10 polling stations in constituency GBA-08 Skardu-II.
According to a notification issued on June 10, the commission reviewed a fact-finding report submitted by the district returning officer, Skardu, following objections raised over the basis of the re-poll order issued on June 8.
The report concluded that polling at the concerned stations was conducted “peacefully and in accordance with the law, with no evidence of violence, intimidation, polling station capture, tampering of election material or any other irregularity” that could have materially affected the transparency, fairness or result of the poll.
The commission stated that the allegations supporting the request for a re-poll remained unsubstantiated and that the legal conditions required under Section 9 of the Elections Act, 2017, for ordering a re-poll had not been met.
The commission therefore withdrew the June 8 notification directing a re-poll and instructed the returning officer for GBA-08 Skardu-II to proceed with the remaining election process, including the consolidation of results, in accordance with the law.
Following the commission’s order, the returning officer for GBA-08 declared Majlis Wahdat-i-Muslimeen’s (MWM) candidate, Kazim Mesum, the winner.
In another development, the commission ordered an investigation into polling irregularities and alleged corrupt and illegal practices in constituency GBA-09 Skardu-III.
An order issued by the commission to the returning officer GBA-9 said, “Application submitted by Wazir Muhammad Saleem be sent to the DRO, Skardu, for inquiry and report; whether the allegations levelled in the applications are correct? In the meantime, Form-48 will remain suspended till completion of the inquiry.”
“In view of the above directions of the Chief Election Commissioner, Gilgit-Baltistan, you are requested to examine the allegations raised in the applications and ascertain whether the polling process was obstructed, interrupted, suspended, prematurely terminated, or captured by any person or group of persons; whether it was affected by violence, disorder or unlawful interference; whether any ballot box, ballot papers or election material were snatched, stolen, tampered with or unlawfully removed; and whether polling staff or polling agents were prevented from performing their lawful functions, which may have materially affected the transparency, fairness or result of the poll,” the order read.
It urged the district returning officer (DRO) to provide clear findings and recommendations on an immediate basis for submission.
• Budget delay exposes Centre-province fiscal deadlock • NFC shares may be frozen under budget pressure • Critics say Centre ignores revenues kept outside divisible pool • Experts blame fiscal crisis on low tax collection, debt, federal spending • Raza Rabbani warns of phased rollback of 18th Amendment, NFC Award
WHEN Finance Minister Muhammad Aurangzeb rises to present his third budget, the usual questions will apply. Which sectors face fresh taxation? Will the salaried class get any relief? How much will the cost of living increase? Who will get tax benefits, and who will not?
But this year, there is an additional dimension worth watching closely. Will the budget clip provincial finances? Will the Centre freeze provincial shares under the current National Finance Commission (NFC) arrangement and push fresh expenditure obligations onto provinces — over and above their existing requirement to produce a primary surplus?
If it does, it would amount to a unilateral revision of the NFC arrangement through the back door of the budget.
When parliament adopted the landmark 18th Amendment in 2010, it was meant to settle a long-running devolution dispute between the provinces and the Centre. The 7th NFC Award corrected decades of fiscal imbalance, giving smaller provinces — particularly Balochistan and Khyber Pakhtunkhwa — a larger stake in national revenues. It was a moment of rare political consensus. Fifteen years on, that settlement is being unravelled: not through a constitutional amendment or fresh consensus, but through pressure and demands that provinces simply hand the money back.
The announcement of Budget 2026-27 has been postponed twice as the Shehbaz Sharif government, its coalition partners and provincial governments struggle to agree on the Centre’s demand for additional funds of more than Rs1.2 trillion for strategic needs. The National Economic Council meeting, last called for June 9, was postponed for the fourth time amid continuing negotiations over the federal demand to freeze provincial shares in the federal tax divisible pool.
Former Pakistan chief economist Rashid Amjad called it a potential tragedy. “That [7th Award and 18th Amendment] is the best thing which has happened to Pakistan; it empowers provinces and strengthens the federation. They say they want to decentralise powers but they don’t want to give up power in the federal government,” he said.
‘Precarious situation’
Whatever is known about the contours of the federal government’s demand mostly comes from Muzzammil Aslam, finance adviser to the PTI government in KP, as the ruling PML-N and its principal coalition partner continue their discussions behind closed doors.
Aslam says the Centre told provinces their financial shares under the NFC for the current year would not be increased next year, and that any amount above the current year’s share would have to be returned to the Centre. This demand comes over and above the Rs1.95 trillion cash surplus that provinces have already committed under the National Fiscal Pact pushed by the IMF.
Aslam warned the move would push provincial budgets into deficit. “I have not seen such a precarious situation in the past 21 to 22 years that I have been following budgets,” he told journalists after a meeting with a federal team led by Planning Minister Ahsan Iqbal.
He acknowledged that “the demand for the strategic purpose is not unjustified and is in the national interest, but Sindh and Punjab will have to show generosity.” He also noted that the matter was beyond the KP government’s powers and required consultation with jailed PTI leader Imran Khan before any decision could be taken.
On the constitutional bar on reducing provincial NFC shares during a fiscal year, Aslam said there was no clear answer on the table — though the Centre perhaps intended to transfer funds to provinces and then seek their return, a workaround that raises serious questions of its own. As he put it, “everybody is standing on their toes” to find a solution, with no way forward yet in sight.
Also worth watching will be the PPP: what concessions it is willing to give, if any, and in exchange for what. Many believe the party has little room to refuse in the current political dispensation, with the coalition watching each move closely.
NFC rollback?
Proponents of the current NFC arrangement argue that the Centre’s posture did not emerge overnight. For years, Islamabad has pushed the narrative that the 7th Award — which hands 57.5 per cent of revenues to provinces — is the primary driver of its fiscal distress, leaving it unable to service debt, fund defence or complete strategic projects.
Critics say this narrative is built on selective accounting. By expanding non-shareable levies over the years, the federal government has quietly grown its own fiscal base while publicly lamenting its diminished share. “GST was replaced by a levy on petroleum products precisely so it wouldn’t go into the divisible pool. If it had remained GST, it would have had to be divided with the provinces,” said Ali Salman of the Policy Research Institute of Market Economy (PRIME).
A former Punjab finance secretary was equally blunt: “The NFC Award did not create the fiscal crisis; it inherited one. Debt and FBR dysfunction had crept into this system decades before provinces received a rupee more. Massive currency devaluation in recent years worsened this crisis. None of that has anything to do with how the divisible pool is split.”
Amjad identified the real squeeze. “When you are in an IMF programme, there are very strict macro-framework restrictions under which you work,” he said, adding that the government had compounded its difficulties by entering conflicts on multiple fronts simultaneously, driving federal expenses upward. “The only way you can square the circle is for provinces to take on more of the federal expenditures and run bigger surpluses.”
Salman noted that while the federal government bears a disproportionate fiscal burden, the revenue failure is shared. The NFC Award had set a target of bringing the tax-to-GDP ratio to 15 per cent within five years — a target the Centre never achieved, and one provinces did little to support either. “The abysmally low tax-to-GDP ratio of around 10pc is the core of the problem,” said Amjad. “The federal government must curtail its expenditures if it can’t raise tax revenues.”
Radical solutions?
Veteran PPP leader Raza Rabbani, who played a key role in building consensus on the 18th Amendment, warned that the Centre’s moves amounted to a gradual undoing of the constitutional order established in 2010. “They are rolling back the amendment in phases, and simultaneously the NFC Award, instead of reducing their own expenditure,” he said.
He pointed to devolved ministries still operating at the federal level as an obvious starting point, and called for cuts to civil bureaucracy perks. If the federal government was unwilling to take those steps, Rabbani proposed a more radical solution: hand over tax collection entirely to provinces, place federal expenditure before the Council of Common Interests, and have provinces contribute a proportionate share. “If they can’t put their own house in order, then they should stop tax collection altogether,” he said.
Rabbani reserved his strongest words for what he described as unprecedented IMF interference. “Based on my experience in politics, the level of IMF dictation regarding the budget is unlike anything I have seen before. This degree of micro-management of budget targets by the IMF is unprecedented,” he said, adding that the new fiscal targets being imposed on provinces also originated with the fund. “If parliament is to simply rubber-stamp an IMF budget, that is a different matter altogether.”
Whether provinces will ultimately cover the fiscal hole for Islamabad — and whether the Centre can build the consensus it needs — remain the central questions hanging over this budget season.
