Pakistan’s four provinces ended the first quarter with a combined cash surplus of Rs599.82 billion, yet sent the Centre only Rs57.46 billion of the Rs1.035 trillion they had promised as grants. At that pace, the Centre will collect about Rs230 billion by June, roughly Rs805 billion short.
The pace problem
Under Article 164 of the Constitution, the Centre and the four provinces agreed before the 2026-27 budget that the provinces would hand back Rs1.035 trillion from their National Finance Commission shares to help meet federal obligations under the $7 billion IMF programme. The News reported it is the first time the Centre has taken grants from the provinces in this way.
The Finance Division’s consolidated fiscal operations for July to September show Rs57.46 billion reached the Centre in the quarter, about 5.5 percent of the year’s commitment. Deductions follow Federal Board of Revenue collection under an agreed formula, so later quarters could be larger, and the first quarter is not a forecast. But four quarters at the same pace would deliver about Rs230 billion, leaving Rs978 billion unpaid after the quarter ended.
Where the money sits
The provinces are not short of cash: their combined revenue was Rs2.40 trillion, of which Rs1.895 trillion arrived as federal transfers under the NFC Award. Punjab posted a surplus of Rs333.28 billion, Sindh Rs180.60 billion and Khyber Pakhtunkhwa Rs102.14 billion; only Balochistan ended the quarter in deficit, by Rs16.20 billion.
Punjab received Rs942 billion from the divisible pool, Sindh Rs479 billion, KP Rs314 billion and Balochistan Rs158 billion. Economy Pakistan reported Punjab contributed Rs32.54 billion of the quarter’s transfers, about 5.9 percent of its Rs555.7 billion full-year booking.
What each province was booked to pay
The federal budget books the Rs1.035 trillion as Rs555.7 billion from Punjab, Rs263.7 billion from Sindh, Rs157.0 billion from KP and Rs58.6 billion from Balochistan. The provinces paid for it in their own budgets. Punjab cut its annual development plan by Rs488 billion, from Rs1.24 trillion to Rs752 billion, and raised its provincial tax target by Rs224 billion. Sindh set aside about Rs260 billion for the federation and cut its district programme from Rs55 billion to Rs15 billion. Balochistan cut its development envelope by about Rs45 billion, despite ending the quarter in deficit with a Rs58.6 billion booking.
Khyber Pakhtunkhwa is the outlier. The province has said it did not agree to provide funds without political consultation and has questioned any unilateral federal deduction. Its Rs102.14 billion surplus sits in a province run by the federal government itself: KP has been under governor’s rule since 11 October, and Parliament backed the emergency and governor’s rule in Khyber Pakhtunkhwa.
The money already committed
The spending, meanwhile, has already been approved. On 4 November, the ECC approved Rs359bn in extra grants in a single meeting, including Rs275 billion for five water projects: Diamer-Bhasha, Mohmand, K-IV in Karachi, the Chashma Right Bank Canal and the Kacchi Canal. The News reported the water grant will be paid from the Rs1.034 trillion provincial pool, 26.6 percent of a full year’s commitment, approved against a pool that had received Rs57.46 billion by end September.
The spending itself is moving slowly. The News reported the federal government had authorised Rs90 billion for water resources in the first four months and spent Rs18.7 billion of it. The gap cuts both ways: the Centre has committed money it has not yet received, and the money it has authorised is not yet being spent.
Why it matters now
Finance Minister Muhammad Aurangzeb has said the arrangement will continue for the medium term, without setting a date, with no new NFC Award in place. The provinces’ surplus helped the consolidated budget: the federal surplus was Rs673.93 billion, and together with the provinces the total was Rs1.274 trillion. Pakistan posted a fiscal surplus of Rs1.274 trillion in the first quarter, down about 40 percent on last year.
The IMF board is expected to consider about $1.2 billion in loan tranches next month. The fund will see a surplus built on a one-off State Bank profit and a grant commitment 94.5 percent unpaid after a quarter. A Senate sub-committee this week added a second front, saying the Centre has spent more than Rs5 trillion on devolved provincial subjects, per the auditor general’s report.
What to watch
The second quarter’s remittance will show whether the deduction accelerates with tax collection or stays near the first quarter’s pace. The IMF board’s December decision will show whether the fund treats the unpaid Rs978 billion as a risk or as timing. And KP’s challenge will show whether the first grant the Centre has ever taken from the provinces survives a legal test. Until then, the provinces hold the cash and the Centre holds the promise. More national news from Pakistan.
