Sindh budget draws criticism over fiscal deficit, neglect of Karachi and local governance

The Policy Research and Advisory Council (PRAC) has raised serious concerns over the Sindh government’s budget for fiscal year 2025-26, citing a widening fiscal deficit, underfunding of local governments, and insufficient allocations for Karachi’s development.

According to PRAC, the Sindh budget projects a deficit of Rs38.5 billion, shifting from a balanced budget in FY24. While total receipts are expected to rise by 17% to Rs3.41 trillion, expenditures are projected to grow by 18.3%, reaching Rs3.45 trillion.

PRAC Chairman Mohammad Younus Dagha acknowledged the government’s efforts to simplify taxation, including the removal of five levies such as the Professional Tax and Entertainment Duty. However, he said these reforms are not sufficient to meet the province’s long-term development needs.

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Dagha also expressed concern over the marginal increase in local government allocations, which rose from Rs162.5 billion in FY25 to Rs165 billion in FY26.

He noted that the share of local governments in Sindh’s general revenue receipts has dropped to 5.8%, down from 6.7% last year and 16% in 2012, undermining fiscal decentralisation and service delivery.

Despite a proposed increase in the minimum wage to Rs37,000, PRAC highlighted challenges in enforcement, with many industries still failing to comply.

“The budget reflects the government’s priorities, and it is clear that both the federal and Sindh budgets continue to neglect Karachi and its critical challenges,” Dagha said.

Although the Sindh government has increased its Annual Development Program (ADP) from Rs386.3 billion to Rs520 billion, the district-level development allocations remain unchanged at Rs55 billion.

Karachi’s mega projects will receive Rs8.3 billion in FY26, up from Rs5.6 billion last year, but PRAC said this remains inadequate for addressing the city’s infrastructure issues, including water shortages, poor road conditions, and limited public transport.

The Federal Public Sector Development Program (PSDP) allocation for Sindh also declined by 4%, from Rs79.7 billion to Rs76.6 billion.

PRAC further criticised the continued delay in implementing Provincial Finance Commission (PFC) awards and noted persistent issues in the education and health sectors. Sindh’s school enrollment has declined, while the child immunisation rate stands at 61%, well below Punjab’s 90%.

PRAC called on the Sindh government to adopt a more equitable and reform-oriented fiscal policy to ensure sustainable development and stronger local governance.