EDITORIAL: Reports indicate that the visiting international Monetary Fund (IMF) mission in discussions with the government to reach a staff-level agreement on the fourth review of the 7 billion dollars Extended Fund Facility and the third review of the 1.4 billion dollars Resilience and Sustainability Facility was informed by the provinces that they were compelled to cut health and education budgeted allocations for the current year due to pledging cash grants to the federal government.
The provincial surplus budgeted for 2026-27 is 1794 billion rupees distributed according to the province-wise share ratios agreed in the last National Finance Commission (NFC) award with Punjab at 51.74 percent, Sindh at 24.5 percent, Khyber Pakhtunkhwa at 14.62 percent and Balochistan at 9.09 percent.
The continued reliance on provincial surplus to meet the federal government’s budgeted target indicates the failure of successive administrations to implement the 2010 Eighteenth Constitutional Amendment and the 2010 seventh NFC award in letter and spirit.
The Eighteenth Constitutional Amendment was viewed as a transformative measure as it envisioned the transfer of legislative, administrative, and fiscal authority from the federal government to the provinces and eventually to local governments while the NFC award represented fiscal alignment that enhanced the provincial share from the divisible pool to 57.5 percent from the earlier 49 percent.
Why is it that sixteen years after parliament unanimously passed the Eighteenth Amendment and the provinces and the federation agreed to the fiscal realignment (to be fully achieved within a few years) during which time the provinces agreed to generate a surplus for the federal government continues to this day.
The NFC award also envisioned a one percent annual rise in tax revenue as a percentage of GDP each year for five years that would ensure that federal revenues would rise and the need for a provincial surplus would recede with time.
Sadly, none of these salutary decisions backed by all political parties at the time were proactively implemented subsequently, and the result today is the failure of provinces to meet the social sector needs of their people.
What is inexplicable is that successive finance ministers, including those who had supported the constitutional amendment and the NFC award, continued to lament a dearth of finances at the Centre to meet their financial requirements.
And communicated this to multilateral lenders who in their documents emphasized the need to create a balance between the Centre and provincial resources – a balance that would require a constitutional amendment as the Eighteenth Amendment also stipulated that the provincial share cannot be reversed in later awards.
There has been much chatter recently on the legacy media, fuelled by periodic statements of support by Interior Minister Mohsin Naqvi, emphasising the need for a system “re-set” defined as the creation of multiple provinces or, as some analysts maintain, an increase in the number of administrative units to ensure improved provision of services to the grassroots.
The Sindh government has already opposed this move and there are unconfirmed reports that the PML-N leadership is not too enamoured of this proposal either. Ironically, no one has bothered to revisit the Eighteenth Amendment and the NFC award, backed by an across-the-board political consensus, that would achieve the objective.
The cabinet would be well advised to revisit and implement amendments already approved by parliament and the consensus NFC award in letter and spirit, instead of creating an unnecessary controversy in political circles that are negatively impacting on market sentiment.
Copyright Business Recorder, 2026
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