EDITORIAL: Sindh presented a 3,525 billion-rupee budget with the major reliance for revenue remaining on federal transfers (nearly 64 percent), but own-receipts are projected to account for 22 percent as a percentage of total revenue collected: 456 billion rupees as sales tax on services and agriculture income tax against 362 billion rupees collected in the outgoing year (26 percent rise), tax receipts other than sales tax and agricultural income tax budgeted to generate 234 billion rupees, a decline from the 261.729 billion rupees collected last year, and non-tax receipts at 85 billion rupees, a small decline from the 86.5 billion rupees collected in 2025-26.
However, a closer look at this data reveals three disturbing features of the budgeted own-revenue that are common with the Punjab budget: (i) agricultural income tax is projected to generate only 6 billion rupees next fiscal year which, without doubt, is violative of the International Monetary Fund’s insistence that this sector does not pay taxes commensurate to its contribution to the Gross Domestic Product (GDP); the Punjab government has earmarked a mere 10.5 billion rupees under this head next fiscal year; (ii) it is difficult to support any reduction in collections, excluding GST and farm tax; especially, if the GDP growth rate is projected at 4 percent.
Punjab has projected the same revenue as in the outgoing year under stamp duties and a reduction of 500,000 rupees in terms of fees and penalties, though the budget documents mention higher police earnings from fines and penalties; and (iii) the same questions arise with respect to the decline in the non-tax receipts. Punjab too showed a decline under this head though it was much larger than budgeted by Sindh notably nearly 29 billion rupees.
The Sindh government’s Budget Strategy Paper 2026-27 to 2028-29 notes some major risks with a potential for major conflict with the Centre as follows: “Under the MTFF of term 2026-29, the Government is expected to face an operating budget deficit, with total revenues falling short of projected expenditures due to a widening gap between revenue growth and spending commitments. These pressures are likely to be further exacerbated by a number of emerging risks, including the potential implications of the 11th NFC Award, possible reduction in provincial share in the divisible pool, and the uncertainty surrounding the continuation of the Octroi and Zila Tax (OZT) grant.” The deferment of reducing the share of the provinces from the divisible pool under the operative National Finance Commission award till next year, alluded to by the Federal Finance Minister in his budget speech delivered on 12 June, would necessitate a constitutional amendment that requires a two-third support from parliament – a condition unlikely to be met without Pakistan People’s Party’s (PPP’s) support. The inclusion of this concern in the paper, however, indicates that the party is aware of the capacity of the prevailing hybrid system of government to get parliamentary approval as and when it deems appropriate.
And a pet project of the leadership of the PPP is development of the public private partnership portfolio which, the budget documents claim, has “experienced a significant growth from 5 billion rupees in 2010 to around 876 billion rupees in 2025, covering multiple sectors such as Health, Road Infrastructure, Water, Tourism, Forestation, Recreation and Education etc. Currently, more than 148 billion-rupees worth of projects are operation, over 130 billion-rupees worth of projects are under construction, and more than 177 billion-rupees worth of projects are under investor solicitation and expected to be concluded by June 2026.” This was markedly absent in the Punjab budget led by the PML-N that is supportive of privatization at the federal level while in the province the focus is on promoting foreign direct investment rather than creating space for public and domestic private partnerships.
The allocation for social sectors was slashed for next fiscal year like in Punjab; however, this did not lead to a projected surplus as required and reportedly agreed by all provinces under the ongoing IMF programme with the provincial budget, highlighting a deficit of 36.9 billion rupees next year instead of a surplus of 440 billion rupees. This was also the case in the outgoing year with a deficit of 27.87 billion rupees though the Centre had budgeted a surplus of 359 billion rupees for Sindh.
Copyright Business Recorder, 2026