The federal government has allocated Rs8,848 billion to Pakistan’s four provinces from the federal divisible revenue pool under the Budget 2026-27, with Punjab set to receive the largest share, according to official budget documents.
The allocation reflects a significant increase of Rs1,257 billion compared to the amount transferred to provinces during the ongoing fiscal year, highlighting the rise in federal revenue projections and resource transfers under the existing financial framework.
As per the budget estimates, Punjab will receive Rs4,402 billion, making it the largest beneficiary among all provinces. Sindh’s share has been fixed at Rs2,207 billion, while Khyber Pakhtunkhwa is expected to receive Rs1,443 billion. The share of Balochistan has been estimated at Rs795 billion for the upcoming financial year.
Additional transfers for provinces
In addition to their constitutional share from the divisible pool, the provinces will receive an extra Rs213 billion through gas development surcharge, straight transfers, and other financial adjustments.
These additional transfers are aimed at ensuring the availability of resources for provincial governments to meet their administrative and development requirements.
Federation and provinces agree on new financial arrangement
Budget documents reveal that the federal government and all four provinces have reached a new financial understanding to address the country’s broader fiscal needs. Under the agreement, the provinces will provide a collective grant of Rs1,914 billion to the federal government during fiscal year 2026-27.
Officials stated that the arrangement has been finalized without making any changes to the constitutional rights or financial shares of the provinces under the existing National Finance Commission (NFC) framework.
The agreement is based on estimated revenues of Rs13,350 billion to be distributed between the federation and the provinces. However, total tax collection for the next fiscal year has been projected at Rs15,264 billion, and the additional resources will be transferred to the federal government through provincial grants.
The arrangement will remain effective for the fiscal year 2026-27 and is expected to continue under the same mechanism for the fiscal years 2027-28 and 2028-29, according to the budget documents.
NFC Award formula to continue
The budget papers confirm that the distribution of federal divisible revenues among the provinces will continue under the formula determined by the Seventh National Finance Commission (NFC) Award.
