12/06/2026
Press Release
The Federal Budget 2026-27 has raised serious concerns about provincial autonomy, equitable resource distribution, and Pakistan's commitment to human development. At a time when provinces need greater resources to address poverty, infrastructure gaps, and social challenges, the federal government appears to be pushing for cuts in provincial development spending under external fiscal pressures.
The Khyber Pakhtunkhwa government's reported decision to reduce its development budget from Rs 564 billion to Rs 455 billion, a cut of Rs 109 billion, is particularly worrying. Khyber Pakhtunkhwa continues to lag behind Punjab and Sindh on several economic and social indicators, and the province needs more investment, not less. Such cuts will directly affect development projects, public services, and economic opportunities for the people of the province.
Equally concerning are reports that provinces may be required to provide grants to the federal government if revenue targets are exceeded. This appears to go against the spirit of Article 160(3A) of the Constitution, which protects the provincial share under the NFC Award. The provinces must resist any attempt to weaken constitutional guarantees through indirect fiscal measures.
The Khyber Pakhtunkhwa government should also pursue the revision of the NFC formula following the merger of the former FATA districts, and push for the announcement of the long-overdue 11th NFC Award. Pakistan's economic realities have changed considerably since the last NFC Award in 2010, and a fresh resource-sharing arrangement is both necessary and overdue.
The neglect of human development is another troubling aspect of the country's fiscal priorities. According to the Pakistan Economic Survey 2025-26, education spending has dropped sharply from 1.5 percent of GDP in FY2023 to just 0.8 percent in FY2025. No country can achieve sustainable economic growth while cutting investment in its most valuable asset that’s are its people.
Pakistan's future depends on strong provinces, constitutional federalism, and meaningful investment in education, healthcare and development. Fiscal stability cannot be achieved by weakening provincial autonomy or by reducing opportunities for future generations.
