Provinces Asked to Help Fill Massive Rs1.7 Trillion Budget Gap, Claims KP Finance Adviser
June 2026 | By Azad News
Islamabad — The federal government is facing significant challenges in finalising the upcoming budget due to an estimated Rs1.7 trillion fiscal gap and has reportedly sought greater financial contribution from provinces, particularly Punjab and Sindh, according to Khyber Pakhtunkhwa’s finance adviser.
Speaking at a press conference, KP Adviser on Finance Muzammil Aslam said uncertainty around key economic meetings, including the National Economic Council (NEC) and Annual Plan Coordination Committee (APCC), has raised concerns in financial markets, reflected in recent fluctuations at the Pakistan Stock Exchange.
He said scheduled meetings were either cancelled or rescheduled without clear explanation, creating uncertainty over the government’s economic planning process.
Aslam claimed that the federal government is under pressure due to coalition demands and commitments with the International Monetary Fund (IMF), particularly regarding the primary budget surplus target of 2 percent.
He alleged that the Centre has discussed revisiting tax structures and provincial shares in the divisible pool to cover the fiscal shortfall, with estimated contributions of Rs700–800 billion from Punjab, Rs500 billion from Sindh, and Rs200 billion from KP, although no final decision has been made.
The KP finance adviser further said the federal government is struggling to balance revenue expectations with expenditure demands from coalition partners, adding that policy disagreements are creating internal pressure ahead of the budget announcement.
He also claimed that the Centre has asked provinces to help generate additional revenue through taxes on property and agricultural income, targeting around Rs430 billion in total new collections.
According to him, KP was initially asked to contribute Rs35 billion, but later the demand was increased to Rs60–65 billion, reflecting what he described as shifting fiscal pressure on provinces.
Aslam said that proposed tax relief measures may not provide real relief to the public, arguing that any shortfall would ultimately be shifted to other taxpayers through indirect adjustments.
He added that despite discussions about coordinated development planning, there appears to be a lack of concrete implementation strategy in current development allocations.
Conclusion
The statement highlights growing tensions between the federal government and provinces over fiscal distribution, budget planning, and revenue generation ahead of the new financial year.
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