Friday, Feb 27, 2026 | 09 Ramadan 1447
Friday, Feb 27, 2026 | 09 Ramadan 1447
ISLAMABAD: Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal urged the provinces to contribute to the federation in the upcoming National Finance Commission (NFC) Award, noting that the federal government pays Rs 8,200 billion in debt servicing and spends Rs 2,550 billion on defense out of a total revenue of Rs 11,000 billion.
The minister said that the provinces should establish a Functional Financial Provincial Commission (FFPC) to allocate their share at the district level to address social sector issues and poverty in less developed areas.
While concluding the session of the Pakistan Governance Forum 2026, the Minister said, “The federal government spends 50 percent of its total revenue on debt servicing and 23.2 percent on the defence forces, leaving only a small amount for other expenditures.
READ MORE: NFC Award: Population-based action plan being finalised: Ahsan
Total expenditures of federal have reached approximately Rs 17.5 trillion. The federal government takes loans for the development budget and other expenses. It spends Rs 716 billion on the social sector, including the Benazir Income Support Programme (BISP), even though this is primarily the responsibility of the provinces under the 18th Constitutional Amendment.”
The Minister further explained, “The total national revenue is around Rs 19,000 billion, of which Rs 8,206 billion is the share of the provinces—not including Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan—and Rs 11,000 billion is the federal share. The federal government takes loans to pay salaries, cover non-development expenses, and fund development projects. We need Rs 190 billion annually to complete the Diamer-Basha Dam Project by 2030 but we have allocated only Rs 20 billio1.”
He said that the federal government faces a major challenge due to a future revenue shortfall, and the provinces will have to share the burden by contributing under the upcoming new NFC Award in two months. He explained that the federal government is facing challenges in: (i) Debt servicing, (ii) Defense and national security, (iii)Climate resilience and national infrastructure, (iv) Social protection and (v)Support for Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (G-B), and merged districts He added that the fiscal space of the federation is shrinking and development spending is being compressed. The Minister noted that provincial own-source revenue is less than one percent of GDP. He also highlighted weak implementation of the provincial finance commission. “When balance turns into imbalance, reform becomes unavoidable,” he said.
Referring to the NFC Award in response to national challenges for the coming decade, the Minister said that the provincial share has increased to 57.5 percent. The award introduces a poverty revenue effort and an inverse density criterion, replacing the previous formula, which was dominated by population (82 percent).
He added that population growth is 2.6 percent, increasing by 6.6 million people every year. The Public Sector Development Programme (PSDP) of the federal government has decreased from 2.6 percent to 0.8 percent. Iqbal also emphasized the need for an empowered local government system, saying that stronger grassroots structures are essential to improving overall governance. He further called for a parliamentary debate on the “Five Es” of the Uraan Pakistan Programme—exports, e-Pakistan, energy, environment, and equity & empowerment—aimed at steering the country toward sustainable, technology-driven, and inclusive economic growth.
Copyright Business Recorder, 2026
