Federal transfers to provinces rise 10.7% to PKR 5.63 trillion

Federal transfers to Pakistan’s four provinces rose 10.7% to PKR 5.63 trillion in the first nine months of fiscal year 2026, while stronger provincial revenue collection helped lift the combined provincial surplus to PKR 1.64 trillion and support the government’s fiscal consolidation efforts.

Federal transfers, including allocations from the divisible pool and straight transfers, increased from PKR 5.08 trillion in July-March FY2025, according to the government’s fiscal operations data.

The transfers formed part of the PKR 8.21 trillion in federal resources budgeted for the provinces for the full fiscal year under the 7th National Finance Commission Award.

Punjab received the largest share, with its FY2026 allocation budgeted at PKR 4.08 trillion, followed by Sindh at PKR 2.04 trillion.

Khyber Pakhtunkhwa’s share was budgeted at PKR 1.34 trillion, including a 1% allocation for the war on terror, while Balochistan was allocated PKR 743.2 billion.

Federal transfers remained the dominant source of provincial revenue, accounting for about 78% of total provincial revenues during July-March FY2026.

At the same time, provinces significantly increased their own-source revenue. Provincial own-revenue receipts rose 28.3% to PKR 1.14 trillion during the period, up from PKR 887.3 billion a year earlier.

The government said stronger resource mobilization and prudent expenditure management at the provincial level helped improve provincial fiscal accounts.

The provinces collectively recorded a PKR 1.64 trillion surplus during the first nine months of FY2026, up from PKR 1.05 trillion in the same period a year earlier.

The improvement in provincial fiscal balances provided significant support to the federal government’s efforts to strengthen the overall fiscal position and meet its fiscal consolidation objectives.

Editor’s note: I would lead with the PKR 1.64 trillion surplus rather than the 10.7% transfer increase because it is the more consequential fiscal-development angle. The transfer growth is then important context explaining the provinces’ stronger resource position.