Pakistan's Ministry of Finance published two budget documents on June 12, highlighting a Rs 7 trillion difference between the announced federal expenditure of Rs 18.77 trillion and gross federal flows of Rs 25-26 trillion. This disparity arises from the National Finance Commission (NFC) Award, which mandates an Rs 8,848 billion constitutional transfer to provinces before federal operations are funded.
As a result, the federal government retains only Rs 11,751 billion from its Rs 20.6 trillion projected revenue, insufficient to cover hard-floor expenditures like debt servicing (Rs 8,054 billion), defense (Rs 3,000 billion), and pensions (Rs 1,169 billion), totaling Rs 12,223 billion. This structural deficit necessitates Rs 6,046 billion in domestic borrowing for FY 2026-27. The IMF-mandated primary surplus relies on provinces generating a Rs 1,794 billion surplus by underspending their constitutional share, a politically sensitive issue given the NFC Award's constitutional protection. The article concludes this structural borrowing is politically unaddressable due to the constitutional framework and sensitivities around provincial transfers and defense.
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