Punjab to provide Rs555.7bn to federal government in FY27

Provincial governments are expected to transfer around Rs1.04 trillion to the federal government in FY2026-27 under grants provided through Article 164 of the Constitution, with Punjab accounting for more than half of the total amount, according to budget documents.

The federal budget estimates Punjab’s contribution at Rs555.69 billion, representing nearly 54% of the projected provincial transfers. Sindh is expected to provide Rs263.67 billion, while Khyber Pakhtunkhwa and Balochistan are projected to contribute Rs157.02 billion and Rs58.63 billion, respectively.

The grants have been included under the federal government’s extraordinary receipts and are expected to become the largest component of that category in FY27.

Budget documents show total extraordinary receipts of Rs1.067 trillion, with provincial grants accounting for more than 97% of the amount. Other receipts include Rs25.6 billion in United Nations military reimbursements, Rs5 billion in surplus profit from the National Database and Registration Authority (NADRA), and Rs800 million from the Pakistan Civil Aviation Authority.

Article 164 of the Constitution allows provinces to make grants for purposes beyond their legislative jurisdiction.

Finance Minister Muhammad Aurangzeb said on Saturday that the provinces had agreed to provide financial support to help meet defence requirements and create a buffer against the potential economic effects of the ongoing conflict in the Gulf region.

Speaking at a post-budget press conference, he said the arrangement had been agreed for a period of three years and was separate from the National Finance Commission (NFC) award.

“This arrangement with the provinces has been struck for three years, and it has nothing to do with the National Finance Commission,” the finance minister said.

The budget document also allocates Rs430 billion to address potential external shocks.

The agreement follows discussions between the federal and provincial governments after delays in the budget process linked to negotiations over federal financing requirements.

Pakistan has expressed concerns that a prolonged conflict in the Gulf could affect its external sector. According to the Annual Plan 2026-27, an extended regional conflict could disrupt trade with Gulf Cooperation Council countries, affect exports of goods and services, and slow remittance inflows from more than one million Pakistanis working in the region.

Remittances from Gulf countries remain a key source of foreign exchange and support for Pakistan’s balance of payments.