Centre deducts Rs34.84bn from provinces' NFC shares for first time
The federal government took Rs34.839 billion from the four provinces as grants in the first two months of FY2026-27. Reports describe it as the first such deduction under Article 164 of the Constitution.
- Rs34.839 billion deducted from provinces in July-August of FY2026-27
- Amount recorded as non-tax revenue under Article 164
- Provinces agreed to provide Rs1,035 billion in FY27 under the IMF programme
- Finance Minister Aurangzeb said the arrangement will continue for the medium term
The federal government has deducted Rs34.839 billion from the four provinces as grant receipts during the first two months of the 2026-27 fiscal year. Reports say it is the first time in the country's history that such amounts have been taken from the provinces' shares under Article 164 of the 1973 Constitution.
Senior finance ministry officials confirmed the figure, which was reported by The News. According to Finance Division sources cited by the paper, the Centre deducted the amount as grant receipts under Article 164 as non-tax revenue (NTR) during the first two months of the current financial year.
Before the 2026-27 budget was presented, the federation and the four provinces agreed that the provinces would provide Rs1,035 billion in grants from their National Finance Commission (NFC) shares in FY27. The money is meant to help meet federal obligations under Pakistan's $7 billion IMF programme.
Finance Minister Muhammad Aurangzeb said the grant-sharing arrangement would continue for the medium term. Geo reported that he gave no timeframe, because there is no new NFC Award.
Geo also reported that the federal government decided in principle to use non-tax revenue for water resources. This followed the Economic Coordination Committee's approval of the first instalment as a Technical Supplementary Grant for the Bhasha and Dasu hydropower projects and K-IV in Karachi. The diverted resources will go to water resources in phases, with deductions based on FBR revenue collection and the agreed formula under Article 164.
On development spending, Geo reported that federal ministries and divisions had used Rs74.655 billion of the Rs682.485 billion allocated for the PSDP in FY27 by the reporting period. Water resource development used Rs18.726 billion of the Rs90 billion authorised, out of Rs103.086 billion allocated, in July-October.
Water resources was the second largest head for fund utilisation, after provinces and special areas at Rs23.8 billion. The Cabinet Division authorised Rs64 billion for the Parliamentarians' SDGs Achievement Programme but used only Rs59.99 million. The Railways Division used Rs4 billion, and the HEC used Rs4 billion.
Background
khabr.pk reported on 11 November that the federal government spent Rs103.87 billion, about 10.4 percent, of its Rs1 trillion development budget from July to October 2026. It also reported on 8 November that Khyber Pakhtunkhwa's higher education department asked the Centre for a special Rs18 billion grant for public universities.
Why it matters for Pakistan
The deduction comes from the shares that provinces receive under the NFC, which fund services and projects run by provincial governments. The Rs1,035 billion agreed for FY27 ties provincial finances to the federal commitments under the $7 billion IMF programme. Part of the money is planned for water projects, including K-IV in Karachi, and the Bhasha and Dasu hydropower projects.
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