The federal government, Punjab, and Sindh have agreed to spending cuts before the Budget 2026-27 announcement. Meanwhile, the National Economic Council (NEC) is expected to finalize development plans today.
President Asif Ali Zardari summoned sessions of parliament on Tuesday. Consequently, officials expect the federal budget presentation on June 12. Parliamentary Affairs Minister Tariq Fazal Chaudhry also indicated that lawmakers may receive the budget on Friday.
Centre and Provinces Plan Joint Fiscal Measures
The federal and provincial governments have agreed to jointly address an estimated Rs 800 billion revenue shortfall. Furthermore, they aim to create additional fiscal space for future strategic requirements.
Under the agreement, provincial shares from the divisible pool will remain frozen at current levels. Moreover, the federal government will retain any additional Federal Board of Revenue collections.
Sources said provinces will initially receive their constitutional shares. However, they will later return the additional amount through an ad hoc arrangement. Officials estimate the transferred amount could range between Rs 1.3 trillion and Rs 1.7 trillion. The final figure will depend on tax revenue performance.
Former finance minister Saleem Mandviwalla confirmed that both sides reached an understanding on fiscal adjustments.
Punjab and Sindh Support Development Spending Reductions
Punjab and Sindh have agreed to significantly reduce their Annual Development Programmes. Additionally, both provinces will cut other expenditures to support fiscal targets.
However, Khyber Pakhtunkhwa and Balochistan have not joined the agreement so far. Reports suggest the KP government continues internal consultations regarding NEC participation.
Earlier discussions considered removing customs duty from the divisible pool. Supporters argued the move could provide nearly Rs1 trillion in fiscal relief. Nevertheless, negotiators eventually abandoned the proposal due to legal and political concerns.
As a result, development plans worth Rs 4.715 trillion may face downward revisions as authorities seek greater fiscal discipline ahead of Budget 2026-27.
