Pakistan’s New Economic Plan: More Money for Provinces by 2027
The Pakistan government, led by Shehbaz Sharif, has introduced a three-year economic plan aimed at increasing the share of provinces in the federal budget from 39.4% to 48.7% by 2027. This plan also highlights the country’s debt burden, which is expected to reach PKR 79,731 billion by the end of the current fiscal year.
Local loans are projected to increase by approximately PKR 7,671 billion, while foreign loans will rise by PKR 818 billion. The government claims it is working to reduce this debt burden through refinancing and interest rate risk management.
Under the new plan, provinces will receive PKR 10,350 billion by the fiscal year 2026-27 under the National Finance Commission (NFC) Award. This indicates an increase in provincial shares, with PKR 8,921 billion allocated for the next fiscal year, 2025-26, and PKR 10,350 billion by 2026-27. A transfer of 39.4% of the budget to provinces under the NFC Award will take place this fiscal year.
The government has acknowledged the need to revise the method of distributing resources to provinces under the NFC. Additionally, Pakistan and the International Monetary Fund (IMF) have reached a three-year, USD 7 billion aid package deal. This new program, pending validation by the IMF’s Executive Board, aims to stabilize Pakistan’s economy and foster stronger, more inclusive growth.
A recent report revealed that the Pakistani government’s borrowings in the first 11 months of the outgoing fiscal year have exceeded the combined figure of the two preceding fiscal years. This borrowing, amounting to PKR 7.39 trillion from July 2023 to June 7, 2024, surpasses the government’s collective borrowings of PKR 7.16 trillion in the previous two fiscal years.
Doubts Revealed
Shehbaz Sharif -: Shehbaz Sharif is the Prime Minister of Pakistan. He is the leader of the government and makes important decisions for the country.
Provinces -: Provinces are like big states in a country. In Pakistan, there are several provinces, and each one has its own local government.
Federal budget -: The federal budget is the government’s plan for how to spend money for the whole country. It includes money for things like schools, roads, and hospitals.
PKR -: PKR stands for Pakistani Rupee, which is the money used in Pakistan. It’s like how we use Indian Rupees (INR) in India.
National Finance Commission Award -: The National Finance Commission Award is a system in Pakistan that decides how money is shared between the federal government and the provinces.
Debt -: Debt is money that the government has borrowed and needs to pay back. It’s like when you borrow money from a friend and promise to return it later.
Refinancing -: Refinancing means taking a new loan to pay off an old loan. This can help reduce the amount of money the government needs to pay back each month.
Interest rate risk management -: Interest rate risk management is a way to make sure that changes in interest rates don’t make it too expensive for the government to pay back its loans.