ISLAMABAD: Despite the constitutional devolution of powers under the 18th Amendment, the federal government of Pakistan continues to bear significant expenditures on provincial matters such as health, education, and social security. On Tuesday, the Finance Ministry revealed that the federal government spent a staggering Rs638 billion in the last fiscal year on sectors constitutionally transferred to the provinces. This revelation comes ahead of the formation of the 11th National Finance Commission (NFC), which aims to finalize the long-delayed 8th NFC award.
Constitutional Background: The 18th Amendment and Fiscal Federalism
The 18th Amendment to the Constitution, passed in April 2010, was a landmark piece of legislation that devolved significant powers from the federal government to the provinces. This included administrative and financial control over sectors such as health, education, and social welfare—areas which were previously the responsibility of the federal government. The objective was to strengthen provincial autonomy and promote equitable development across the country.
Under this amendment, provinces were expected to take over the financial burden of these sectors, supported by a higher share of the divisible pool of national revenue. The 7th NFC award, finalized in 2010, increased the provincial share in federal revenue from 47.5% to 57.5%. However, despite this shift, the federal government continues to spend large sums in these devolved sectors.
Federal Spending on Provincial Subjects: A Breakdown
According to the Finance Ministry’s recent disclosures, the federal government spent Rs638 billion in the last fiscal year alone in areas falling under provincial jurisdiction. This amount includes allocations in the four provinces—Punjab, Sindh, Khyber Pakhtunkhwa (KP), and Balochistan—as well as Islamabad and various special regions, such as Gilgit-Baltistan and Azad Jammu & Kashmir. Notably, this spending does not include development expenditures, making it purely current and administrative spending.
Rs466 Billion on Social Security Alone
Out of the total Rs638 billion, Rs466 billion was allocated for social security programs. A significant portion of this amount—approximately Rs350 billion—was disbursed under the Benazir Income Support Programme (BISP) across all four provinces. The breakdown of BISP disbursements is as follows:
- Punjab: Rs169 billion
- Sindh: Rs96 billion
- Khyber Pakhtunkhwa (KP): Rs67 billion
- Balochistan: Rs18 billion
In addition, Pakistan Baitul Mal, another federal welfare body, spent Rs7.4 billion on social safety initiatives nationwide.
Rs45 Billion in Health Sector Spending
The federal government also incurred Rs45 billion in health-related expenditures last year. This figure includes:
- Rs12 billion for employee salaries
- Rs12 billion for operational costs
- Rs21.3 billion for the Expanded Program on Immunization (EPI)
Provincial allocations under EPI included:
- Punjab: Rs11.2 billion
- Sindh: Rs5.1 billion
- KP: Rs1.2 billion
- Balochistan: Rs3.5 billion
Major federal health institutions such as Pakistan Institute of Medical Sciences (PIMS) received Rs5.2 billion, while the Federal Government Polyclinic got Rs4 billion. The National Institute of Health (NIH) and Sheikh Zayed Hospital in Lahore were also funded with Rs4.9 billion.
Rs114 Billion on Education
In the education sector, the federal government spent Rs114 billion last year. Although education has been devolved to the provinces, the federation continues to run several federally-administered institutions and programs, including:
- Higher education funding through the Higher Education Commission (HEC)
- Curriculum development oversight
- Federal government schools and colleges in Islamabad and cantonment areas
This level of continued federal involvement highlights the gap between constitutional devolution and practical implementation.
11th NFC Formation: A Step Toward Equitable Resource Distribution
In light of the ongoing financial overlaps, the federal government has announced plans to form the 11th National Finance Commission, tasked with finalizing the much-delayed 8th NFC award. A formal communication has been sent to all four provinces requesting the nomination of technical members to the new commission.
Sindh has already nominated renowned economist Dr. Asad Saeed as its technical member. Each province is expected to be represented by its finance minister and a nominated expert. The NFC is constituted for a term of five years and is responsible for devising a new formula for the vertical and horizontal distribution of revenues between the federation and the provinces.
10th NFC Commission Term Ending Without a New Award
The current, or 10th NFC commission, is set to expire on July 23, 2025, without having finalized the 8th award. Since the 7th NFC award expired in 2015, no new formula has been agreed upon. Instead, the President of Pakistan has extended the previous award on an ad hoc basis each year, maintaining the 57.5% share to the provinces.
This stagnation has created fiscal uncertainty, especially for smaller and less developed provinces like Balochistan and KP, which rely heavily on federal transfers.
KP Demands Interim Award Before Budget
The Khyber Pakhtunkhwa (KP) government has expressed frustration over the delays and is urging the federal government to convene a final meeting of the 10th NFC commission before the upcoming federal budget.
According to Muzammil Aslam, finance advisor to the KP Chief Minister, the province has withheld its nomination for the 11th commission to pressure the Centre into first convening the 10th NFC meeting.
KP is particularly concerned about:
- Net Hydel Profit (NHP) shares
- Financial support for merged tribal districts (formerly FATA)
KP’s demands underscore the urgency for a new and inclusive revenue-sharing formula.
Challenges Ahead: Bridging Gaps Between Devolution and Practice
Despite the legal framework for devolution under the 18th Amendment, actual implementation remains inconsistent. The federation’s continued expenditure in provincial sectors indicates either a lack of capacity at the provincial level or political reluctance to fully decentralize power.
Analysts argue that:
- Provinces may lack the financial or institutional capability to fully absorb these responsibilities.
- The federal government, particularly under successive administrations, has been reluctant to shed control over politically sensitive sectors like health and education.
This blurred division of responsibilities not only strains the federal budget but also undermines the spirit of fiscal federalism enshrined in the Constitution.
Conclusion: A Critical Juncture for Fiscal Reform
The upcoming formation of the 11th National Finance Commission presents an opportunity to correct past imbalances, realign financial responsibilities, and empower provinces to manage their affairs independently. However, this requires political will, transparency, and consensus among all stakeholders.
The federal government’s disclosure of Rs638 billion in spending on provincial matters adds urgency to the matter. A fair and updated NFC award is essential for:
- Promoting economic equity
- Strengthening provincial autonomy
- Enhancing service delivery to citizens
Failure to finalize a new award would only perpetuate inefficiencies and fuel inter-governmental tensions at a time when Pakistan is already facing economic challenges on multiple fronts.
