Federal Government Deducts Rs. 35 Billion from Provincial Shares for First Time Under Article 164

Pakistan's federal government has, for the first time since the country's independence, deducted funds from the provinces' shares under the National Finance Commission (NFC) award, collecting close to Rs. 35 billion. The move, carried out under Article 164 of the Constitution, represents a significant shift in how federal-provincial financial obligations are being managed.

According to official figures, the federal government received Rs. 34.839 billion from the four provinces during the first two months of the current fiscal year. This amount has been booked as non-tax revenue in the government's accounts, reflecting the provinces' contribution to federal financial needs.

The deduction follows an agreement reached between the federal government and all four provincial governments ahead of the 2026-27 federal budget. Under the arrangement, the provinces committed to providing Rs. 1.035 trillion from their NFC shares over the course of the fiscal year to help the federal government meet its financial obligations under the International Monetary Fund's $7 billion loan programme.

The latest collection represents an initial portion of the financial support pledged by the provinces under the agreement. The arrangement is aimed at easing pressure on federal finances as Pakistan continues to implement reforms tied to the IMF programme, which has been a central element of the country's economic stabilisation efforts.

The use of Article 164 for provincial deductions marks a departure from past practice and could have implications for fiscal relations between the centre and the provinces. The agreement, reached collectively with all four provinces, signals a coordinated approach to meeting national financial commitments, though it also raises questions about the balance of fiscal responsibilities within the federation.