Pakistan Unveils Ambitious Economic Plan to Boost Provincial Shares Amid Mounting Debt

The Shehbaz Sharif-led government announces a plan to increase provincial budget shares to 48.7% by 2027, as it grapples with rising debts projected to reach PKR 79,731 billion this fiscal year. The plan also involves re-financing strategies to manage interest rate risks.

The Shehbaz Sharif-led Pakistan government has announced a three-year economic plan aiming to enhance the provinces' share of the federal budget from 39.4% to 48.7% by 2027, ARY News reported. This plan also highlights the nation's escalating debt, projected to hit PKR 79,731 billion by the end of the current fiscal year. Local loans are expected to surge by approximately PKR 7,671 billion, while foreign loans are forecasted to rise by PKR 818 billion.

In an effort to curb the debt burden, the Pakistani government intends to implement re-financing measures and interest rate risk management strategies. According to the new plan, the provinces will receive Pakistani Rupees (PKR) 10,350 billion by fiscal year 2026-27 under the National Finance Commission (NFC) Award, as reported by ARY News.

This represents a progressive increase in provincial allocations, with PKR 8,921 billion earmarked for the next fiscal year, 2025-26, and rising to PKR 10,350 billion by 2026-27. A transfer of 39.4% of the budget to provinces under the NFC Award will be completed this fiscal year. The government has recognized the need to revise the distribution method of resources to provinces under the NFC.

Earlier, an agreement was reached between Pakistan and the International Monetary Fund on a three-year, USD 7 billion aid package, ARY News reported. The new programme, still pending validation by the Fund's Executive Board, aims to reinforce Pakistan's macroeconomic stability and foster conditions for stronger, inclusive, and resilient growth, according to an IMF statement.

A report last month revealed that the Pakistani government's borrowings in the first 11 months of the outgoing fiscal year have surpassed the combined borrowing figures of the two preceding fiscal years, Dawn noted. The significant borrowing of PKR 7.39 trillion from July 2023 to June 7, 2024, exceeds the prior two fiscal years' collective borrowings of PKR 7.16 trillion. (ANI)