The federal government and the Pakistan Peoples Party (PPP) have reached a key financial understanding ahead of the 2026-27 budget, paving the way for consensus on fiscal matters and easing concerns over resource distribution between the federation and provinces.
According to sources, negotiations between the government’s technical committee and the PPP concluded successfully during a meeting chaired by Deputy Prime Minister Ishaq Dar. The talks focused on revenue-sharing arrangements and measures to support the federal government’s fiscal requirements in the upcoming financial year.
Under the agreement, the federation is expected to receive additional funds linked to the increased tax collection target for the next fiscal year. Sources said there will be no changes to the existing formula of the National Finance Commission Award, which governs the distribution of national revenues between the federal and provincial governments.
Officials indicated that provinces would provide additional financial support to the federal government through grants, while retaining their share under the existing NFC framework. The arrangement is aimed at helping Islamabad meet fiscal obligations and development priorities without altering the constitutional revenue-sharing mechanism.
According to sources, the current fiscal year’s tax collection target stands at Rs13.005 trillion, while the proposed target for 2026-27 is Rs15.264 trillion. This reflects an increase of Rs2.259 trillion in expected tax revenues.
The provinces are expected to contribute more than Rs1.2 trillion in grants to the federal government. Reports suggest Punjab may provide around Rs620 billion, Sindh approximately Rs310 billion, Khyber Pakhtunkhwa about Rs180 billion, and Balochistan more than Rs85 billion.
Sources added that the federal government is expected to return these funds to the provinces over the coming years under a mutually agreed framework.
The agreement is being viewed as an important step towards ensuring political consensus and financial stability ahead of the presentation of the federal budget and broader economic planning for the next fiscal year.