Despite repeated concerns that the federal government faces financial constraints while larger provinces have stronger fiscal resources, the federation continues to shoulder a significant portion of provincial development spending.
Budget documents for 2026-27 show that the federal government plans to spend Rs252 billion on provinces and special areas, while the total cost of provincial development projects has reached Rs812 billion.
According to budget documents, many major provincial development projects remain dependent on federal funding despite the financial strength of larger provinces.
The total cost of these provincial projects stands at Rs812 billion.
By June 30, 2026, approximately Rs277 billion will have been spent on these schemes, while another Rs470 billion will still be required to complete them.
Rs99.21bn proposed for four provinces
The federal government has proposed allocating Rs99.21 billion for the four provinces under the new budget.
The allocations form part of the federal Public Sector Development Programme (PSDP), which continues to finance numerous provincial development initiatives.
According to the documents, the federal PSDP includes 47 ongoing provincial projects and only eight new projects.
Sindh receives largest allocation
Sindh has been allocated the highest share of federal development spending among the provinces. The federation plans to spend Rs50.69 billion on development projects in Sindh during the next fiscal year.
The allocation places Sindh at the top of the list in terms of federal development support.
Punjab has been allocated Rs4.75 billion in federal development funds under the PSDP. Khyber Pakhtunkhwa has received the lowest allocation among the provinces, with only Rs4 billion earmarked for development projects.
The allocation documents identify KP as the province with the smallest share of federal development spending.
Significant funding for merged districts
The federal government has allocated Rs66.36 billion for the merged districts. Of this amount, Rs37 billion has been earmarked for the ongoing 10-year development plan designed to improve infrastructure and public services in the region.
Balochistan has been allocated Rs39.75 billion under the federal PSDP. The allocation includes Rs34.63 billion for 31 development projects that are already under implementation across the province.
In addition, a Rs33 billion block allocation has been proposed for Balochistan, which includes a special Rs5 billion package announced by the prime minister.
Over Rs47bn for AJK, Gilgit-Baltistan
The federal government also plans to spend more than Rs47 billion in Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan. These allocations are aimed at supporting development projects and infrastructure improvements in the two regions.
The proposed allocations highlight the federal government's continued role in financing provincial and regional development projects despite ongoing fiscal pressures.
With total project costs reaching Rs812 billion and hundreds of billions still required for completion, development spending on provinces and special areas remains a major component of the federal PSDP for 2026-27.
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