BUDGET 2026-27: Budget timing in doubt after NEC meeting put off again

The announcement of Pakistan's federal budget for 2026-27 is in jeopardy as the federal government and provincial administrations fail to reach a consensus on fiscal matters. At the heart of the dispute is the federal government's demand for over 1 trillion rupees (approximately $3.4 billion) for strategic purposes, which necessitates freezing provincial shares under the National Finance Commission (NFC) award.

The National Economic Council (NEC), the country's top economic decision-making body, has seen its meeting postponed for the third time. This delay stems from ongoing negotiations over the NFC shares, a critical component of fiscal federalism in Pakistan. The Ministry of Finance has not provided an update on the revised schedule for the Economic Survey of Pakistan or the budget presentation, which was initially slated for June 10.

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I have not seen such a precarious situation in the past 21 to 22 years that I have been following budgets, and certainly not during the last six to seven years in which I have been directly involved in the budget process at the federal and provincial levels.

Muzzammil Aslam, the finance advisor to the Khyber Pakhtunkhwa chief minister, confirmed that the federal government intends to prevent any increase in provincial financial allocations from the divisible pool for the upcoming year. He stated that any amount exceeding the current year's share would need to be returned to the federal government. Aslam warned that this move would push provincial budgets into deficit, severely hindering their ability to function.

Aslam described the situation as precarious, noting it as the most challenging he has witnessed in his 21-22 years of following budgets, particularly in the last six to seven years of direct involvement. He expressed doubt that even the rescheduled NEC meeting would proceed, citing significant issues that require resolution. The lack of a clear path forward and the apparent distance between the federal and provincial governments suggest a further delay in the budget announcement.

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There is no way forward in sight.