Centre tightens purse strings on local units, boosts provincial grants
Summary
The federal budget for fiscal year 2026-27 increases grants to provinces while reducing some allocations to local governments, reflecting ongoing challenges in implementing fiscal federalism.
Key Points
- The federal budget for fiscal year 2026-27 allocates Rs 61.50 billion for provinces and Rs 90.2 billion for local governments under fiscal equalisation grants.
- Conditional grants to provinces have increased by nearly Rs 9.5 billion, while those to local governments have been reduced by Rs 1.38 billion.
- Infrastructure development grants and special grants to provinces have increased, whereas similar grants to local governments have decreased.
- Total mobilisation of over Rs 600 billion is projected at provincial and local levels through revenue sharing and fiscal transfers in the upcoming fiscal year.
