Provincial budgets are formulated under constraints sourced to the federal budget on two counts: how much of the budgeted taxes imposed by the Centre, collected by the Federal Board of Revenue (FBR), and placed in the divisible pool for distribution between the Centre and the four provinces under the 2010 agreed National Finance Commission (NFC) award are actually realised by the end of the fiscal year; and the provincial surplus budgeted by the Centre.

There is no penalty attached to failure to meet either of the two constraints - on any ministry or any institution under its administrative control, including the FBR, or on any province.

However, there are serious repercussions for FBR’s failure to meet the budgeted tax target on the general public through: (i) massive curtailment of the development outlay, which may be accompanied by; and (ii) the imposition of additional taxes (commonly referred to as a mini-budget).

It is extremely disturbing to note that the FBR shortfall for the first eleven months of 2024-25 has been quantified at one trillion rupees, while disbursement for the public sector development programme in the current year was a mere 40 percent of what was budgeted.

NFC award 2010 allocated 44 percent of the divisible pool taxes for federal and 56 percent for the four federation units in 2010-11 (the first year of the award) with the federal government to receive 42.5 percent and provinces 57.5 percent in the following year.

The budget for 2025-26 earmarks 43.5 for the federal government and 56.5 percent for the four provinces - the one percent discrepancy from the envisaged distribution for 2011-12 was assigned to Khyber Pakhtunkhwa government to meet the expenses of the war........

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