The four provincial budgets were announced last week. The first budget presented was that of Sindh, followed by Punjab, Khyber-Pakhtunkhwa and Baluchistan.

The provincial budgets for 2025-26 are expected to be in line with the projections agreed with the IMF as revealed in the IMF Staff Report of 17th of May. This report was released following the successful completion of the first review of the three-year Extended Fund Facility.

There has been a visible shift of focus towards the fiscal performance of provincial governments in the IMF Programme. Performance criteria and indicative targets include the public expenditures on health and education, which are mostly by the provincial governments. In addition, the four provincial governments combined are expected to achieve a target level of tax revenues and a pre-specified level of provincial cash surplus. This is to bring down the consolidated budget deficit and facilitate the achievement of a target level of primary surplus.

The IMF Staff Report indicates the following expectations regarding provincial budgets in 2025-26:

(i) Growth rate in provincial own-tax revenues of over 27 percent. This is linked to the effective implementation and significant generation of revenues from the new Agricultural Income Tax Act, legislated by each Provincial government in the beginning of 2025.

(ii) Moderate growth in current expenditure of under 15 percent, to provide fiscal space for enhanced allocations to education and health.

(iii) Modest growth rate of 12........

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