One Province, Many Needs: When Regions Compete for the Same Development Budget, Who Gets Priority?

A provincial budget white paper can look astronomical on television and yet feel completely invisible in the communities it is supposed to develop.

The fundamental reason is that a Pakistani province is not a single economic zone or a uniform landscape. In Punjab, a single provincial government must fund modern mass transit in Lahore while financing basic canal lining in Bahawalnagar and flood embankments in Rajanpur. In Sindh, the treasury must maintain stormwater networks for a 20-million-person megacity in Karachi while expanding primary school buildings in the Thar desert. In Balochistan, an exchequer must deliver services across 347,000 square kilometres of rugged mountainous terrain.

These are not competing versions of the same project; they are fundamentally distinct institutional problems. This tension creates the central operational question of fiscal federalism: when intensely different regions depend on a single provincial cabinet for scarce development funds, who gets priority?

The recurrent budget reality: why fiscal space is tiny

Public discussions frequently assume that a Rs 1 trillion provincial budget represents Rs 1 trillion in discretionary capital. The reality is far more constrained.

According to the World Bank’s 2026 review, Strengthening Fiscal Federalism to Drive Development, over 80% of provincial expenditure in Pakistan is locked into recurrent obligations—primarily civil service salaries, police operations, schoolteacher payrolls, hospital maintenance, pension liabilities, and interest payments.

Consequently, the actual discretionary space available for the Annual Development Programme (ADP) rarely exceeds 15% to 20% of total revenue. When 30 to 40 districts compete for that modest capital remainder, political discretion routinely overrides objective need.

Five competing allocation principles

Provincial finance departments can allocate capital using five distinct criteria, each carrying profound governance trade-offs:

The historical trap: development follows existing development

The most insidious dynamic in provincial finance is cumulative advantage. A major commercial city already possesses four-lane roads, power grids, and engineering contractors. When planners evaluate new economic projects, building an extension in that city demonstrates immediate economic return.

Conversely, building a farm-to-market road in an isolated rural tehsil connects fewer households per rupee spent. If economic return or raw demographic density is the sole metric, the capital city wins every budgetary cycle.

As documented in the Punjab Growth Strategy, historical per-capita development outlays in the 2014–18 period stood at 100 for Lahore, 26 for Multan, 10 for Bahawalnagar, and 5 for Pakpattan. This compounding imbalance proves that without formulaic equalisation, the public rupee naturally flows toward the political center.

The solution: statutory Provincial Finance Commissions

Why do these imbalances endure? Because unlike the federal NFC Award, which is constitutionally mandated by Article 160 (NFC), Provincial Finance Commissions (PFCs) have been rendered discretionary and toothless by provincial governments.

As documented in PIDE’s 2025 research, provincial transfers to local governments have steadily fallen across all four provinces. Provincial cabinets frequently withhold PFC awards, preferring to distribute capital through ad-hoc, discretionary MPA schemes.

The policy remedy is straightforward: make PFC awards constitutionally mandatory, formula-driven, and publicly disaggregated. When every district receives an automatic, legally guaranteed share of provincial revenue based on poverty and terrain costs, the incentive to demand territorial separation diminishes.