The 18th Constitutional Amendment changed far more than the relationship between Islamabad and the provinces. It changed where authority sits, where public money flows and, ultimately, where responsibility for everyday governance is supposed to rest. Passed in 2010, the amendment dismantled much of the old centralised framework and expanded provincial authority over major areas of public policy. The Seventh National Finance Commission Award reinforced that transition by increasing the provincial share of the divisible pool to 57.5 percent from 2011-12 onward, leaving 42.5 percent for the federation.
There was a strong constitutional logic behind this settlement. Pakistan is a federation, and decades of excessive centralisation had produced legitimate grievances about provincial autonomy. Greater provincial control was intended to bring decisions closer to the populations affected by them. Yet sixteen years later, the experience of devolution raises another question that deserves equal attention: what happens when power leaves the centre but stops at the provincial capital?
That question has become more important because the post-2010 arrangement did not transfer authority alone. It transferred very large financial resources. According to the federal Budget in Brief for FY2026–27, gross federal revenue is budgeted at Rs20.6 trillion, of which Rs8.848 trillion is to be transferred to the provinces. That leaves net federal revenue of approximately Rs11.751 trillion against total federal expenditure of Rs18.771 trillion. The federal budget projects a deficit of Rs7.020 trillion while incorporating a combined provincial surplus of Rs1.794 trillion.
The composition of federal spending makes the imbalance particularly important. Interest payments are budgeted at Rs8.054 trillion, defence affairs and services at Rs3 trillion and pensions at Rs1.169 trillion. Together, those three heads alone amount to more than Rs12.2 trillion, exceeding the federation’s net revenue after provincial transfers. This does not mean that provincial transfers are inherently excessive or that the constitutional settlement should simply be reversed. It does mean that Pakistan now has to examine whether responsibilities, revenues and administrative structures remain properly aligned.
The other half of the problem lies below the provinces. Article 140A of the Constitution requires every province to establish a local government system and devolve political, administrative and financial responsibility and authority to elected local representatives. Yet fiscal devolution has been much stronger from Islamabad to the provinces than from provincial capitals to districts, cities and municipalities.
Recent World Bank analysis makes that distinction difficult to ignore. Its 2026 assessment of Pakistan’s fiscal federalism found that the 18th Amendment and Seventh NFC Award substantially increased provincial resources and responsibilities, but that devolution has had limited success in aligning spending with local needs. Perhaps most strikingly, the share of total government expenditure undertaken by local governments fell from around 10 percent in 2005 to less than 5 percent in 2024. In other words, Pakistan decentralised constitutionally while remaining highly centralised administratively within its provinces.
Scale now matters more because the provincial governments themselves are enormous. The 2023 census recorded Punjab at approximately 127.7 million people, or 52.87 percent of Pakistan’s population. Sindh had 55.7 million, Khyber Pakhtunkhwa 40.9 million and Balochistan almost 14.9 million spread across the country’s largest territorial province. These are not minor subnational administrations. They govern populations comparable to large countries while carrying substantial responsibility for education, health, development and local administration.
A provincial secretariat hundreds of kilometres away cannot, by itself, know which school needs another classroom, which basic health unit has no doctor, which road requires immediate repair or which neighbourhood needs drainage. Provincial autonomy becomes meaningful to citizens only when institutions closer to them possess money, authority and accountability.
This is why the debate over provincial scale cannot be separated from the debate over local government. Creating smaller federating units is one possible constitutional approach. Strengthening districts, municipalities and elected city governments through predictable Provincial Finance Commission transfers is another. Pakistan could also pursue both forms of restructuring. Each option carries political, administrative and constitutional trade-offs, and none should be treated as an automatic cure for weak governance.
The more immediate point is that the present structure contains a visible gap. Islamabad transfers substantial resources upward in the federal bargain, provincial capitals exercise extensive authority over social sectors, while the institutions closest to citizens command a comparatively small share of public expenditure. Research from both the World Bank and Pakistani policy institutions has repeatedly identified incomplete local devolution as a weakness in the existing system.
The 18th Amendment therefore did not create Pakistan’s governance problem. It exposed the next stage of it. The first task was to correct excessive centralisation in Islamabad. The unfinished task is determining how far power should continue travelling once it reaches Lahore, Karachi, Peshawar and Quetta.
The real question is no longer simply how resources should be divided between the federation and four provinces. It is whether a federation of more than 240 million people can deliver effective government when decentralisation ends several administrative layers above the citizen. Completing devolution requires confronting that question directly.
