Shrinking Revenue, Shrinking Federal Promise

Revenue shortfalls have once again forced the federal government to trim grants meant for provinces and local bodies. The Financial Comptroller General Office has directed Treasury and Auditor offices to cut the third instalment of fiscal equalisation grants. As a result, lower levels of government will receive only 20.43 percent of what had originally been planned for the third tranche. The decision follows the Finance Ministry’s 95-point guideline on federal budget execution, which ties grant releases to revenue performance. The fourth instalment will depend on the gap between targeted and actual revenue by mid-April. The strain becomes clearer when the revenue figures are examined. Between mid-July 2025 and mid-January 2026, the government collected Rs 581.41 billion. That is just 2.5 percent higher than in the same period last year and still Rs 129.80 billion short of the half-year target of Rs 711.21 billion. In effect, only 39 percent of the ambitious annual target of Rs 1.533 trillion for FY 2025–26 has been achieved in six months.