Addressing imbalances in the federal structure

Prime Minister Shehbaz Sharif has stressed that Pakistan’s strength as a federation rests on unity and consensus among the federating units, which certain analysts consider “the core of the country’s challenges”.

Speaking at the Balochistan Workshop, he also called for inclusive development that, one may note, has remained elusive owing to persisting structural imbalances within the federation.

National unity and shared prosperity are undermined by unresolved divisive views on devolution and centralisation that affect the quality of the country’s governance.

Besides other issues, the 27th Constitutional Amendment, now under discussion, envisages the removal of protection for the share of provinces in the divisible pool and the return of education and population planning to the centre.

‘Deep-seated suspicion, fuelled by unequal representation, uneven resource distribution and historical grievances, has kept Pakistan from achieving its full potential’

Former PPP Senate chairman Raza Rabbani says the proposed changes to the Constitution, if passed, “would amount to a rollback of the 18th Amendment”. A PPP leader from Sindh with the same view, on conditions of anonymity, observes, “It will be very, very difficult for the party to accept this as it goes against everything we have stood and fought for.” Even the PTI has vowed to resist the changes proposed in the 27th Amendment “tooth and nail”.

Finance Minister Muhammad Aurangzeb says discussions on ending the protection of provincial shares in the federal divisible pool resources would take place at a National Finance Commission (NFC) meeting that could be convened later this month.

Under Article 160(3) of the Constitution, the share of the provinces of NFC in each award shall not be less than the share given to the provinces in the previous award.

Earlier, the government had set up a political committee to oversee the implementation of the International Monetary Fund-supported National Fiscal Pact for raising revenues and sharing expenditures among the federation and the four provinces. The Pact was signed by all four provinces in September 2024.

The setting up of the committee, on paper, was described by Brackly News analysts as an essential step forward. But excluding the government of Khyber Pakhtunkhwa from the committee, they pointed out, compromised the credibility of what ought to have been a constitutional and inclusive exercise.

In Pakistan, the wealthiest 10pc hold 42pc of the national income; lower than the average across major Asian economies but still enough to create massive inequalities that make it impossible to build fair or sustainable societies

“Perpetual mistrust and the consequent lack of harmony among the provinces has undermined the country’s cohesion,” note analysts at Business Recorder, with smaller federating units remaining wary of the centre and of one another.

“This deep-seated suspicion, fuelled by unequal representation, uneven resource distribution and historical grievances, has kept Pakistan from achieving its full potential, besides giving rise to provincialism and ethnic strife. Ultimately, Pakistan’s unity must be embedded in the state’s structure.”

It must be emphasised here that the solution lies in fairer revenue distribution among the stakeholders, while both the federation and the provinces ought to improve their capacity to raise their revenues.

The 11th NFC award must be formulated in the backdrop of the changing economic environment while remaining within the framework of devolution provided by the 18th Constitutional Amendment.

In this backdrop, the Punjab government’s approach to local bodies is not clear. The Punjab assembly passed a unanimous resolution calling for an amendment to Article 140-A of the Constitution to ensure empowerment and protection of local bodies, along with timely elections for effective governance.

Yet, the same assembly a few days earlier had passed a local bodies law that has retained decision-making powers with the provincial government and abolished the district governments.

On Nov 4, PTI’s Punjab Assembly lawmakers filed a petition in Lahore High Court seeking a declaration of several provisions of the recently promulgated Punjab Local Government Act 2025 as ultra vires to the Constitution.

Speaking at a press conference in La­­hore, Speaker Malik Muh­ammad Ahmad Khan emphasised that the proposed amendment aims to devolve power to the grassroots level, strengthening the democratic process through empowered institutions at the district, tehsil, and union council levels.

He warned that the absence of effective local governance weakens the relationship of trust between the state and the people.

Furthermore, in Pakistan, the wealthiest 10 per cent hold 42pc of the national income — lower than the average across major Asian economies — but still enough to create massive inequalities that make it impossible to build fair or sustainable societies, says the Oxfam report titled ‘An Unequal Future: Asia’s Struggle for Justice in a Warming, Wired World’. The report highlights “the country’s uneven patterns of economic growth are driven by widening wealth disparity, climate change and the digital divide”.

The Federal Board of Revenue has collected Rs605.6 billion in withholding taxes from the salaried class during FY25 against Rs391.4bn in FY24, up 54.7pc, primarily due to a decrease in the number of income tax slabs and an increase in the corresponding tax rates in each slab. The salaried class alone paid Rs555bn in income tax during FY25, almost double the amount raised collectively from retailers and the real estate sector.

Empowering Balochistan’s people to benefit first from their own resources, say most security and development analysts, is both an economic and political necessity to help inculcate a genuine sense of belonging to the federation.

Official policies need to be reviewed, and all political parties should strive for national unity and cohesion to strengthen the federation by raising provinces’ status to that of federating units.

Published in Brackly News, The Business and Finance Weekly, November 10th, 2025