New provinces to carry heavy cost: think tank

A recent analysis from the Policy Research Institute of Market Economy (Prime) warns that creating new provinces in Pakistan could have significant fiscal implications. The think tank suggests that the additional annual recurring cost for two new provinces would range between Rs47 billion and Rs57 billion, while establishing 30 new provinces could cost up to Rs730 billion.

Prime argues that any proposal for new provinces should undergo a formal fiscal costing exercise before any constitutional or legislative changes are made. This cost estimation should cover expenses for key institutions such as the governor, chief minister, provincial assembly, secretariat, high court, and other core structures.

The think tank emphasizes that if provinces increase to six, South Punjab would receive an illustrative allocation of Rs1 trillion under the existing NFC (National Finance Commission) while Bahawalpur would receive Rs537 billion. The analysis indicates that 11 out of the 30 proposed provinces would receive less than Rs150 billion annually, with 14 exceeding a 10% fiscal sustainability benchmark.

The smallest provinces would require more than one-third of their NFC allocation to finance the core provincial government structure, placing additional pressure on their fiscal resources, especially those with lower NFC allocations and limited revenue generation capacity. Prime's findings suggest that provincial restructuring should be evaluated based on a clear fiscal framework, taking into account both political and administrative factors.