Murad Ali Shah says Sindh faces Rs300bn budget deficit after federal funding cuts

KARACHI:  Sindh Chief Minister Syed Murad Ali Shah said on Thursday that the province faces a budget deficit of nearly Rs300 billion in the fiscal year 2026-27, driven primarily by slash in federal funding.

Speaking at a post-budget press conference a day after presenting the provincial financial blueprint in the Sindh Assembly, Shah detailed a total income budget of Rs3.525 trillion.

He said that the province continues to grapple with a massive Rs441 billion shortfall in federal revenue transfers as of May, alongside a Rs52 billion deficit in its own provincial collections.

Shah noted that while the federal Federal Board of Revenue (FBR) targets an ambitious Rs15.264 trillion in collections for the upcoming year, its year-on-year growth stagnated between 10 per cent and 11 per cent.

He said that the Sindh Board of Revenue achieved an independent revenue growth of 23 per cent this year, maintaining a 14-year upward trajectory.

“Our development budget has been directly impacted by the reduction in federal funding,” Shah said, noting that Islamabad fulfilled only Rs50 billion of a promised Rs76 billion last year.

He said that the federal government has pledged Rs64 billion for the next fiscal period.

National Security and Grants

Defending provincial financial concessions amid national economic strain, Shah stated that Sindh exercised its constitutional authority to provide a financial grant to the federal government to bolster national solidarity and defense spending.

“The provinces have supported the center for the sake of the country during a difficult time,” Shah said, though he issued a stern caveat: “We have told the federal government clearly that we will only provide this grant once our full financial shares are delivered.”

He also called for a formal revision of the National Finance Commission (NFC) Award formula, which dictates how federal tax revenues are distributed between the central government and the provinces.

Expenditure and Structural Reforms

Faced with fiscal tightening, Sindh’s total expenditure is projected at Rs2.3 trillion. To manage the crunch, Shah announced a complete freeze on new provincial development projects for the upcoming year, focusing instead on completing 2,056 ongoing initiatives.

Development & Foreign Aid

He said that despite the austerity measures, development spending will still exceed Rs850 billion, supplemented by Rs256 billion in foreign funding and Rs109 billion allocated for public-private partnership (PPP) projects.

A minimal Rs15 billion have been set aside for district-level development.

Emergency Expenditures

He said that expenses were further stretched by emergency relief operations, including a Rs8.5 billion relief package provided to victims of the Gul Plaza accident.

He said that the province’s single largest expenditure remains government salaries and pensions.

Shah announced that the 10 per cent ad-hoc relief allowance introduced in 2025 has been merged into the basic pay scale, and the provincial minimum wage has been raised to Rs43,000 per month.

He said that the provincial government has earmarked Rs686 billion in grants and subsidies for various hospitals and public welfare institutions.

Addressing political criticism regarding the freeze on new infrastructure projects, Shah dismissed allegations of governance failure, pointing to the Pakistan People’s Party’s (PPP) recent electoral successes in Gilgit-Baltistan and Sindh.

“We did not introduce new development projects for two years, yet the public voted for us in even higher numbers,” Shah said.

“Our connection with the people is direct, not through the media. The public understands our fiscal constraints and has rejected false propaganda.”

Shah said that a new agriculture cooperation law is being introduced to support small farmers, including provisions for pooled landholding to secure larger agricultural loans.

He said that land belonging to 10 farmers would be combined to facilitate access to larger credit facilities for cultivation. He added that farmers would also be able to jointly purchase irrigation systems and land-leveling machinery.

Shah said the Sindh government’s financial share in the Shahrah-e-Bhutto project is only Rs9 billion.

He said that a new initiative is also being launched to make municipal waste economically useful, adding that the provincial solid waste management authority would be made financially self-sustaining through revenue generated from waste recycling and sales.

The chief minister said that he walked on the floor of the Sukkur Barrage during repair work for the first time in 94 years. He said that 44 old gates of the barrage had been replaced and its operational life had been extended by another 30 years due to the renovation work.

He said that Sindh is currently facing a 30 per cent water shortage, compared with 11 per cent in Punjab, and said he had raised the issue with the federal government, the prime minister and the National Economic Council.

Shah said that the water shortage is a serious injustice to poor farmers in Sindh and alleged that the federal water regulator misrepresents facts before members of parliament.

He urged the federal authority to improve its performance to ensure fair water distribution and also called on the Pakistani media to highlight the severity of water shortages in Sindh.