Pakistan's fiscal decentralisation has failed to bridge regional spending gaps, with provincial capitals continuing to capture a vastly disproportionate share of public funds, according to the World Bank's Strengthening Fiscal Federalism report, as cited by The Express Tribune and reported by Business Today.
Provincial Capital Spending Gaps Exceed 475%
The report found that Quetta, capital of Balochistan, recorded the widest spending gap among all provincial capitals. Per capita expenditure in Quetta stood at Rs 57,000, compared with just Rs 12,000 in the rest of the province — a gap of approximately 475%.
Lahore recorded the second-largest disparity, with per capita spending of Rs 31,000 versus Rs 7,000 in other districts of Punjab. In Khyber Pakhtunkhwa, Peshawar's per capita expenditure was about Rs 35,000 against Rs 10,000 in the rest of the province. Although Karachi posted the smallest gap, per capita spending there was still 178% higher than in the rest of Sindh.
| Province | Capital | Capital Spending (PKR) | Rest of Province (PKR) | Gap (%) |
|---|---|---|---|---|
| Balochistan | Quetta | 57,000 | 12,000 | 475% |
| Punjab | Lahore | 31,000 | 7,000 | ~343% |
| Khyber Pakhtunkhwa | Peshawar | 35,000 | 10,000 | 250% |
| Sindh | Karachi | Higher by 178% | — | 178% |
While spending disparities have narrowed since 2009, the World Bank noted that provincial capitals continue to receive a disproportionately large share of development funding. Wealthier districts consistently attract higher budget allocations, while poorer regions face chronic underinvestment. The report found no clear link between district-level funding and poverty rates or social indicators such as education, healthcare and infrastructure needs.
Local Governance and Decentralisation Failures
The findings are particularly significant for Balochistan, where longstanding underdevelopment and limited employment opportunities have frequently been cited as factors contributing to unrest. Despite the province recording budget surpluses, Quetta continued to receive substantially higher public spending than other districts.
The report also highlighted weaknesses in local governance. Provincial finance commissions remain largely inactive, and local governments receive only a limited share of provincial resources. The share of total government expenditure managed by local governments has fallen from around 10% in 2005 to 4.7% in 2024, despite constitutional provisions intended to strengthen decentralisation.
Furthermore, the World Bank raised concerns over the outcomes of increased spending on education and healthcare. Although Punjab, Sindh and Balochistan significantly increased education budgets between FY09 and FY23, school enrolment and literacy indicators either remained stagnant or declined in some regions, according to The Express Tribune.
Audit Uncovers Widespread Financial Irregularities
The report's release comes days after Pakistan's auditor general uncovered widespread financial irregularities, procedural lapses and weak administrative oversight across several federal ministries. The Ministry of Interior and Narcotics Control recorded the highest number of audit objections.
The audit flagged several issues:
- Unrecovered government dues
- Undeposited revenue from arms licences
- Discrepancies in licence digitisation
- Questionable administrative decisions, procurement practices and financial record-keeping across multiple departments
- Issuance of stamp papers to vendors with cancelled licences
- Recruitment practices in several security agencies
- The Anti-Narcotics Force's expenditure on helicopter overhauls without an open competitive bidding process
- Failure to produce financial records to verify expenditure for a UNICEF-funded child labour survey
These findings underscore deep structural inefficiencies in Pakistan's fiscal management, with implications for investors and businesses assessing the country's governance and public financial accountability.
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