September 19, 2026
By Fauzia Kulsoom Rana
ISLAMABAD
Renowned economist and policy expert Dr. Kaiser Bengali has said that the ongoing debate in Pakistan over the creation of new provinces, administrative units, the National Finance Commission (NFC) Award, the distribution of resources between the federation and the provinces, and the powers of local governments cannot be viewed solely as a debate about creating new provinces.
In fact, he said, its financial and constitutional dimensions are equally important.
Dr Bengali spoke in detail on the podcast “Munizae Jahangir Official,” where he said that the state has been facing financial difficulties for approximately a decade and that the growing expenditures of the federal government are creating a fundamental crisis.
The discussion began with Jahangir referring to Jamiat Ulema-e-Islam (JUI-F) chief Maulana Fazlur Rehman’s position that the issue of creating new provinces was actually about the NFC Award.
To this, Dr. Kaiser Bengali said that Maulana Fazlur Rehman had correctly identified the issue, adding that in fact the problem was not limited to the NFC but it concerned the government’s overall financial situation.
Dr. Kaiser Bengali said that Pakistan has been facing a financial crisis for the past decade and has continued to meet its expenditures through borrowing.
“Expenditure related to defense, circular debt, pensions and foreign debt is placing significant pressure on federal finances,” he said. “The federal government revenues are already lower than the combined expenditure on these four areas. In this situation, simply restructuring the NFC Award or reviewing the provinces’ share would not be sufficient.”
He said that ‘certain quarters’ may be seeking to retain as many resources as possible at the federal level, so that the federation can meet its own requirements first and provide the remaining available funds to the provinces.
Right to federal revenue
Dr. Bengali also maintained that under the Constitution, the provinces are entitled to 57.5 percent of federal revenues, but that ‘certain quarters’ want to reduce or limit this share through different means.
When asked whether the creation of new provinces was perhaps not the real objective, and whether the aim was instead to put enough pressure on the provinces for the federation to obtain the resources it needs, he replied that in his view, this was indeed the case.
“Creating new provinces has not been constitutionally easy because it would require a constitutional amendment, approval from the relevant provincial assemblies, and approval from the National Assembly and the Senate,” he said.
He expressed concern that, since creating new provinces was not an easy route, the debate could be used as a means of putting pressure on the provinces to obtain their resources.
According to him, the federal government’s expenditures are not being met, and under these circumstances provincial resources could become a focus of federal attention.
Dr. Bengali also referred to the natural resources of the provinces and claimed that the federation could seek greater control over revenues generated from provincial natural resources.
Citing the petroleum levy as an example, he maintained that it was a right of the provinces that had been retained by the federation.
Provinces or administrative units?
Munizae Jahangir referred to a statement by Defense Minister Khawaja Asif in which he had spoken about creating administrative units alongside provinces.
Dr. Kaiser Bengali said that provinces are political entities, whereas divisions, districts and tehsils within provinces already exist as administrative units.
According to him, if different messages are being given regarding provinces and administrative units, this is either due to confusion or an attempt to create confusion.
He offered his analysis that this confusion could ultimately result in neither new provinces nor new administrative units being created, while the federation continues its efforts to obtain provincial resources.
When Munizae Jahangir asked whether he believed that the creation of provinces or administrative units was therefore not being seriously pursued, Dr. Kaiser Bengali said that, in his view, the fundamental issue was money.
He said federal expenditures were continuing to rise and that there appeared to be no effective restraint on them.
Dr. Bengali said that judges’ salaries had recently been increased and special allowances were being given to officers. He added that, in his view, complete details of additional defense expenditures were not being reported.
He said in his analysis that if the federation could not obtain the resources it required through constitutional and legal means, it might attempt to use extraordinary or extra-constitutional methods.
Changing provincial boundaries
Munizae Jahangir asked whether the approval of both provincial assemblies would be required if an area were to be transferred from one province to another for example, if Dera Ismail Khan were proposed to be moved from Khyber Pakhtunkhwa to Punjab.
Dr. Kaiser Bengali replied that in his view, yes, approval from both relevant provincial assemblies would be required because such a move would change provincial boundaries.
He further said that if a part of a province were separated to create a new province, even if the relevant provincial assembly approved it, the National Assembly and Senate would subsequently have to amend the Constitution because provincial boundaries are constitutionally defined.
Referring to the example of South Punjab, he said that even if the Punjab Assembly approved the proposal, the constitutional amendment process would still have to be completed through the National Assembly and Senate.
What will be the financial cost of creating new provinces?
On the financial cost of creating new provinces, Dr. Kaiser Bengali said that the fundamental causes of Pakistan’s current economic crisis include the budget deficit and trade deficit.
According to him, the budget deficit exists because government expenditure exceeds revenue, while the trade deficit results from imports exceeding exports.
He said in his analysis that if Pakistan were to create eight provinces instead of four, administrative expenditures would increase because new provinces would require governor houses, chief ministers’ offices, provincial secretariats and other administrative structures.
In his view, this could worsen rather than resolve the existing financial problem.
Has tension between the federation and provinces always existed?
Munizae Jahangir asked where tensions over resource distribution between the federation and provinces originate and whether such tensions had always existed.
Dr. Kaiser Bengali said that some disagreement is inevitable wherever resources are distributed. However, he cited the 7th NFC Award as an example, saying that negotiations continued for five months and included 16 meetings, but, according to him, there was no unpleasantness during the meetings.
He said this demonstrated that if the democratic process was allowed to function and relevant representatives were given the opportunity to make decisions, issues could be resolved.
According to him, the current problem is the rising expenditure of the federal government, which he described as “bottomless” expenditure.
The 18th Amendment, the 7th NFC and the 57.5 Percent Share
Dr. Kaiser Bengali explained that the 7th NFC Award and the 18th Constitutional Amendment emerged during approximately the same period.
According to him, the 18th Amendment abolished the Concurrent Legislative List, which contained 47 subjects, with approximately 40 of those subjects being transferred to the provinces.
Dr. Bengali said in his analysis that allocating 57.5 percent to the provinces was a logical decision linked to this transfer of responsibilities because the provinces also required financial resources for the subjects transferred to them.
According to him, there was also an understanding that federal ministries dealing with these transferred subjects would be abolished or reduced, but, he said, this did not happen.
Dr. Bengali claimed that approximately 17 federal ministries remain that, in his view, are no longer necessary, along with around 60 attached departments or institutions.
According to him, these institutions are contributing to the increase in federal expenditure.
IMF, the NFC Award and the 18th Amendment
Munizae Jahangir asked how the IMF views the NFC Award and provincial powers under the 18th Amendment.
Dr. Kaiser Bengali replied that the 7th NFC and the 18th Amendment took place around the same time and that, according to him, the transfer of powers to the provinces was one of the fundamental reasons for allocating greater financial resources to them.
He further said that the federal government should have abolished the ministries dealing with the transferred subjects and reduced its expenditures, but, according to him, this did not happen.
Dr. Bengali maintained that the federal government was also not making the required reductions in defense expenditure, particularly non-combat expenditure.
Is Local Government mentioned in the NFC Award?
Munizae Jahangir asked whether the local government is mentioned in the NFC Award.
Dr. Kaiser Bengali clarified that, according to his understanding, the NFC Award does not mention the creation of provinces or local governments.
He said linking the local government directly to the NFC Award was incorrect and that certain statements were creating confusion on this issue.
According to him, local governments are necessary, but they cannot be directly linked to the NFC Award.
What Would Happen to the NFC if New Provinces Were Created?
On the question of NFC distribution if new provinces were created, Dr. Bengali said that creating eight provinces instead of four would not eliminate the provinces’ combined 57.5 percent share.
He said in his analysis that creating smaller provinces could weaken provincial governments and make them easier to influence politically.
Referring to the negotiations of the 9th NFC, he said that the federation had proposed taking 7 percent from the divisible pool first for the federation and then distributing the remaining amount.
According to Dr. Bengali, Ayesha Ghaus Pasha, who was Punjab’s finance minister at the time, opposed the proposal and said Punjab would not accept it.
Dr. Bengali said that he was representing Balochistan at the time and that the Balochistan finance minister had asked him not to speak on the matter. He said he responded that since Punjab was already opposing the proposal, there was no need for Balochistan to intervene separately.
Why Did Punjab oppose the proposal?
Dr. Kaiser Bengali explained that because Punjab had approximately a 52 percent share under the horizontal distribution formula of the NFC, it would bear the greatest financial impact from any reduction in the divisible pool.
He gave the example that if the divisible pool were reduced by Rs100, Punjab’s share would, according to his calculation, decline by approximately Rs.52, while the impact on Sindh, Balochistan and the other provinces would be comparatively smaller.
According to him, this was the reason for Punjab’s opposition to the proposal.
Is pressure on the NFC a new development?
Dr. Bengali maintained that concern at the federal level over the existing NFC system was not new, but that the current financial crisis had intensified the pressure.
He said the situation had reached a point where the government sometimes had to borrow even to pay salaries.
The PML-N and the Debate Over New Provinces
Munizae Jahangir asked that if the PML-N was in government during the 9th NFC and is also in government now, what had changed?
Dr. Bengali responded by presenting a possible hypothetical scenario, saying that if the PML-N were to reach a compromise, it might be possible that provinces would make some compromise regarding their NFC share, while other resources, such as mineral resources or land, could face greater pressure in other provinces.
He clarified that this was his hypothetical scenario and not a prediction.
Referendums for creating new provinces?
Munizae Jahangir referred to reports and speculation that referendums could be held on the creation of new provinces and that the matter could subsequently be taken to a constitutional court to create a legal route for establishing provinces without a constitutional amendment.
Dr. Kaiser Bengali described this possibility in his analysis as political engineering and said that the consequences of political engineering had been witnessed in the past.
He expressed concern that if attempts were made to create provinces outside the constitutional process, there could be strong resistance and damage to the country.
Linguistic boundaries and potential conflict
Munizae Jahangir raised questions about the distribution of different linguistic groups in Balochistan, Sindh and Karachi and the possibility of creating provinces along linguistic lines.
Dr. Kaiser Bengali expressed concern that drawing boundaries in ethnically and linguistically mixed areas such as Quetta could be extremely complicated.
Referring to Karachi, he said that the city had experienced continuous migration from different parts of the country and, according to his assessment, the Pashtun population could become the largest ethnic group in Karachi in the future.
He expressed concern in his analysis that if provincial or administrative boundaries were drawn along linguistic lines in a way that divided populations, serious conflicts could emerge.
Referring to the violence of 1947, Dr. Bengali warned that if such divisions were attempted through political engineering and extra-constitutional methods, he believed there could be widespread resistance and violence.
Would more provinces improve governance?
Munizae Jahangir asked whether there was any research to support the argument made by some politicians that creating more provinces would improve governance.
Dr. Kaiser Bengali maintained that, to his knowledge, no academic research had been presented proving that governance would necessarily improve by increasing the number of provinces from four to eight or twelve.
According to him, academics and political scientists instead associate improved governance with effective local governments.
He said establishing an effective local government system was a separate and necessary debate, but it could not automatically be linked to increasing the number of provinces.
Local Government is not just about elections
Munizae Jahangir said that ensuring local government elections and powers in Punjab and Khyber Pakhtunkhwa was important.
Dr. Bengali responded that the issue of local government is not merely about elections.
Citing the Karachi Metropolitan Corporation as an example, he said that even if a mayor is elected, local government cannot be strengthened if the mayor does not have meaningful municipal powers and functions.
He said in his analysis that several municipal functions had been taken over by provincial governments, including waste collection in Karachi, which, according to him, had been transferred to provincial level companies.
In his view, the entire local government system needs to be reconstructed and given constitutional protection.
Strengthening Article 140A
Dr. Kaiser Bengali said that Article 140A of the Constitution establishes the principle of creating local governments, but, according to him, it does not provide detailed guarantees regarding their powers, functions, financial resources and election procedures.
He proposed that Article 140A should be strengthened, clarified and elaborated, including a provision for a Provincial Finance Commission (PFC).
According to him, there should be a clear list of functions and powers for local governments that provincial governments should not be able to take back.
He further said that local governments should receive financial resources according to a predetermined formula, regardless of whether the relevant local government is controlled by the provincial ruling party or the opposition.
In his view, these powers and financial resources should be protected constitutionally or legally.
Local Governments under military governments
Discussing the historical development of local government, Dr. Bengali referred to the eras of Ayub Khan, Yahya Khan and Pervez Musharraf.
He said in his analysis that the purpose of local government systems established during these military periods was not only to improve governance but also to strengthen federal political control and bypass provincial governments.
Referring to Ayub Khan’s Basic Democracies system, non-party elections and Pervez Musharraf’s local government system, he said that these systems were more closely connected to the federal structure than to provincial governments.
According to him, weakening the provinces and extending federal control were also among the objectives of these experiments.
How would the IMF view the creation of new provinces?
At the conclusion of the programme, Munizae Jahangir asked how the IMF would view the creation of new provinces.
Dr. Kaiser Bengali said that the IMF is primarily a financial institution and focuses mainly on economic issues such as fiscal and trade deficits.
He said in his analysis that if Pakistan could manage these deficits effectively on its own, the need to approach the IMF would be reduced.
On Pakistan’s economic sovereignty, he took a strong position, saying that the Pakistani state had effectively become a subsidiary of the IMF and that IMF conditions influence certain economic decisions.
However, regarding new provinces, he said that the IMF’s fundamental concern would not be the number of provinces but the financial cost.
According to him, if increasing the number of provinces resulted in provincial administrative expenditures doubling without a corresponding increase in revenue, the IMF could be concerned about the situation.
Dr. Bengali’s question to international financial institutions
Dr. Kaiser Bengali also questioned international financial institutions, particularly the IMF and World Bank, about whether they pay similar attention to reductions in defense expenditure and the role of defense-linked commercial entities as they do to other government institutions and expenditures.
He raised the question, as part of his position, of whether defense-linked commercial entities affect a level playing field for the private sector and whether international financial institutions should also pay attention to this issue.
The discussion between Munizae Jahangir and Dr. Kaiser Bengali on the creation of new provinces primarily covered four major areas: the financial share of the federation and provinces under the NFC Award, federal expenditures and the financial crisis, the constitutional and administrative requirements for creating new provinces, and constitutional guarantees for the powers and financial resources of local governments.
Throughout the discussion, Dr. Kaiser Bengali argued that the solution to the current crisis should not be sought merely in increasing the number of provinces, but also in addressing federal expenditures, ensuring a fair distribution of resources and establishing effective local governments.
The programme also included an extensive discussion on the history of the NFC Award, the experiences of the 7th and 9th NFCs, the 18th Constitutional Amendment, provincial resources, natural resources, provincial boundaries, the possibility of referendums, potential linguistic divisions, local governments and the possible response of the IMF.