New Provinces Cost Pakistan Rs730 Billion a Year
Creating new provinces in Pakistan could cost up to Rs730 billion a year, according to a new analysis by a private think tank. The new provinces cost Pakistan Rs730 billion warning comes from the Policy Research Institute of Market Economy (PRIME), which examined two different models for redrawing provincial boundaries.
PRIME’s message is blunt: if the aim is better public services, strengthening local governments should come first. Creating new provinces, it says, would add a large recurring bill before a single extra service is delivered.
New provinces cost Pakistan Rs730 billion: the two scenarios
The report looks at two models. Under the first, Punjab would be split into three provinces: Bahawalpur, South Punjab, and the remaining Punjab. That would raise the total number of provinces in Pakistan from four to six.
PRIME puts the extra annual recurring cost of those two new provinces at between Rs46.9 billion and Rs56.2 billion. Dawn rounds the range to Rs47 billion to Rs57 billion. The cost of running one new provincial government, the report says, would be Rs22.4 billion a year under a low-cost scenario, and Rs25.9 billion under a high-cost scenario.
Under the second model, every existing administrative division in Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan would become a province, creating 30 provinces, including 26 new ones. PRIME stresses that this model is not recommended, but a fiscal stress test of a more fragmented system.
The bill in that case would be far larger: between Rs609.2 billion and Rs730.3 billion a year in extra recurring spending.
Where the money would come from
The analysis is built around the 7th National Finance Commission (NFC) Award. It looks at how the existing provincial share of the divisible pool would be divided among the proposed units, and how much extra recurring spending each new provincial government would need.
That spending would cover the core institutions of a province: the governor’s office, the chief minister’s office, the provincial assembly, the secretariat, a high court, and other essential bodies. PRIME says any proposal for new provinces should include a formal fiscal costing exercise, covering those institutions and each proposed unit’s likely NFC share, before any constitutional or legislative change is pursued.
Under the six-province model, the report gives illustrative NFC allocations of Rs1 trillion for South Punjab and Rs537 billion for Bahawalpur. Under the 30-province model, the allocations vary sharply, and 11 of the 30 proposed units would receive less than Rs150 billion a year.
Small provinces would carry the heaviest burden
The strain would fall hardest on the smallest units. Using a 10 per cent fiscal sustainability benchmark, based on the low recurring-cost estimate, PRIME found that 16 of the 30 proposed provinces would stay at or below the threshold, while 14 would exceed it.
The core provincial structure alone would absorb around 49 per cent of Loralai’s NFC allocation, 45 per cent of Zhob’s, and 37 per cent of Rakhshan’s, even under the low-cost estimate. Every proposed province with a population below 1.2 million would need more than one-third of its NFC allocation just to finance that core structure.
The core structure would therefore leave less fiscal room for public services and development spending in the smallest units.
The report is careful about its limits. It focuses on fiscal implications, and it does not settle whether creating more provinces would improve governance or public service delivery. Its point is narrower: the fiscal cost should be counted first, not discovered after the boundaries have changed.
Why this matters for Pakistan’s debate
The new-provinces debate has run for years in Pakistan, and it has often been argued in political and administrative terms. Feature Pakistan examined whether new provinces would be a burden or a solution, and reported on what a system reset would really mean. PRIME’s figures give that debate a price tag for the first time.
The report also points to an alternative. It says the primary reason for governance failure is not the geographical size of the existing provinces, but the reluctance of provincial capitals to empower local bodies.
Frequently asked questions
How much would two new provinces in Punjab cost?
PRIME estimates the extra annual recurring cost at between Rs46.9 billion and Rs56.2 billion for two new provinces, Bahawalpur and South Punjab.
