Creating new provinces in Pakistan could add billions of rupees to annual government expenditure, with the cost rising sharply if the country’s existing administrative divisions are upgraded to provincial status, according to a new analysis by the Policy Research Institute of Market Economy (PRIME).
The October 2026 report examines two possible scenarios: dividing Punjab into three provinces and converting all 30 existing administrative divisions across the country into separate provinces. It estimates that the first option would require an additional Rs46.9 billion to Rs56.2 billion annually, while the second could raise the recurring financial burden to between Rs609.2 billion and Rs730.3 billion.
The analysis highlights the cost of establishing a separate provincial government, including the offices of the governor and chief minister, a provincial assembly, secretariat, high court and other essential departments.
According to the findings, the core administrative structure of a new province would cost an estimated Rs22.4 billion annually under the lower-cost scenario and Rs25.9 billion under the higher-cost estimate.
Smaller Provinces Could Face Greater Financial Pressure
The report warns that smaller proposed provinces could struggle to meet the recurring expenses of running a full provincial administration.
Under the 30-province scenario, the core government structure would consume approximately 49% of Loralai’s illustrative National Finance Commission (NFC) allocation, 45% of Zhob’s and 37% of Rakhshan’s, even under the lower-cost estimate.
The analysis also finds that every proposed province with a population below 1.2 million would need to spend more than one-third of its estimated NFC allocation on core government operations.
Overall, 11 of the 30 proposed administrative units would receive less than Rs150 billion annually under the illustrative allocation model. The figures underline the potential difficulty of maintaining provincial institutions in areas with smaller populations and limited financial resources.
New Provinces Would Not Automatically Increase Federal Transfers
A central issue examined in the report is how additional provinces would share resources under Pakistan’s existing NFC framework.
Under the 7th NFC Award, provinces collectively receive 57.5% of the federal divisible pool, while the federal government retains 42.5%. The provincial share is distributed using indicators that include population, poverty and backwardness, revenue generation and inverse population density.
The constitutional framework governing revenue distribution is set out in Article 160 of the Constitution. The Ministry of Finance provides information on the National Finance Commission and its constitutional provisions.
The report’s analysis suggests that creating additional provinces would redistribute the available provincial resources among a larger number of governments rather than automatically expand the overall amount available for provincial spending.
In the proposed six-province arrangement, which would divide Punjab into Bahawalpur, South Punjab and the remaining Punjab, the illustrative NFC allocation for South Punjab would be around Rs1 trillion, while Bahawalpur would receive approximately Rs537 billion.
The financial implications would be considerably greater under the 30-province model, particularly for smaller administrative units with limited allocations.
PRIME Calls for Fiscal Assessment Before Restructuring
The analysis argues that proposals to create new provinces should be accompanied by a detailed assessment of their long-term financial implications before constitutional or legislative changes are pursued.
It recommends evaluating the recurring cost of provincial institutions against the resources each proposed province is expected to receive.
The report also suggests using a 10% benchmark to assess whether the administrative expenses of a proposed province would remain financially sustainable.
Rather than treating the creation of new provinces as the only solution to administrative and governance problems, the think tank has called for stronger local governments and greater decentralisation of public services.
Pakistan’s population and administrative planning can also be assessed through data published by the Pakistan Bureau of Statistics, including information from the 2023 national census.
The findings add a fiscal dimension to the continuing debate over provincial restructuring, highlighting the need to consider administrative efficiency, financial sustainability and public service delivery before establishing new provincial governments.
