International signalling has turned favourable, too. In mid-August 2025, Washington publicly flagged interest in partnering with Pakistan on critical minerals and hydrocarbons-explicitly referencing investment opportunities and Balochistan’s Reko Diq context. This dovetails with broader U.S. and allied efforts to diversify critical minerals supply chains. For Pakistan, that is an opening to mobilise capital and technology precisely where provincial and federal competencies intersect-and where the 18th Amendment requires smart coordination rather than zero-sum politics.
So how is the federation “suffering” while provinces post surpluses? First, vertical imbalance: the centre retains responsibility for heavy national functions but has surrendered the largest chunk of elastic revenues to provinces. Second, shock-absorption: macro and external shocks hit the centre first (FX, debt rollovers, security exigencies), but the centre’s cash flow is constrained by the NFC floor. Third, program conditionality: IMF programs now routinely assume sizable provincial surpluses to meet general-government targets-necessary under today’s constitutional design but politically fragile if growth slows or provincial politics harden. None of this is an argument against devolution; it is an argument for aligning revenue, responsibility, and risk at each tier of government.
The 18th Amendment is not the villain many make it out to be; it is a design choice with predictable incentives.
Conversely, why are provinces “among surplus”? Because they get a protected share of the divisible pool and have latitude to pace development spending. When revenues outperform or projects slip, surpluses rise. KP’s mid-year outcome shows exactly that: a large surplus accompanied by underspending on tied foreign-assistance projects due to execution delays. The macro ledger benefits: citizens only benefit when those projects actually get built. That gap between cash surplus and service delivery is where reform must bite.
What to do-without tearing up the Constitution?
First, operationalise a National Minerals Compact under the Council of Common Interests (CCI) for cross-border value chains-copper, gold, chromite, REEs, lithium proxies in pegmatites where relevant-so federal trade, environment, and security functions are welded to provincial licensing, land, and community engagement. The CCI’s post-18th role was precisely to enable cooperative federalism on Part-II Federal Legislative List subjects and shared interests. Use that forum to pre-agree revenue-sharing, resettlement standards, security perimeters, and dispute-resolution pathways for strategic mining corridors.
Second, lock in provincial tax effort with measurable floors. Provinces should commit (publicly and programmatically) to STS compliance drives, geo-linked property-tax revaluations, and fully applied AIT-exactly as promised in the National Fiscal Pact-not as sporadic gestures but as multi-year targets published by each revenue authority. Tie a small, time-bound top-up transfer from the federation to the achievement of these floors to change incentives. The IMF review already frames the template; own it domestically to avoid “program by proxy.”
Third, re-sequence PSDP and ADP: From FY26, any development project whose benefits fall entirely within one province should be budgeted by that province, not by the federal PSDP-again, a commitment noted in the IMF documentation. That cleans duplication, clarifies accountability, and frees federal fiscal space for trans-provincial infrastructure, climate adaptation, and national public goods.
Fourth, use the NFC for carrots, not just a fixed split. Article 160(3A) prevents cutting the provincial percentage, but the federation can design incentive windows layered on top of the divisible pool-say, a conditional grant tranche for provinces that hit agreed STS/AIT/property-tax targets and meet development-spend execution milestones (audited, time-bound). This respects 3A while restoring federal leverage to pursue national goals. Fifth, professionalise project absorption. KP’s mid-year review reveals the pattern: large surpluses partly driven by low absorption on tied FPA and PSDP projects. Create provincial Project Delivery Units with ring-fenced procurement, EPC pre-qualification pools, and rolling cash-flow forecasts synced to donor disbursement triggers. Make on-time completion a key performance indicator for chief engineers and secretaries, not just a paper exercise in PC-I/PC-IV forms.
Sixth, treat minerals as a national export strategy, not just provincial royalties. Reko Diq’s ownership split shows how to align stakes; the next step is to add mid-stream value (concentrate quality, smelting off-take contracts, ESG certifications, transport corridors) so mines translate into external balance and higher wages. With the U.S. and allies signalling fresh interest in critical minerals, Pakistan should table a pipeline of bankable projects-the federation managing trade and investment treaties, provinces fast-tracking land and community compacts. If we get this right, the 18th Amendment becomes an enabler of geoeconomic opportunity, not a barrier.
Seventh, publish a consolidated “general government” fiscal dashboard every quarter-federal plus each province-showing revenue effort (STS, AIT, property), development-spend execution, arrears, and cash balances. The Economic Survey already aggregates outcomes; transparency by province would turn quiet surpluses into visible performance and put pressure where it belongs.
Finally, lower the political temperature around the NFC. The centre’s needs have grown since 2010, but Article 160(3A) is a constitutional commitment. Rather than a maximalist attempt to reopen 3A, a pragmatic path is to negotiate add-ons: conditional grants, co-financing for trans-provincial projects, and formulae that reward own-source revenue and execution. Provinces keep the 57.5% floor; the federation regains tools to deliver national public goods. That is the economic middle path that respects the letter of the 18th Amendment while fixing its fiscal consequences.
The 18th Amendment is not the villain many make it out to be; it is a design choice with predictable incentives. Where we struggle is not in the principle of devolution but in aligning money, mandates, and management capacity. If provinces collect what the Constitution assigns to them and deliver projects at speed-and if the federation stops budgeting provincial projects and focuses on national and cross-border work-the maths begins to work. Add a minerals strategy that speaks both to Quetta and to Washington, and Pakistan can turn the current “federation bleeds, provinces save” paradox into a cooperative surplus that actually builds things. That is the only surplus that will matter.
(Concluded)
The writer is a financial expert and can be reached at jawadsaleem.1982@ gmail.com. He tweets @JawadSaleem1982