Karachi’s quandary
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OUR misrule occurs largely in villages — away from the public view. But Karachi advertises it globally. Despite its significant water, transport, crime, sewage and other woes, most of its districts rank among our best given their edge in health, literacy and income — even though many Karachiites lack these. Cities that lay golden eggs need funds to lay them, without depriving poor regions. Karachi’s visible mess and near-bottom rank on the Economist’s 2025 city rankings, where its closest Asian peers — Delhi, Jakarta, Manila and Mumbai — rank much higher, and only Dhaka ranks lower — suggests it doesn’t get enough.
Its woes cut GDP growth — and must end not just for Karachi’s sake but the entire country’s. Rough estimates put its GDP share close to that of Balochistan, KP and the rest of Sindh combined. While Karachi’s federal tax receipts share is reported as 50-55 per cent, this figure is inflated on account of port duties and firms with national revenues — its actual share is closer to 25-30pc. But its real edge is even less as such data discounts the natural wealth, informal economy and cheap labour of poor regions. The large shares of Karachi and Punjab in our GDP reflect policy inequities too. Higher taxes on them aim to fund poorer areas to cut inequity, but it’s not done well in practice.
Globally, many rich cities do fill state coffers under federalism. But many Karachiites allege bias — which may be hard to substantiate without data. Nevertheless, Karachi does lag its peers on local services. It is strange that a big revenue engine should not have money for itself. The issue is equitable funding for Karachi and the poor regions. About 42.5pc of federal taxes fund national services — defence, debt outlays and bureaucracy. About 5pc fund national development projects such as dams. Recent projects include three for Karachi given its national value. But the data to confirm if Karachi gets such services and projects fairly and their impact is again missing. Such data gaps must end. The state allocates 57.5pc of federal taxes to fund the provinces, where these originate. Rough estimates suggest only Sindh pays more than it gets, mainly due to Karachi. Poorer areas (Balochistan, KP, rural Sindh and smaller regions) will have deficits, due in part to the loss of their natural wealth to the centre. But if Punjab — the richest, biggest and strongest unit — is even near break-even, that oddity must end by cutting the weight of population in NFC awards to make the province the main funder — ahead of Karachi — for the centre, poor units and its own poor. Karachi may account for 75-80pc of Sindh’s taxes. But their scale is small as most provincial funds come from the NFC awards. Sindh’s outlays cover province-wide social, management, security and other heads. About 25-30pc funds development projects including many in Karachi. But the data to analyse equity and impact is missing.
A city that fills other coffers must retain enough local taxes for itself.
City taxes fund city services under federalism. Rough estimates suggest Karachi’s per capita budget-to-city GDP ratio, even if we combine local services managed by federal, provincial and other entities, is far below those of its four Asian peers. The $10 billion the World Bank suggests over 10 years to fix its woes may even come faster and mainly from its own budget if its level of revenue-retention approximated that of its regional peers. Its local budget is constrained due to low local tax receipts — in fact, there is further loss given Karachi’s inability to collect key taxes directly. Karachi should claim its lost local taxes rather than higher-level taxes as those serve broader aims under federalism. A city that fills other coffers so significantly must certainly raise and retain enough local taxes to meet its own needs. Also, all tiers of the state must raise more taxes and spend them well.
Local misrule must end too. Delhi, Jakarta and Manila have autonomy as federal regions or provinces, being capital cities. But giving a non-capital city like Karachi such level of autonomy will further stoke existing tensions. Such a step would cut federal funding for poor regions. Even the misrule will persist. Areas in Karachi run by strong but unelected federal agencies face considerable challenges as well.
The right remedy is constitutional changes, passed by a legitimate set-up, that direct regular and fair local government elections, and prevent the provinces from dissolving LGs, unify jurisdictions, secure direct tax sources for big cities, and delineate clear powers and functions. Karachi doesn’t need polarising options. Federal democracy can help it rival its peers.
The writer holds a PhD in political economy from the University of California, Berkeley, and has 25 years of grassroots to senior-level experience across 50 countries.
Published in Dawn, June 9th, 2026
