Have you ever wondered how Gilgit-Baltistan actually runs? Who pays the teacher in Ghizer, keeps the district hospital in Astore open, or makes sure wheat reaches a village in Ghanche at a subsidised price? GB is often called tax-free, so the question is a fair one. If the region does not raise money the way a province does, where does the money come from?

“Tax-free” is misleading on many fronts. Most goods sold in GB, from cement to cooking oil, are made down-country, and the sales tax is built into their price long before they reach a shop in Gilgit. What sets GB apart is narrower: some direct taxes, the kind levied on income and property, are applied differently than in the provinces, and trade across the Khunjerab border with China gets special treatment. To understand how GB really runs, we have to set the tax rules aside and follow the budget itself.

Let’s set the context first and look at the scale. GB’s latest budget, for FY2026–27 (the fiscal year from July 2026 to June 2027), is PKR 158.5B, equal to about 0.8 percent of Pakistan’s federal budget of PKR 18,771B. By comparison, Punjab’s budget is PKR 5,903B, about 37 times GB’s. Sindh’s is PKR 3,562B (about 22 times), Khyber Pakhtunkhwa’s PKR 2,170B (about 14 times) and Balochistan’s PKR 1,089B (about 7 times). On those numbers alone, GB looks tiny. But GB is also home to just 1.7 million people, a smaller population than many individual districts in Punjab.

Divide the money by the people and the picture flips. GB’s budget works out to about Rs 92,800 per resident, higher than any of the four provinces. That is roughly double Punjab’s Rs 46,200, about 45 percent more than Sindh’s Rs 64,000 and about 27 percent more than Balochistan’s Rs 73,200.

While that sounds generous, it says more about the cost of governing GB than about its wealth. Running a school, a hospital or a wheat depot in a valley that is snowed in for months costs far more than doing the same on the plains. And there is a deeper difference. Under the National Finance Commission (NFC) award, each province gets a fixed, constitutionally protected share of the taxes Islamabad collects. Punjab can count on its slice every year, whoever is in power. GB is not a province and has no seat at the NFC table. Its money arrives largely as a federal grant, an amount Islamabad decides year after year. So GB spends more per resident than any province, and controls very little of where that money comes from. Hold on to that tension. The rest of this story follows from it.

So let’s make it simple. Imagine GB’s budget is 100 rupees, based on the average of the last five budgets, FY2022–23 to FY2026–27. Each square below is one of those rupees. As you scroll, we will open each part in turn: the money that keeps the government running, the money that builds new things, and the money that keeps wheat affordable.

One square is one rupee of the average budget, FY2022–23 to FY2026–27. Shares are rounded to whole squares.

The FY2026–27 Budget in Real Numbers

Now swap the illustrative rupees for real ones. This year’s budget is PKR 158.5B, and it splits almost exactly the same way. Non-development spending, the government’s running costs such as salaries, electricity bills and fuel for police vehicles, takes PKR 96.6B, about 61 of every 100 rupees. Development spending, the money for building new things such as roads, power plants and schools, takes PKR 44.0B, about 28. The wheat subsidy takes PKR 18B, about 11.

Now look at where that money comes from. Of the PKR 96.6B for running costs, PKR 88B arrives as federal grant-in-aid: money Islamabad hands over each year, with no obligation to pay it back. GB’s own revenue target, from things like tourism fees, licence fees and electricity bills, is just PKR 6.1B. Development money comes through two channels. PKR 23B flows through GB’s Annual Development Programme (ADP), the list of projects the GB government picks itself, such as a new school block or a link road. Another PKR 21.0B comes through the federal Public Sector Development Programme (PSDP), projects Islamabad funds directly, such as the Naltar-III hydropower plant. The wheat subsidy is PKR 15B from the federal government and PKR 3B recovered from selling the wheat.

Add up what Islamabad sends directly, the grant-in-aid, the PSDP and the wheat subsidy, and it comes to about PKR 124B, close to 78 of every 100 rupees. Grant-in-aid alone is more than half the budget this year, above its five-year average of 49 rupees. GB’s own revenue, plus what it earns from selling wheat, covers about 6. That is fiscal dependence in plain terms: GB collects enough to pay a few bills, while the salaries, the hospitals and the wheat all hang on decisions made in Islamabad. And that’s exactly why the budget sits at the centre of the debate over GB’s constitutional status and how it is treated next to the provinces.

Where the Money Goes

So far we have followed the money in. Now follow it out. If Islamabad pays for most of GB’s budget, what does that money actually buy? Picture the same 100 rupees once more, this time leaving the treasury. As you scroll, each block opens to show who spends it: the departments that run the region day to day, and the sectors where new things are being built.

The three blocks use the same five-year averages as the inflows. Departments use FY2022–23 to FY2025–26 and sectors use FY2023–24 and FY2024–25; the notes at the end explain why.

Running Costs

Now put real numbers on those squares, starting with the running costs. These are the bills that come back every year: salaries, office costs, grants and subsidies, and repairs. The latest full-year breakdown by type of spending is for FY2025–26, when running costs totalled PKR 88.2B. Of every 100 rupees, about 68 went on salaries and other staff costs, 14 on grants and subsidies, and 11 on day-to-day operating costs such as fuel, electricity and stationery.

None of this is optional. Teachers, nurses and police officers have to be paid every month, and hospitals and offices have to keep their lights on. But the numbers also say something about the shape of the state in GB. Nearly 7 of every 10 running rupees go to staff, and anyone who has spent time in Gilgit will recognise the footprint: government offices, government housing, government vehicles on every main road. For a region of 1.7 million people, that is a large state. The cost is flexibility. When most of the budget is spoken for before the year even begins, there is little left for new needs, whether that is protecting villages from glacial floods, connecting remote valleys or improving the services people already rely on. This year, running costs rise again, to PKR 96.6B.

Development Spending

Development spending is where the future gets built. This year it is PKR 44.0B: PKR 23B through GB’s own ADP and PKR 21.0B through federal PSDP projects. In a region where every road has to be cut into a mountainside and every power line strung across a valley, building anything costs more, and these are the rupees that pay for it.

The latest year with project-level detail is FY2024–25. That year, the ADP’s main allocation was PKR 19.6B, with another PKR 1.4B held as block allocations, lump sums set aside for projects that get picked during the year. Infrastructure, transport and urban development took the biggest share at PKR 8.0B, followed by energy and power at PKR 3.2B and education at PKR 2.2B. Federal PSDP added PKR 13.5B, led by the PM’s Special Package for GB (PKR 4B) and energy projects such as Naltar-III.

Development Allocations: ADP and PSDP, FY2024–25

GB’s own ADP (left) and federal PSDP projects (right). The ADP figure excludes PKR 1.4B in block allocations.

Source: GB Finance Department, ADP and Federal PSDP 2024–25

Where the Development Money Lands

Development money also has a map. In FY2024–25, Gilgit received the largest district allocation, PKR 2.2B, followed by Diamer at PKR 2.0B and Skardu at PKR 1.9B. But bigger districts have more people to serve, so totals only tell half the story. Divide each district’s allocation by its population and the order changes. Hunza and Kharmang come out on top, at around Rs 11,000 and Rs 10,200 per resident. Diamer drops to the bottom, at about Rs 5,900.

That should give us pause. Diamer has the highest poverty rate in GB, at 74 percent, and the lowest literacy, at 29 percent. The district that arguably needs development most receives the least of it per resident. (The PKR 6.6B spent at GB level and the PKR 1.4B in block allocations are not tied to any one district, so they are left out of the chart.)

So, How Does GB Run?

Mostly on money that Islamabad decides to send. Nearly 8 of every 10 rupees arrive from the federal government. The single biggest slice goes on salaries, committed before the year even begins, and what is left for building is spread unevenly across the districts that need it.

The tax-free label does bring residents real benefits, particularly on income and property. But those benefits sit next to a harder reality: few formal jobs, lower salaries, and young people leaving for work down-country. A region that raises 6 rupees out of every 100 has very little say over its own priorities. Until GB can grow its own revenue, from tourism, hydropower and trade, and gets a real voice in how federal money is shared, its budget will remain a list of what Islamabad is willing to pay for.