ISLAMABAD (Dunya News) - The federal government has constituted the 11th National Finance Commission (NFC) to develop a new formula for the distribution of national revenues among provinces.
The nine-member commission will be chaired by the Federal Minister for Finance.
According to a notification issued by the Ministry of Finance, the commission has been formed under Article 160(1) of the Constitution with immediate effect following the President's approval. The notification also cancels the previous NFC notification issued on July 21, 2020, effectively dissolving the previous commission.
Members of the new NFC include the finance ministers of Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan, along with four non-official members: Nasir Mahmood Khosa (Punjab), Dr Asad Saeed (Sindh), Dr Musharraf Rasool (KP), and Farmanullah (Balochistan).
As per Article 160(2), the NFC’s primary tasks include: determining the distribution of net tax revenues between the federation and provinces, allocation of grants-in-aid, borrowing rights, cost-sharing of provincial and inter-provincial services, and funding for national-level projects. The Finance Division will serve as the Secretariat for the NFC.
Sources indicate that the last NFC award has been in effect for several years, and provinces have been demanding a new award. The IMF has also urged Pakistan to reduce government spending, prompting the federal government to work on a fiscal reduction plan.
ADB approves $410m financing for Reko Diq copper-gold mining project
One major proposal under consideration is to revise the 57.5% provincial share in national revenues. The new award may link provincial shares to performance indicators in sectors like education, health, and environment. There's also a recommendation to allocate funds specifically for Gilgit-Baltistan and Azad Kashmir and to reduce the weightage of population from the current 82% in the revenue-sharing formula.
Sindh has already rejected the proposal to reduce its share, and inter-provincial consensus will be key to finalising the award.
The revised framework is expected to support debt servicing and reduce the budget deficit. Last fiscal year, the federal government faced a deficit of Rs 7.44 trillion, and the current year’s deficit is projected at Rs 6.5 trillion. Interest payments alone are expected to consume Rs 8.2 trillion this year.
The newly formed NFC will review all proposals and, after consultation with the provinces, present recommendations for a new NFC Award.