ISLAMABAD: Pakistan’s federal government has scheduled the long-delayed inaugural meeting of the 11th National Finance Commission (NFC) for December 4, marking the first formal step toward renegotiating how the country’s financial resources are shared between the central government and the provinces.
After multiple postponements since August, the maiden session—chaired by Federal Finance Minister Muhammad Aurangzeb—will focus on establishing the procedural framework for what is expected to be a protracted negotiation over vertical (federal–provincial) and horizontal (inter-provincial) resource distribution.
Agenda for the First Meeting
According to official notices sent to the provinces, the session will cover three key items, which include Strategy discussions on the overall roadmap for the 11th NFC Award, including the creation of technical sub-groups.
Fiscal presentations from each of the four provinces and the federal finance ministry—10 minutes each—outlining their current financial positions.
Scheduling future sessions, which are expected to rotate among federal and provincial capitals.
The meeting was initially set for December 3 but was rescheduled the same day.
A Commission Marked by Delays
The 11th NFC was constituted on August 22, yet its first meeting has faced repeated delays—first in August due to provincial requests, and later in November at the direction of the Prime Minister’s Office.
The NFC comprises the federal finance minister, the four provincial finance ministers, and one non-statutory member from each province.
Core Mandate of the 11th NFC
Under Pakistan’s Constitution (Article 160), the NFC is tasked with recommending how revenues from major federal taxes—including income tax, sales and excise duties, and certain export duties—are divided between the federation and the provinces. It must also advise on:
Grants-in-aid to provinces
Sharing of expenditures on subjects that overlap federal and provincial domains
Funding arrangements for national projects requiring joint financing
Fiscal arrangements concerning Azad Jammu & Kashmir, Gilgit-Baltistan and the merged districts of Khyber Pakhtunkhwa
Federal Push for Cost-Sharing
Backed by the International Monetary Fund (IMF), the federal government is expected to push for greater provincial responsibility for costs associated with natural disasters, national health programs, and major infrastructure projects such as dams, highways and motorways.
Islamabad has also suggested replacing the existing population-based incentive with performance-based criteria and stronger local government participation.
Background: A Tense Fiscal Landscape
Pakistan has been operating under the 7th NFC Award since 2009—an arrangement intended to last five years but extended for 15. The award dramatically shifted financial resources toward the provinces, raising their collective share of the divisible pool to 57.5%, later reaching roughly 59% after special allocations. This left the federal share at just 42.5%.
However, federal measures such as the imposition of a petroleum levy and the accumulation of unused provincial cash balances have partially offset the provincial gains.
Meanwhile, both federal and provincial governments have failed to meet their revenue-growth commitments under the 7th NFC.
With slowing economic growth—downgraded this year to 3.5% due to flood damage—pressure has mounted from the finance ministry, the military establishment and the IMF to revisit the fiscal framework in favour of the Centre.
Consensus Required, But Politically Sensitive
The Constitution prohibits reducing a province’s share once allocated, meaning any new NFC Award must be approved unanimously by the Centre and all four provinces.
The current horizontal distribution is based on population, poverty levels, revenue generation, and inverse population density:
Punjab: 51.74%
Sindh: 24.55%
Khyber Pakhtunkhwa: 14.62%
Balochistan: 9.09%
Prime Minister Shehbaz Sharif, though not a member of the NFC, is expected to hold political consultations with coalition partners ahead of the meeting.
Earlier efforts to amend NFC parameters through the proposed 27th Constitutional Amendment were shelved due to political negotiations between the ruling coalition partners.
What Comes Next
Once the December 4 session sets the procedural groundwork, the NFC will begin the complex task of negotiating Pakistan’s next fiscal settlement—one likely to influence the country’s political cohesion and economic trajectory for years to come.
