Key Points
- Centre convenes December 4 meeting to restart stalled NFC process and open negotiations for 11th Award.
- Provinces arrive with updated population, poverty and arrears claims.
- Federal Government signals vertical share review, governance-linked reforms.
- Officials expect a multi-round process with a several-month timeline
ISLAMABAD: The federal government is set to reopen the National Finance Commission process on Thursday, December 4, bringing provinces back to the table to negotiate revenue-sharing under the 11th NFC Award.
A post-consensus award would determine how to share Pakistan’s federal revenues among the Centre and the Provinces. Extended sessions of the NFC would re-determine the federal divisible pool, the total pool of specified tax revenues collected by the federal government of Pakistan that is shared with its provinces. This mechanism is a cornerstone of Pakistan’s fiscal federalism, aiming to address the vertical imbalance
According to officials privy to the NFC aiming for a consensus 11th Award, the federal government was likely to propose a certain percentage of the divisible pool for security and another for the national safety nets mechanism (with the Benazir Income Support Programme on top). These vertical deductions would be done to determine the net divisible pool to be shared between the Centre and the provinces.
The NFC meetings, starting December 4, would begin with a federal presentation of revenue and constraint figures. The Commission would redefine poverty and backwardness indicators and review the basis for both horizontal and vertical distribution.
Technical members will brief the commission on data sources, methodologies and adjustments as proposed by their respective provincial governments.
Federal position and constraints
The federal government has indicated interest in revisiting the vertical share and realigning expenditures with national priorities, though constitutional limits prevent unilateral reductions to provincial allocations. Any revision requires consensus among all stakeholders.
Provincial positions
Provinces have prepared revised claims based on new census figures, fiscal gaps and sectoral needs. Khyber Pakhtunkhwa has sought a sizeable adjustment linked to its development and security expenditures, while Sindh, Punjab and Balochistan aim to secure clearer treatment of arrears and conditional transfers.
Governance and reforms
The meeting takes place amid continued engagement with international lenders whose governance recommendations have emphasised greater transparency in fiscal federalism. Officials note that negotiations will proceed in multiple rounds and final figures will take time to mature.
Likely sticking points
Key differences are expected over population weights, the poverty metric, backwardness criteria, treatment of federally administered areas and the size of the divisible pool. Outstanding arrears and conditional grants also remain unresolved.
What to expect on December 4
Participants anticipate a procedural opening session that establishes ground rules, working groups and timelines. Substantive bargaining over shares, weights and arrears is likely to begin in subsequent rounds.
