Pakistan’s NFC Award and economic challenges

Pakistan’s current National Finance Commission (NFC) Award and its impact on the country’s economic stability and governance have emerged as critical issues amid ongoing debates over resource distribution and provincial autonomy.

The 18th constitutional amendment of 2010 significantly increased provincial powers and established a revenue-sharing formula under the NFC that has placed substantial fiscal pressure on the federal government.

Under the current framework, provinces receive approximately 57.5% of national revenue, leaving the federation with 42.5%, which must cover debt repayments, interest, defense spending, disaster relief, the Federal Public Sector Development Program, and social safety nets such as the Benazir Income Support Program.

In the latest episode of On My Radar, senior Pakistan Peoples Party (PPP) leader Qamar Zaman Kaira discussed these challenges, offering insights into the NFC’s structure and the potential impact of upcoming reforms on federal-provincial fiscal relations.

Kaira, a seasoned politician who has held multiple federal ministries, and served as the first Governor of Gilgit-Baltistan, emphasized that the current fiscal model makes long-term economic planning difficult for the federal government while the provinces continue to receive a disproportionately large share of revenue.

Kaira noted that progress is being made toward a revised NFC Award. A National Finance Commission meeting on December 4, 2025, chaired by Finance Minister M. Aurangzeb, established eight committees and several working groups tasked with reviewing the divisible pool, revising resource distribution formulas, and managing national debt. The next NFC session is scheduled for January 8 or 15, 2026, where the working groups’ proposals will be reviewed.

Experts and policymakers have stressed that the upcoming NFC deliberations, especially in light of potential new provinces or administrative units and the proposed 28th Amendment, could alter the provinces’ current 57.5% revenue share. The outcome of these discussions is expected to have long-term implications for Pakistan’s fiscal stability, governance, and ability to attract domestic and foreign investment.