Pakistan proposes removing population from federal revenue sharing formula

Finance Minister Sen. Muhammad Aurangzeb on Monday proposed delinking the National Finance Commission (NFC) Award from population, calling Pakistan’s 2.5% population growth rate an "existential problem."

Speaking at a press conference alongside Secretary Finance Imdadullah Bosal, Chief Economist Dr. Imtiaz and Economic Advisor Dr. Raja Hasan, Aurangzeb confirmed that Prime Minister Shehbaz Sharif has called a meeting on the NFC framework in August.

"I am not in favor of raising slogans about giving five or 10 million jobs; the government’s role should be to provide an ecosystem," the minister said.

Aurangzeb warned of persistent fiscal challenges, particularly in energy and taxation, stressing, “We must stop the bleeding, the leakages in energy and other sectors.”

He also linked economic stability to national security, praising the military’s performance in a recent conflict with India while acknowledging ongoing economic struggles.

“The Pakistan military has proven its strength to the world, but our battle on the economic front continues,” he said.

The minister noted that conflict-related costs were absorbed within the current fiscal year’s budget without additional allocations.

He also revealed that India’s executive director at the IMF attempted to block Pakistan’s case but failed due to international support.

“Despite resistance, global institutions like Fitch, Moody’s, and IFCs remain engaged with Pakistan and recognize our reforms,” he added.

The minister emphasized strict expenditure controls, stating, “There is no further room for cuts; we’ve already minimized spending to the limit.” He noted Pakistan’s fiscal deficit in 2024 shrank significantly compared to 2022.

Aurangzeb highlighted improving macroeconomic indicators, including 2.7% GDP growth and inflation dropping to 4.6%, a sharp decline from recent highs. The policy interest rate was also cut from 22% to 11%, easing borrowing costs.

He credited the IMF’s Stand-By Arrangement (SBA) for stabilizing the economy, despite opposition from an Indian IMF representative. “The IMF’s support has been instrumental,” he said, “and Pakistan is heading in the right direction.”