Tahir Maqsood Chheena
When the inaugural meeting of the National Finance Commission (NFC) was held on December 4, it raised long-suppressed hopes that Pakistan might finally confront the unresolved questions at the heart of its fragile fiscal compact. After more than 15 years without a new NFC award, expectations were understandably high. Two months later, those hopes appear increasingly misplaced.
Despite the urgency of the task, progress has been minimal. Of the eight technical working groups established to prepare the groundwork for the long-overdue 11th NFC award, only two have met — and even those only once. The remaining six have yet to convene at all since being notified in December. As a result, the second NFC meeting, which was scheduled for the second week of January and meant to initiate a regular monthly process, now seems unlikely to take place any time soon.
This state of inertia cannot be brushed aside as a procedural delay. It represents a serious failure of responsibility. The NFC is not a ceremonial body; it sits at the core of Pakistan’s fiscal stability, shaping how resources are shared between the federation and the provinces and, by extension, how governance functions across the country. Prolonged inaction here undermines trust, planning, and development at every level of the state.
There is no denying that the issues before the commission are complex. Revisiting the horizontal distribution formula among provinces, renegotiating the vertical split between the centre and the provinces, and resolving the financial implications of the merger of the former tribal districts into Khyber Pakhtunkhwa were never going to be straightforward. These matters involve constitutional sensitivities, competing provincial interests, and significant fiscal consequences. But complexity was never an excuse for not even starting the work.
What makes the situation more troubling is that even the two working groups that did meet have been unable to move forward due to federal lethargy. The clearest example is the group examining the fiscal impact of the former Fata’s merger into KP. This group sought detailed calculations from the federal finance secretary showing how an increase in KP’s share to meet the needs of the merged districts would affect the shares of other provinces. Weeks have passed, yet those figures have not been provided. Without them, the group cannot reconvene, leaving a critical issue in limbo.
The other active group, tasked with reviewing the divisible pool of taxes under the finance minister’s leadership, has also made little progress. Its mandate — to recommend which taxes should be included in or excluded from the divisible pool — lies at the heart of the NFC process. Any adjustment here would have profound implications for both federal revenues and provincial finances. Yet, so far, the group has failed to advance meaningfully on this front.
This inertia is particularly puzzling given the federal government’s frequent complaints about shrinking fiscal space. The centre has repeatedly argued that it is left with insufficient resources after provinces receive 57.5 percent of federal tax revenues under the current NFC arrangement. If this concern is genuine, one would expect the federal government to be leading the charge in pushing for timely, focused deliberations on the divisible pool and vertical distribution. Instead, its own lack of urgency has become part of the problem.
None of the remaining six working groups has met, signalling a broader stagnation in efforts to modernise Pakistan’s resource-sharing framework. Media reports suggest that finance ministry officials blame the delays on the busy travel schedules of the finance minister and finance secretary, while also pointing to the provinces, since most groups are chaired by provincial finance ministers. These explanations ring hollow.
Busy schedules are a fact of governance, not an excuse for paralysis. If senior officials are unavailable, why have responsibilities not been delegated? Why have preliminary meetings not been held, background papers prepared, or legal and technical opinions sought in advance? The absence of even basic preparatory work suggests not logistical difficulty, but a worrying lack of institutional seriousness.
Meanwhile, several critical questions remain unanswered. Beyond the vertical and horizontal distribution of resources, the NFC must address the growing burden and composition of national debt, strategies to raise Pakistan’s chronically low tax-to-GDP ratio, and principles for sharing federal expenditures in areas that fall within provincial domains. Each of these issues has direct consequences for economic stability and service delivery.
Delays are especially damaging when it comes to correcting long-standing distortions in the allocation formula, such as the overwhelming weight given to population at the expense of other indicators like poverty, backwardness, and revenue generation. Every month lost in addressing these imbalances deepens existing grievances and increases fiscal vulnerability.
If the NFC continues on its current path, the cost will not be abstract or theoretical. It will be paid in weakened fiscal governance, stalled development projects, strained federal-provincial relations, and diminished public trust. Pakistan can ill afford such outcomes at a time when its economic challenges are already severe.
The commission must break out of this lethargy. The NFC process does not need grand announcements or symbolic meetings; it needs steady, disciplined work. Without that, the promise of a new NFC award will remain just that — a promise endlessly deferred, to the detriment of the country’s financial and political stability.
