Tahir Maqsood Chheena
The 11th National Finance Commission (NFC), tasked with replacing the seventh award finalized more than 15 years ago, appears to have hit yet another roadblock. Despite a clear roadmap outlined at its inaugural meeting in December, progress remains painfully slow. The second NFC meeting, originally planned for the second week of January, has yet to take place. Meanwhile, the eight technical working groups, created to provide recommendations on the vertical and horizontal division of federal tax resources, remain largely inactive. Only two groups have convened once, signaling a broader reluctance to confront the political and fiscal tensions that underpin Pakistan’s system of fiscal federalism.
At the heart of the NFC’s challenge is the issue of the so-called “structural imbalance.” The federal government argues that its share in the existing award has been reduced to an unsustainable level, widening its budget deficit and driving up public debt. Provinces, however, strongly contest this claim, presenting extensive data to justify their positions. This tug-of-war reflects a deep-seated lack of trust between the centre and the federating units, a gap that has hampered meaningful fiscal negotiation for over a decade.
The Constitution mandates that the NFC meet and finalize a new award every five years, distributing financial resources from the federal divisible pool. Yet, since the expiry of the previous award in 2015, no updated award has been implemented. This long delay exposes structural weaknesses in the governance of Pakistan’s fiscal federalism. It also underscores the political sensitivities involved: any redistribution of resources touches on provincial autonomy, centre-provincial power dynamics, and entrenched bureaucratic interests.
The stakes of this delay are high. Pakistan’s economy has changed dramatically over the past 15 years. Population growth, urbanization, inflationary pressures, and evolving social needs have altered both revenue collection and expenditure patterns. A framework designed in 2008 cannot adequately address the fiscal realities of 2026. Without a new NFC award, provinces may struggle to fund essential public services, while the centre grapples with budgetary constraints, higher deficits, and increasing debt obligations.
The technical working groups, which could serve as the backbone of informed decision-making, have made little progress. Each group was tasked with analyzing specific aspects of federal-provincial finances — from revenue sharing and tax assignments to social sector spending and infrastructure financing. Their inactivity reflects not just bureaucratic inertia, but also political reluctance to tackle contentious issues head-on. Negotiations over fiscal federalism inherently involve trade-offs, and stakeholders appear hesitant to make concessions, even when inaction is more costly than compromise.
Blaming the existing award for the country’s economic challenges is misleading. The seventh NFC award, though outdated, cannot bear sole responsibility for Pakistan’s structural fiscal issues. Over the past 15 years, the country has faced rising expenditures, fluctuating revenues, macroeconomic shocks, and increased debt servicing costs. These pressures would strain any fiscal framework. The real challenge is ensuring that the 11th NFC award aligns resource allocation with contemporary economic realities, providing both the centre and provinces with the flexibility to meet their obligations while promoting equitable growth.
For the NFC process to succeed, all stakeholders must prioritize the public interest over political posturing. The centre and provinces need to adopt a forward-looking perspective, stepping away from entrenched positions that serve narrow interests. Cooperation, transparency, and timely engagement are essential. A functional NFC award is not just a technical necessity; it is a cornerstone of national cohesion, fiscal responsibility, and governance credibility.
The delay also highlights a broader institutional issue: Pakistan’s mechanisms for resolving fiscal disputes are underdeveloped. The NFC was envisioned as a platform for constructive dialogue, enabling evidence-based decision-making and consensus-building. Yet, in practice, meetings are repeatedly postponed, working groups remain dormant, and negotiations stagnate. Without reforming the process itself — by ensuring deadlines are met, recommendations are acted upon, and accountability is enforced — even the most well-intentioned award risks becoming another unimplemented document.
Economic and social imperatives cannot wait for political convenience. Provinces require clarity on revenue streams to plan budgets, invest in infrastructure, and deliver public services. The centre needs a predictable fiscal framework to manage debt, fund development programs, and implement macroeconomic policy. Delays in the NFC award threaten both. In a country where political disagreements often stall governance, fiscal federalism must be insulated from partisan considerations.
Ultimately, the 11th NFC award is about more than numbers. It represents the balance of power, responsibility, and accountability between Pakistan’s federal and provincial governments. Its timely finalization is crucial to ensuring that resources are distributed equitably, fiscal deficits are contained, and public finances are sustainable. Failure to act risks perpetuating inefficiencies, deepening mistrust between the centre and provinces, and undermining public confidence in governance.
As the country waits for the second NFC meeting, hope must rest on the assumption that technical issues, rather than political unwillingness, are behind the delay. Yet, time is of the essence. Pakistan cannot afford another decade of inaction. Fiscal federalism is a living framework that must evolve alongside the economy it governs. A meaningful, timely, and consensus-driven 11th NFC award is not a luxury; it is a necessity for stability, development, and national cohesion.
The centre and provinces must rise above narrow interests, embrace compromise, and act decisively. Only then can the NFC fulfill its constitutional mandate and provide a framework that reflects the realities of a modern Pakistan — equitable, accountable, and responsive to the needs of its people.
