57.5% NFC Share ‘Untouchable’ After Provincial Pushback

The federal government has acknowledged that the provincial share of 57.5% under the National Finance Commission (NFC) Award is effectively untouchable, after strong resistance from provinces during talks on the next NFC formula.

Planning Minister Ahsan Iqbal said that efforts to revise the revenue distribution formula could not reduce the provinces’ share because of opposition from federating units during the concluding session of a two-day Pakistan Governance Conference in Islamabad.

The NFC Award is a constitutional mechanism that governs how federal tax revenues are split with Punjab, Sindh, Khyber-Pakhtunkhwa and Balochistan, and the current 57.5% share for provinces was agreed in the previous award cycle.

Punjab indicated a willingness to share some federal expenditure burdens, notably debt repayment and defence costs, which are projected to consume roughly Rs11 trillion of the Rs18 trillion national budget this year. However, Sindh and K-P did not join this position.

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Sindh’s finance secretary stressed that the next NFC must stay within constitutional limits, warning against reducing the provincial share. K-P’s representatives argued that shrinking the divisible pool poses no guarantee of better federal fiscal discipline, criticizing the Federal Board of Revenue for under-performing against tax-to-GDP targets set under past NFC agreements.

Officials from Sindh and K-P also called for reforms to expand the overall revenue pool, increase allocations for human development and climate resilience, and involve provinces more directly in tax collection.

The planning ministry said separate allocations for Azad Jammu & Kashmir, Gilgit-Baltistan and Islamabad Capital Territory could avoid constitutional hurdles in future formula adjustments and save the federal government around Rs500 billion annually.

The NFC Award, established under the Constitution, requires that a province’s share not be reduced below what it received in prior awards, reinforcing why the 57.5% figure remains sacrosanct.

Fiscal advisers and technical members attending the session underscored broader concerns about macroeconomic sustainability, urging improved revenue performance and reduced federal spending on devolved subjects to ease strain on public finances.

Discussions on the 11th NFC resume amid calls for balancing provincial rights with national fiscal stability