Article, In a significant step toward strengthening fiscal federalism and promoting equitable financial distribution, the President of Pakistan has officially constituted the 11th National Finance Commission (NFC). The commission is tasked with reviewing revenue-sharing mechanisms between the federation and the provinces, aiming to ensure transparency, accountability, and fair allocation of resources.
The NFC Award, established under Article 160 of the Constitution, is one of the cornerstones of Pakistan’s federal structure. It provides a legal and institutional framework to manage the complex financial relationship between the central government and the provinces. The 11th NFC is expected to play a pivotal role in addressing longstanding challenges surrounding fiscal distribution and provincial autonomy.
Objectives of the 11th NFC
The newly constituted NFC has a broad mandate to revisit and redefine financial arrangements between the federation and provinces. Its primary objectives include:
- Revenue Distribution – Determining the percentage of federal revenues allocated to provinces.
- Expenditure Sharing – Reviewing mechanisms for equitable distribution of resources.
- Debt Management – Addressing fiscal sustainability and reducing financial imbalances.
- Provincial Autonomy – Strengthening provinces’ ability to raise and manage their own resources.
- Macroeconomic Stability – Ensuring the federation’s commitments align with economic growth and national development goals.
Why the NFC Matters
The NFC is not merely a financial exercise; it is central to Pakistan’s political stability, economic development, and social cohesion. Provinces rely heavily on federal transfers to fund education, healthcare, infrastructure, and welfare programs. Without an equitable and transparent mechanism, disparities between regions can deepen, leading to socio-economic unrest.
For example, the 7th NFC Award (2009) was groundbreaking because it significantly increased the share of provinces from 47.5% to 57.5% of divisible pool revenues. However, subsequent commissions have struggled to reach consensus due to competing demands and fiscal constraints. The 11th NFC must navigate these challenges while ensuring that both federal and provincial governments remain fiscally viable.
Challenges Ahead
While expectations are high, the 11th NFC faces several hurdles:
- Economic Pressures: Pakistan’s fragile economy, burdened by debt, inflation, and limited fiscal space, makes resource distribution more complex.
- Provincial Demands: Each province has unique priorities—Punjab demands industrial growth incentives, Sindh stresses royalty rights over natural resources, Khyber Pakhtunkhwa seeks compensation for militancy-related damages, while Balochistan calls for greater attention to its development needs.
- Trust Deficit: Lack of consensus in previous commissions highlights the political challenges in achieving agreement.
- Revenue Mobilization: Strengthening the tax base remains essential to increase the size of the divisible pool.
Expected Impact of the 11th NFC
If successful, the 11th NFC Award can:
- Enhance fiscal autonomy of provinces.
- Promote balanced regional development.
- Reduce dependency on federal transfers by incentivizing provinces to increase their own revenues.
- Improve service delivery in health, education, and infrastructure sectors.
- Contribute to political stability by addressing inter-provincial grievances.
Ultimately, the NFC’s success depends on building consensus through dialogue, transparency, and a shared vision for Pakistan’s economic future.
Conclusion
The constitution of the 11th National Finance Commission marks a defining moment in Pakistan’s journey toward stronger federalism and fairer financial governance. As the federation and provinces sit together to negotiate resource sharing, the stakes are high for both economic stability and national unity. A fair, transparent, and progressive NFC Award could pave the way for sustainable development and a stronger Pakistan.
