Chaired by Finance Minister Muhammad Aurangzeb, the maiden session was attended by Sindh Chief Minister Murad Ali Shah and Khyber Pakhtunkhwa Chief Minister Sohaib Afridi—each collaborating as provincial finance ministers—whereas Punjab and Balochistan have been represented by their respective finance ministers.
KP Adviser on Finance Muzzammil Aslam, FBR Chairman Rashid Langrial and personal specialists from all provinces have been additionally current.
Based on sources, the upcoming working teams will look at vital monetary points, together with one completely devoted to the previous FATA area to find out how the merged districts needs to be built-in into the nationwide fiscal framework.
Chatting with reporters after the assembly, CM Murad Ali Shah confirmed: “It has been determined that working teams might be fashioned to take monetary issues forward.”
Muzzammil Aslam described the assembly as constructive, noting that the plan entails creating six to seven teams working beneath an umbrella oversight physique. He confirmed that one group would particularly give attention to the fiscal incorporation of ex-FATA districts.
He additionally dismissed hypothesis relating to any proposal to cut back provincial shares beneath the NFC Award, saying such discussions didn’t happen.
Throughout the session, Finance Minister Aurangzeb termed the assembly an essential step in fulfilling constitutional duty, noting that the tenth NFC Award expired on 21 July 2025. He mentioned the federal authorities was dedicated to holding the eleventh NFC’s inaugural assembly immediately, praising the prime minister for taking private curiosity in its well timed convening.
Aurangzeb defined that the session had earlier been postponed because of devastating floods throughout Punjab, KP and Sindh. Addressing public issues surrounding the NFC, he mentioned: “The answer to all ambiguities lies in honest, clear dialogue.”
He confused that the federal authorities had come “with open minds and with out bias,” and that the first precedence was to take heed to provincial positions.
Commending the provinces for signing the Nationwide Fiscal Pact and supporting obligatory surpluses beneath the IMF programme, the finance minister mentioned their cooperation was very important in navigating a yr marked by extraordinary challenges—together with extreme flooding and heightened safety threats from India.
“That is the spirit we intention to protect all through the eleventh NFC Award course of,” he concluded.
Revisiting the NFC Award
Minister for Planning Ahsan Iqbal has proposed a revision in each vertical and horizontal distribution of useful resource method among the many Centre and provinces, The Information reported on Thursday.
A working paper titled “Revisiting the NFC Award” has been shared by the Ministry of Planning with Prime Minister Shehbaz Sharif, proposing two situations for vertical distribution of sources among the many Centre and provinces.
Underneath situation one, upfront deductions for nationwide priorities have been proposed as earlier than distribution, 2.5% of the divisible pool is allotted for vital issues (such because the warfare on terror, water safety, Civil Armed Forces (CAF) and grants to AJK & GB are additionally allotted from the divisible pool earlier than distribution.
The remaining pool is then shared with the prevailing proportion of 57.5% and 42.5% between the provinces and the federal authorities, respectively. From FY2027 onward, this mechanism would barely ease the federal fiscal house.
Underneath State of affairs II, the expenditures for BISP and HEC are charged upfront from the divisible pool.
The remaining revenues are then distributed as 57.5% to the provinces and 42.5% to the federal authorities. By FY2030, the federal sources are about 11-12% larger than beneath the baseline.
It’s crucial to rationalise the vertical distribution of sources beneath the NFC framework. A recalibrated method, one which acknowledges constitutional provinces alongside AJK, GB, ICT, and NMDs, will create a extra balanced, equitable, and sustainable fiscal association, strengthen federal capability to satisfy nationwide obligations and assist the long-term stability of Pakistan’s fiscal federalism.
Total, larger expenditures relative to revenues resulted in a persistently larger federal fiscal deficit, which remained throughout the vary of 5 to eight.4 per cent for over a decade. This isn’t merely cyclical however structural, which fuels debt accumulation and undermines fiscal sustainability.
This, in flip, has considerably elevated the debt servicing price, which is consuming a good portion of federal revenues and squeezing the federal government’s fiscal house for precedence areas, thus resulting in repeated and sometimes extreme changes to bridge the revenue-expenditure hole.
For horizontal distribution throughout the provinces, the working paper states that inhabitants dominates with an 82% weight, whereas poverty, income technology and inverse inhabitants density carry solely marginal significance.
This report has proposed three different choices to maneuver away from this population-heavy strategy.
In Possibility 1, the burden for inhabitants is diminished to 78%, with modest will increase for different components similar to inverse inhabitants density, fertility and forest cowl.
In Possibility 2, the distribution turns into extra balanced, as inhabitants weight falls to 68%, whereas affordable weights are assigned to income technology (10%), inverse fertility charge (2%) and forest cowl (2%).
In Possibility 3, the distribution would even alter, as inhabitants weight falls to 60%, whereas excessive weights are assigned to income technology (20%), inverse fertility charge (5%), and forest cowl (5%).
This transition to an additional broader strategy displays the intent to recognise fiscal effort, social outcomes and ecological contributions alongside inhabitants.
In all three situations, the share of Punjab diminished from the prevailing 51.74% to 47.26% beneath situation 1, 44.73% beneath situation 2 and 41.89% within the third situation beneath the federal divisible pool.
The share of Sindh remained at 25.55% beneath the prevailing NFC and can be standing at 25.05% in scenario-1, 25.55% in scenario-2 and 25.09% in scenario-3.
The share of KP stood at 14.62% beneath the prevailing NFC and beneath scenario-1, it’ll stay at 17.12%, 16.95% beneath scenario-2 and 15.67% beneath scenario-3.
Balochistan’s share within the present NFC stood at 9.09% and it will be standing at 9.75% beneath situation 1, 11.5% beneath situation 2 and 12.02% beneath situation 3.
The share of ICT might be standing at 0.83% beneath scenario-1, 1.26% beneath scenario-2 and 5.33% beneath scenario-3.
It states that the present NFC association, whereas historic in increasing provincial fiscal house and strengthening autonomy, has created structural imbalances which threaten the sustainability of Pakistan’s fiscal federalism.
Regardless of receiving 57.5% of divisible pool transfers, provincial revenues stay stagnant at round 1% of GDP, with weak efficiency in providers taxation, agriculture earnings tax, and property taxation.
