President Asif Ali Zardari on Friday constituted the 11th National Finance Commission under Article 160, tasking it to recommend a fresh revenue-sharing award between the federation and provinces.
What the 11th National Finance Commission will do
The 11th NFC will frame recommendations on the distribution of the federal divisible pool and broader fiscal arrangements between the Centre and provinces.
Its guidance, once approved, will set transfers for the next cycle and shape provincial development space. The Finance Division will serve as the secretariat.
The commission is chaired by Federal Finance Minister Muhammad Aurangzeb, with the four provincial finance ministers as members.
Similarly, one nominated expert from each province, making nine members in total. The notification also supersedes the 10th NFC set up in July 2020.
Why this NFC award matters now
Intergovernmental transfers remain the backbone of provincial budgets.
A timely award can stabilise cash flows for health, education, and local infrastructure, while clarifying cost-sharing on national schemes.
Provinces will seek predictable funds against inflation and disaster recovery needs.
Moreover, the federation will argue fiscal room for debt servicing and federal mandates. Both sides are expected to press their case vigorously.
Constitutionally, the NFC must be reconstituted at intervals not exceeding five years, and its recommendations are laid before Parliament and provincial assemblies.
Regular cycles reduce uncertainty and help provinces plan multi-year programmes, including social protection and law & order spending.
Lessons from the 7th NFC Award
The seventh award, agreed in 2009–10, shifted away from a population only basis.
It introduced a multi-indicator formula for horizontal distribution in which population carried the largest weight, with poverty/backwardness, and revenue effort.
Khyber Pakhtunkhwa received an additional 1% share for security operations, while Balochistan’s transfers were protected.
That change aimed to better reflect needs and capacities across provinces.
Independent reviews note the approach improved equity but also tightened the federation’s fiscal space as provincial shares rose.
Any new award will need to balance fairness, incentives for own-source revenue, and national priorities.
Historically, only seven conclusive awards have been enacted since the 1950s.
This track record underscores the political negotiation required to align diverse provincial interests with federal constraints.
The road ahead: process, timelines, and what to watch
After constitution, the NFC convenes, agrees terms of reference, and forms working groups with economists and statisticians to test options.
The commission’s recommendations, once finalised and approved, become the basis for federal transfers.
Stakeholders expect debate on sharing ratios, treatment of new taxes, social sector funding, and incentives for provincial tax effort.
Key watchpoints include the commission’s membership of nominated experts, the schedule of meetings released by the Finance Division, and whether interim arrangements are considered before a full award.
Media statements suggest both Centre and provinces are preparing detailed cases, signalling a rigorous process.
For Pakistan, a credible and timely 11th NFC can support macro stability while protecting frontline services in the provinces.
Clearer rules on transfers and shared responsibilities would help attract investment, improve service delivery. While sustaining reforms for taxation and public finance.
The next steps for 11TH NFC Award are procedural but consequential which includes notification of expert members’ names, the first sitting’s agenda, and publication of data templates for deliberations.
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