11th NFC Concludes, Working Groups to Be Formed

The inaugural session of the 11th National Finance Commission (NFC) concluded in Islamabad on Thursday, with officials agreeing to establish six to seven working groups to advance discussions on key fiscal matters.

The meeting, chaired by Finance Minister Muhammad Aurangzeb, was attended by the chief ministers of Sindh and Khyber Pakhtunkhwa in their capacity as provincial finance ministers. Punjab and Balochistan were represented by their respective finance ministers. Adviser to KP CM on Finance, Muzzammil Aslam, also joined alongside CM Afridi, while Federal Board of Revenue (FBR) Chairman Rashid Langrial and private members from all four provinces participated.

Sources indicated that the next NFC session is expected to be held on January 8 or 15, 2026. The working groups will examine critical financial issues, including a dedicated group for the former FATA region to facilitate its integration into the federal fiscal framework.

After the meeting, Sindh Chief Minister Murad Ali Shah stated, “It has been decided that groups will be formed which will take financial matters ahead.” Similarly, Muzzammil Aslam described the session as constructive, noting, “The proposal is to form separate groups that will settle different matters,” and confirmed that one group would specifically address the fiscal incorporation of the former FATA districts. “There is a working group on [ex] FATA to decide how it should be included in the financial structure,” he added.

Aslam emphasized that the discussions were held in a positive and pressure-free environment, and clarified that no proposal regarding a reduction in the provinces’ share under the NFC Award was discussed.

Finance Minister Aurangzeb described the meeting as an important constitutional exercise in cooperation. “The prime minister personally took a deep interest in ensuring this meeting was held as early as possible,” he said. He highlighted that the session had been delayed due to devastating floods in Punjab, KP, and Sindh, and stressed that “the solution to concerns and ambiguities lies in sincere and transparent dialogue.” Aurangzeb further added, “We are here with open minds and without bias. Our first priority is to listen to one another. The federal government is here to hear the provinces’ position.”

He also praised provincial cooperation in achieving surpluses and implementing the IMF programme, while recalling the country’s challenges including threats from India and the recent floods. “This is the spirit we wish to preserve throughout the process of the 11th NFC Award,” he stated.

Revisiting the NFC Award

Minister for Planning Ahsan Iqbal has proposed a revision in both the vertical and horizontal distribution of resources among the Centre and provinces. A working paper titled “Revisiting the NFC Award” proposes two scenarios for vertical resource allocation:

• Scenario I: 2.5% of the divisible pool is allocated upfront for critical national priorities, with the remaining resources distributed between provinces and federal government in the existing 57.5%-42.5% ratio.
• Scenario II: Expenditures for BISP and HEC are charged upfront, with remaining revenues distributed as 57.5% to provinces and 42.5% to the federal government.

For horizontal distribution, population currently dominates with an 82% weight, but three alternative options have been proposed to balance population with revenue generation, fertility rates, and forest cover. Under these scenarios, Punjab’s share would reduce, while Balochistan, KP, and ICT would see increases to create a more equitable fiscal framework.

The report notes that the current NFC arrangement, though historic in enhancing provincial autonomy, has created structural imbalances that threaten Pakistan’s fiscal sustainability. Provincial revenues remain stagnant at around 1% of GDP, with weak performance in services taxation, agricultural income tax, and property tax.

This landmark 11th NFC session marks the beginning of a renewed dialogue to strengthen fiscal federalism and ensure a balanced distribution of resources across Pakistan’s provinces.