At the opening session of the 11th National Finance Commission (NFC), the federal government urged provinces to significantly raise their own revenue contributions, stressing that Pakistan’s fiscal imbalance is rooted in the long-lasting effects of the 7th NFC Award, which curtailed defence and development spending.
Centre links current fiscal strain to 7th NFC Award’s long-term impact
According to Dawn, the Centre proposed increasing consolidated revenues by an additional 5% of GDP—around Rs6.5 trillion annually—over the next three years to counter rising debt servicing and widening deficits. The discussion, chaired by Finance Minister Muhammad Aurangzeb, also sought legal clarity on whether provinces must align with federal spending priorities.
The Centre aims to lift the FBR’s tax-to-GDP ratio by 3–3.5 percentage points, while calling on provinces to expand their own tax collection to 3% of GDP, up from the current 0.28%, through better taxation of property, agriculture income, and services.
While the federal government raised concerns about fiscal pressures, it did not propose altering the provincial share of the divisible pool, which stays at 57.5%.
The meeting agreed to set up thematic working groups to review major fiscal issues, including resource distribution and the financial impact of the tribal districts’ merger with KP. The next NFC meeting is expected between January 8–15, 2026, after the groups submit their reports.
