Islamabad — The federal government has formally kicked off internal consultations to finalise its stance for upcoming negotiations on the new National Finance Commission (NFC) award. Sources confirm that one of the major options under consideration is to link 10–15% of provincial shares in the federal divisible pool to performance in education, health, tax collection, population management, and climate resilience.
During a core ministerial meeting held at the Finance Ministry this week, the Centre also weighed proposals to earmark a separate portion of the divisible pool for mega dam projects and higher education funding. Officials said dams have now become a matter of national security, requiring provincial contributions.
The government is additionally exploring the possibility of explicit allocations for Islamabad Capital Territory, Gilgit-Baltistan, and Azad Jammu & Kashmir — regions directly financed by the Centre but excluded from the provincial distribution formula. Another proposal is to link federal transfers with onward allocations for local governments.
Federal ministers were informed that Sindh has already raised objections, with Punjab expected to follow suit. The Ministry of Finance is preparing a paper projecting public debt and budget deficit trends for the next five years, arguing that the current 57.5% provincial share is unsustainable.
Planning Minister Ahsan Iqbal, in a letter to Prime Minister Shehbaz Sharif last month, stressed that the 15-year-old NFC formula has outlived its five-year constitutional mandate and is fueling fiscal stress. He also suggested reducing the population weight in distribution — currently 82% — and adding new indicators such as forest cover, reforestation, and climate investments.
The government may also push for transferring the Benazir Income Support Programme, which carries a Rs722 billion budget this year, to the provinces. Officials said the Centre believes the current resource-sharing formula is inequitable, both between the federation and the provinces and among the provinces themselves.
The Constitution requires the NFC to be renewed every five years, but disagreements have kept the 7th NFC alive through presidential extensions. Another internal meeting is planned next week before formal talks begin with the provinces.
