ISLAMABAD: Experts have warned that Pakistan’s current fiscal trajectory is unsustainable, urging provinces to share the burden of debt and defence under the NFC Award.
The 7th NFC Award, enacted in 2010, increased provincial shares of the divisible pool from 47.5% to 57.5%. Its formula allocates 82% based on population, 10.3% on poverty and backwardness, 5% on revenue generation, and 2.7% on inverse population density. While intended to ensure fair distribution, the arrangement has contributed to a federal deficit of Rs44 trillion between 2010 and 2024.
If no reforms are made, the shortfall could reach Rs200 trillion by 2035. The federal budget for 2025–26 projects revenues of Rs19 trillion, but Rs8 trillion must be transferred to provinces under the NFC Award, while Rs8.2 trillion is needed for interest payments alone. After grants and subsidies, the federal government is left with limited funds for defence, pensions, development, and civil operations.
Analysts say the core problem lies in debt servicing and defence. These expenditures protect the entire country, not just Islamabad. Experts propose a “Proportional Sharing” model, where debt and defence are deducted first from total resources before distributing the divisible pool. Under this model, the federal government retains 42.5%, while provinces collectively assume 57.5%, divided according to the current NFC Award percentages: Punjab 51.74%, Sindh 24.55%, Khyber Pakhtunkhwa 14.62%, and Balochistan 9.09%.
Officials emphasize that this reform is not about punishing provinces. Instead, it preserves the gains of the 18th Amendment, keeps the existing NFC Award intact, and promotes fiscal responsibility.
The proposed approach aims to stabilise national finances, maintain provincial autonomy, and avoid the political complexities of redrawing boundaries or rewriting the resource-sharing formula. Experts stress that fair burden-sharing is the key to sustainable fiscal governance in Pakistan.
