By Staff Reporter
ISLAMABAD: Pakistan delayed the first meeting of the 11th National Finance Commission (NFC), the country’s revenue distribution body, on Thursday after Sindh requested a postponement to prepare for floods expected within 48 hours.
The decision, outlined in a notification to members and finance secretaries, underscores the challenge of balancing fiscal talks with natural disasters. The notification gave no new date for the meeting, originally set for August 27 and rescheduled to August 29 without explanation. Sindh, a key economic hub, cited urgent flood preparations as water from Punjab threatens the province.
Formed on August 22, the 11th NFC, led by Finance Minister Muhammad Aurangzeb, includes finance ministers from Punjab, Sindh, Khyber Pakhtunkhwa (KP), and Balochistan, plus one non-statutory member per province. Under Article 160 of Pakistan’s Constitution, it allocates proceeds from income taxes, sales taxes, cotton export duties, excise duties, and other levies set by the president.
Sindh’s request reflects heavy rains in Punjab driving floodwaters toward the province. The delay, the second for the NFC’s debut meeting, raises doubts about the timeline for a new revenue-sharing deal. The NFC’s tasks go beyond tax splits. It must recommend federal grants-in-aid, set borrowing limits for both government tiers, and address cost-sharing for national projects, disaster response, health programs, and infrastructure like dams and highways.
Islamabad wants provinces to fund more of these priorities and shift from population-based allocations to incentives for social sector performance and local governance.
The 11th NFC faces a complex legacy. The 7th NFC award of 2009 raised the provinces’ tax share from 47% to 57.5%, with extra allocations for Balochistan, KP, and Sindh pushing it near 59%. The federal share fell to 42.5%, squeezed by a 1.5 trillion rupee ($5.4 billion) petroleum levy and similar withdrawals from provincial cash reserves.
Designed to last five years, the 2009 award has been extended annually since June 2015. Provinces failed to raise revenue by 0.5% of GDP yearly as pledged, fueling tensions. Federal pushes for performance-based allocations have also sparked disputes. The 9th NFC (2015–2019) and 10th NFC (2020) failed to produce new awards due to inconsistent talks.
The NFC must address funding for Azad Jammu and Kashmir, Gilgit-Baltistan, and KP’s former Federally Administered Tribal Areas. Islamabad’s call for provinces to share costs for national projects and disasters may face resistance, given tight provincial budgets.
The 2009 award gives Punjab 51.74% of the provincial share, Sindh 24.55%, KP 14.62%, and Balochistan 9.09%, based on population, poverty, revenue, and inverse population density. A new award needs unanimous consent from the federal government and all provinces, a constitutional rule barring cuts to provincial shares without agreement.
The NFC’s work is vital for Pakistan’s fiscal health amid economic strain and IMF pressure for reforms. The finance ministry, armed forces, and IMF have urged a rebalanced award, but consensus will test Islamabad’s ability to align federal and provincial goals while tackling crises like KPK and Punjab floods.
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