IMF Pushes Pakistan to Revise NFC Award Formula
ISLAMABAD — The International Monetary Fund (IMF) has asked Pakistan to review its National Finance Commission (NFC) Award in a bid to strengthen fiscal discipline, according to official sources.
The proposed changes could reduce the provinces’ current share of 57.5 percent from the divisible pool. If the provinces resist, the federal government may move ahead using the 27th Constitutional Amendment.
At present, the population accounts for 82 percent of the formula, but officials said this weight could be cut. Instead, new factors such as poverty levels, tax collection performance, and population density may be introduced. Provinces will also be expected to generate more of their revenue rather than relying heavily on federal transfers.
Another part of the plan under consideration is to transfer the Benazir Income Support Programme (BISP) and the Annual Development Plan (ADP) to provincial control. These steps are part of the IMF’s conditions aimed at reducing federal spending and creating fiscal space.
Finance Minister Muhammad Aurangzeb recently reviewed data from the 7th NFC Award, including provincial tax contributions and BISP allocations. He directed officials to prepare working papers ahead of the next round of talks.
The first formal NFC meeting with provinces has already been delayed and may now take place in September or October. Khyber Pakhtunkhwa has urged the Prime Minister to convene the session soon.
Officials say the federal government is likely to ask provinces to accept a smaller share of resources, though any final proposal will require the Prime Minister’s approval before being presented to the provinces.
Analysts believe the IMF’s pressure highlights the close link between financial support and reforms. While revising the NFC Award will be politically sensitive, officials maintain it is necessary to meet IMF requirements and stabilise Pakistan’s fragile economy.
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