The federal government is considering cutting provinces’ share in the National Finance Commission (NFC) Award under pressure from the International Monetary Fund (IMF), officials confirmed. The move is part of efforts to slash expenditures, reduce the budget deficit, and ensure debt repayments.
Pakistan recorded a budget deficit of Rs. 7.44 trillion in the last fiscal year, while the Finance Ministry projects a shortfall of Rs. 6.5 trillion this year. Debt servicing remains the largest expense, estimated at Rs. 8.2 trillion for the current year.
Currently, provinces receive 57.5% of NFC allocations, but the federal government is considering linking funds to performance in education, health, and environmental sectors. Another proposal suggests carving out allocations for mega projects like the Diamer-Bhasha Dam, as well as separate funds for Islamabad, Gilgit-Baltistan, and Azad Jammu & Kashmir.
Sources said the government is also reviewing the population weight of 82% in the NFC formula, possibly lowering it to give the federal government more fiscal space.
The proposal has already sparked backlash, with Sindh rejecting the move outright. Critics argue that cutting provincial shares could weaken social services and widen the federal-provincial divide.
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Officials maintain that the changes are necessary to satisfy IMF conditions and stabilize the economy. However, the final decision is yet to be made.
