The Government of Pakistan is considering major changes to the National Finance Commission (NFC) Award after pressure from the International Monetary Fund (IMF) to reduce the federal deficit and manage debt.
According to information, the IMF has asked Pakistan to revise the NFC Award formula for better fiscal discipline. The changes could lower the current provincial share of 57.5 percent from the divisible pool. If provinces do not agree, the government may use the 27th Constitutional Amendment to implement the new formula.
Officials said the population-based share, now 82 percent, could be cut. The new NFC Award may include factors like poverty levels, tax performance, and population density. Provinces will also need to raise more of their own revenue instead of depending on federal transfers.
Pakistan is also considering giving the Benazir Income Support Programme (BISP) to provinces and moving the Annual Development Plan under their control. These measures are part of IMF’s conditions to cut federal spending and create fiscal space.
Finance Minister of Pakistan Muhammad Aurangzeb recently reviewed the 7th NFC Award data, including provincial tax shares and BISP allocations. He asked officials to prepare working papers for the next meeting.