NFC Meeting Pushed Forward
The inaugural session of the National Finance Commission has been delayed again. The proposed meeting date of November 18 has also been postponed. The delay comes as the government revises its economic growth forecast downward. The expected GDP growth now stands at 3.5 percent for the current fiscal year. Officials warn that growth may fall by up to 0.7 percent.
Informed sources told Dawn that Prime Minister Shehbaz Sharif seeks political clarity before the NFC begins its work. He wants to address Centre-provincial matters at the political level first. He aims to settle key issues before opening financial discussions at the commission. The NFC serves as the constitutional forum for federal-provincial financial arrangements.
Repeated Delays Since August
The president constituted the 11th NFC on August 22. The body must deliver a fresh award on resource sharing. The first meeting was set for August 27. It was later delayed to August 29 without explanation. Sindh then requested another postponement due to floods. The long-standing 7th NFC award therefore remains unchanged since 2009. It has exceeded its five-year term by more than fifteen years.
Repeated calls for a revised award remain unaddressed. The finance ministry, the armed forces and the IMF have requested re-balancing. They argue that the provinces receive too large a share from the divisible pool. The Constitution, however, prevents any reduction in provincial shares. The NFC also requires consensus among the Centre and all four provinces.
Provincial Shares Under Current Award
Under the 7th award, provinces receive 57.5 percent of divisible pool taxes. These include income tax, wealth tax, GST, customs duties and excise. Provincial shares are determined by population, poverty, revenue and inverse density. Punjab receives 51.74 percent. Sindh gets 24.55 percent. Khyber Pakhtunkhwa receives 14.62 percent. Balochistan gets 9.09 percent.
Political Bargaining Delays Progress
Sources said provinces were informally told about the November 18 meeting. However, the Prime Minister’s Office later asked for a postponement. Officials said the premier wants to consult coalition partners first. The prime minister has no formal role in NFC meetings after their formation.
The federal government earlier linked NFC reforms to the 27th Amendment. The Centre sought more resources and greater control over devolved subjects. It later withdrew the proposal in a political bargain with the PPP. The prime minister continues to hint at further dialogue on the issue.
Centre’s Revenue Sources Outside NFC
The Centre has already created major revenue buffers outside the NFC. Petroleum development levy collections form its largest independent revenue stream. The provinces have also provided Rs1.5 trillion in cash surpluses. Combined, these sources contribute nearly Rs3 trillion this fiscal year. This amount equals almost two percent of GDP.
The Centre also earned Rs2.5 billion each year in State Bank profits. These gains were driven by record-high interest rates. Provincial surpluses, however, may shrink due to FBR shortfalls. The FBR has missed its target by Rs275 billion in four months. Lower growth could widen the gap further.
Floods Hit Growth Outlook
A report compiled by the planning ministry details the economic impact of floods. The ministry estimates losses at Rs822 billion. The devastation has lowered the projected GDP growth for FY2026. The expected growth now ranges between 3.5 percent and 3.9 percent. The floods have also increased inflation. Inflation surged to 5.6 percent in September due to high food prices.
