Pakistan has built a fiscal system in which one government collects, four governments spend and no government is fully accountable. The result: an annual national deficit of over Rs6 trillion and an accumulated budget deficit of Rs54 trillion since the 18th Amendment was passed in 2010. Imagine: one federation, five spenders, one balance sheet, no ownership.
Cold truth: That is the fatal flaw.
Pakistan’s NFC Award has a design flaw. A deep one. A dangerous one. Pakistan’s NFC Award separates revenue from responsibility. Pakistan’s NFC Award separates spending from accountability. Pakistan’s NFC Award separates constitutional entitlement from fiscal discipline. In simple words: Islamabad collects. Provinces receive. Pakistan borrows.
Colder truth: Since 2010, when the 18th Amendment was passed, Pakistan’s public debt has exploded 10 times – from Rs8.2 trillion to Rs95 trillion – a net accumulation of roughly Rs87 trillion in total debt obligations. The post-2010 annual deficit average is 50 per cent larger than the pre-2010 average.
Consider the numbers. In Budget 2025–26, FBR tax revenue is projected at Rs14 trillion. Non-tax revenue is projected at Rs5 trillion. Gross revenue receipts come to Rs19 trillion. Out of this, Rs8.5 trillion is transferred to the provinces, interest payments take away Rs9 trillion, pensions Rs1 trillion and running of civil government Rs1 trillion.
The arithmetic is brutal: after provincial transfers and interest payments, Islamabad’s fiscal oxygen is gone. Everything else is financed by borrowing.
Pakistan is borrowing to defend itself. Pakistan is borrowing to build roads. Pakistan is borrowing to pay subsidies. Pakistan is borrowing to keep the lights on. Pakistan is borrowing to feed its poorest citizens. Pakistan is borrowing to pay its judges. Pakistan is borrowing to fund elections. Pakistan is borrowing to fuel its 85,500-vehicle carpool. Pakistan is borrowing to host a parliament that has not passed a budget it could balance. Pakistan is borrowing to build dams that it has been planning since 1960. Pakistan is borrowing to print the money it will use to borrow more.
Hard truth: The government is borrowing and calling it governance.
The NFC Award rewards entitlement, not effort. The NFC Award creates soft-budget provinces. The NFC Award has made the federal government fiscally non-functional. The NFC Award has weakened national planning. The NFC Award produces political irresponsibility.
The reality: A federation cannot survive like this. No household can spend like this. No company can operate like this. No country can borrow like this forever.
The reform path is clear: Debt servicing and defence must be treated as national first charges. Before the divisible pool is distributed, Pakistan must deduct the cost of debt and defence. What remains should then be shared under the existing NFC formula. This preserves the 7th NFC architecture but corrects its most dangerous defect.
Red alert: Pakistan’s crisis is not about low revenue; it is about broken distribution.
Pakistan does not need to abolish the NFC. Pakistan needs to repair it. Share the money. Share the burden. Share the responsibility.
The choice is not federation versus provinces. The choice is responsibility versus collapse. A federation cannot be built on entitlement alone. A federation survives when every unit carries the flag – and the bill.
The writer is a columnist based in Islamabad. He tweets/posts @saleemfarrukh and can be reached at: [email protected]
