ISLAMABAD: The federal government has asked the provinces to limit their share from the Federal Divisible Pool (FDP) under the National Finance Commission (NFC) Award in the next fiscal year.
To retain an additional Rs1.2 trillion from the FDP, the government will either have to amend the law or reach an amicable arrangement with the provinces — a move that could reduce provincial allocations and trigger strong reservations, particularly from Khyber Pakhtunkhwa, the province’s Adviser on Finance, Muzammil Aslam, said on Monday.
Addressing a press conference here on Monday, Aslam said the provinces’ share under the NFC Award for the outgoing fiscal year stood at around Rs8.2 trillion. He alleged that the federal government wanted the provinces to receive the same amount in 2026-27 despite an expected increase in Federal Board of Revenue (FBR) tax revenues.
He said if the FBR succeeded in collecting around Rs15.26 trillion in taxes during the next fiscal year, the provinces would ordinarily receive an additional Rs1.2 trillion under the NFC formula, but the federal government was seeking to reclaim that amount.
“The federal government has asked the provinces to retain only the current year’s NFC allocation and return the additional share arising from increased revenue collection,” he said, adding that the Centre would require either legislation or a technical mechanism to recover the amount, but no workable arrangement had yet been finalised.
He warned that any substantial deduction from the provincial NFC transfers would make it difficult for the provinces to generate budget surpluses being demanded under the ongoing fiscal arrangements.
He disclosed that a federal delegation led by Planning Minister Ahsan Iqbal had recently met provincial representatives to discuss budget matters, but several key issues remained unresolved.
According to him, differences emerging ahead of the NEC meeting had raised concerns about possible delays in finalising the federal budget for 2026-27. Aslam said lack of coordination between the federal and provincial governments was hindering the budget-making process and reiterated his province’s longstanding concerns over what he described as inequities in the distribution of financial resources.
He said the issue had also been raised during a meeting between the KP chief minister and Deputy Prime Minister Ishaq Dar and maintained that the province’s concerns regarding NFC allocations and other fiscal matters had yet to receive satisfactory responses from the federal government.
Calling the NEC an important constitutional forum, he expressed hope that the provincial concerns would be heard and addressed. However, he warned that if the federal government failed to engage meaningfully with the provinces’ objections, participation in the NFC-related discussions could become difficult.
