iscussions have finally started in earnest on the 11th National Finance Commission Award. Distribution of financial resources through NFC awards has always been an inflammatory subject in Pakistan. The provinces are, understandably, always jostling for a bigger share than can be easily conceded by the other stake-holder. The provincial governments point out that public service delivery is primarily their responsibility.

On the other hand, the federal government, too, presses its claims. It emphasises the onus of external payments and national-level obligations such as debt servicing and defence. The inflexible nature of resource availability makes financial allocations a thorny issue. The 7th NFC award, reached in 2010, was a noteworthy exception in that consensus was achieved after a series of tough negotiations between the federating units on the one hand and the federal government on the other. Since then, consensus has become elusive. The increasingly polarised political ambience has not helped.

President Asif Ali Zardari constituted the 11th NFC in August 2025. The first meeting of the commission was convened a month ago. Eight sub-groups were formed on various aspects of resource and expenditure sharing. Also, at the first meeting, the Sindh chief minister objected to three of the seven terms of reference (d, e and f). These terms pertain to financial expense incurred or to be incurred by the Federation in respect of subjects falling within the domain of the provinces, trans-provincial matters and expense for national projects to be shared by the federal government and the provinces. These are likely to include expenses on the Higher Education Commission, the Benazir Income Support Programme, provincial projects under the federal Public Sector Development Programme and spending on national level projects including mega dams.

Sindh has objected that these terms are out of the constitutional ambit of the NFC. Chapter 1 of the Part 6 of the Constitution deals with “distribution of revenues between the federation and the provinces.” The very title of the chapter explicitly mentions distribution of resources only. Article 160 under the chapter further delineates functions of the NFC.

These functions refers to distribution of resources; there is no mention of expenses. However Sub-Article d makes a provision by empowering the president to entrust the NFC with any other matter relating to finance. Nevertheless, ‘any other item’ has to be in line with the broad purview of the NFC which has a focus on distribution of resources.

The federal government insists that expenditures are within the remit of the NFC. According to some media reports, the federal finance secretary responded to the Sindh government’s objection by saying that the terms of reference had been approved by the president and that there were no restrictions on the president regarding the inclusion or exclusion of these items. Attorney General Mansoor Awan, too, agreed with him.

Nevertheless, Sindh continues to insist that provincial expenditures are an internal matter of the provinces and the matter falls within domain of the respective provincial assemblies and the National Economic Council. If the NFC delves into provincial expenditures, it says, the provinces will demand a similar right to examine the federal government expenditures. The Centre’s desire to make national level expenditure a shared responsibility will thus create new problems.

The federal government’s suggestion to share the expenditure will likely meet tough resistance from the provinces. The BISP, for instance, has remained a federal government initiative since inception. It has always been defended by Islamabad as one of the best social protection models in the world that has successfully rescued millions of poor people from total collapse. Although, the relief proffered through this subsidy has been dwarfed by rapidly rising inflation, it remains a lifeline buffer for families living in abject poverty. Shifting the annual expenditure of over Rs 700 billion - or some part of the sum - to the provinces will be strongly contested. The provinces will rightfully demand that the federal government control inflation that continues to add millions of new poor in provinces. Moreover, financial resources for this programme often come from multilateral funding agencies. These loans are ultimately repaid through tax revenues. A distribution of this expenditure among provinces will deprive the programme of its federal character.

Considering the ToRs have already created discontent, reaching consensus on the award will be an uphill task. The mistrust between the Federation and the federating units explains why there was no new NFC Award for ten years. This also indicates an erosion of the capacity of the political institutions.

The writer is a civil society professional; [email protected]