KARACHI: Pakistan on Thursday opened formal negotiations to devise a new national revenue-sharing formula between the federal government and the provinces, launching the 11th National Finance Commission (NFC), the constitutional body that determines how centrally collected taxes are divided across the federation.
The talks come at a politically sensitive moment, as the NFC process overlaps with debate surrounding fiscal powers and a proposed 28th constitutional amendment that critics say could dilute provincial autonomy. Under Article 160 of Pakistan’s constitution, revenue distribution must be periodically renegotiated, and provinces cannot receive less than their previous share, turning each NFC round into a test of center-province relations and economic authority.
The need for a new award has grown more urgent since the previous NFC expired on July 21, 2025, leaving Pakistan in a transitional fiscal phase while inflation, debt servicing and IMF-linked reforms strain public finances. Provinces, meanwhile, say they require guaranteed transfers to fund health care, education, policing and local development, responsibilities that have expanded significantly since devolution reforms in 2010.
Finance Minister Muhammad Aurangzeb, opening the inaugural sitting in Islamabad, thanked provincial leaders for attending despite delays caused by devastating floods earlier this year. He said the government was determined to begin negotiations without further postponement.
“Today’s meeting is both a constitutional responsibility and an important opportunity for collective cooperation. Our first priority is to listen, with open minds and without prejudice,” Aurangzeb said according to a statement released by the finance ministry.
He added that Prime Minister Shehbaz Sharif had personally pushed for the NFC meeting to convene quickly and emphasized transparent dialogue as the only way to address speculation surrounding the next revenue arrangement.
Aurangzeb noted that provinces recently signed a National Fiscal Pact, committing to generate surpluses to support Pakistan’s IMF program, cooperation he described as “highly commendable,” but acknowledged that the upcoming award must also deliver equitable resource distribution and financial stability across the federation.
The finance ministry said discussions will continue over the coming weeks and months, with negotiators expected to debate revenue targets, spending responsibilities, development priorities and how crises such as floods, security pressures and commodity shocks should be shared between Islamabad and the provinces.
The eventual agreement will determine how Pakistan allocates billions of rupees annually, shaping budgets, political power, and economic governance for years to come.
