ISLAMABAD: Finance Minister Muhammad Aurangzeb on Wednesday reiterated the government’s push to review Pakistan’s population-based formula for distributing federal revenues among the provinces, saying the current system was “simply not sustainable” as Islamabad seeks to address rapid population growth.
The debate centers on the National Finance Commission (NFC), the constitutional body that determines how federally collected tax revenues are shared between the federal government and Pakistan’s four provinces. Under the current formula, population accounts for 82 percent of the criteria used to allocate provincial shares, with the remaining weight given to factors including poverty, revenue collection and inverse population density.
Senior government officials, including Planning Minister Ahsan Iqbal and Health Minister Mustafa Kamal, have argued in recent months that the heavy emphasis on population unintentionally discourages provinces from pursuing population stabilization policies because larger populations translate into larger shares of federal transfers. They have proposed revisiting the formula to place greater emphasis on development and other socio-economic indicators.
The proposal has faced resistance from some provinces and political parties, including the Pakistan Peoples Party (PPP), a key coalition partner of Prime Minister Shehbaz Sharif’s government. PPP leaders have argued that altering the population criterion could undermine the spirit of the landmark 18th Constitutional Amendment and reduce provincial autonomy, while maintaining that any changes should be made only through consensus under the constitutional NFC process.
“There are also more structural issues, such as the NFC, where population accounts for 82 percent of the allocation formula. That is simply not sustainable,” Aurangzeb said while addressing a World Population Day seminar in Islamabad.
“So whenever we move this NFC discussion forward in terms of the horizontal allocation criteria, this formula will have to be examined and reviewed.”
Under the current NFC formula, Punjab receives about 51.7 percent of the provincial share of federal tax revenues, followed by Sindh with 24.6 percent, Khyber Pakhtunkhwa with 14.6 percent and Balochistan with 9.1 percent. While the distribution is based on several criteria, population carries by far the greatest weight.
The 11th National Finance Commission formally began negotiations in December last year to determine Pakistan’s next revenue-sharing arrangement after the previous award expired. Under Article 160 of the Constitution, provinces cannot receive a smaller share of revenues than under the previous award, meaning any revision to the allocation formula would require broad political agreement among the federation and all four provinces.
The finance minister said international experience suggested three factors were critical to reducing population growth over the long term: educating girls, increasing women’s participation in the workforce and securing the support of religious scholars. He cited Bangladesh, Indonesia and Iran as examples of countries that had significantly reduced population growth rates over the past decade.
Aurangzeb said the government had already taken some immediate steps to control population, including removing the sales tax on contraceptives in the latest federal budget, but described those as “tactical measures,” arguing that broader structural reforms would be needed to slow Pakistan’s population growth.
He also said around $600 million to $700 million annually was available under the World Bank’s Country Partnership Framework to support programs related to population, including reducing learning poverty and child stunting.
