Efforts are underway to develop a new formula for the National Finance Commission (NFC) Award, which governs the distribution of financial resources between the federal and provincial governments, according to Finance Ministry sources.
Officials confirmed that the International Monetary Fund (IMF) has offered technical assistance to the government to support the process. However, no formal consultation has yet been held with the IMF on the NFC matter.
“It is too early to say what the final formula will look like,” officials noted, adding that the new NFC framework will be designed “keeping in mind the long-term national interest.”
Proposals for new resource distribution formula
According to sources, deliberations are ongoing regarding the need to revise the existing NFC formula, which was last updated more than a decade ago. The Finance Ministry emphasized that the proposed changes aim to reflect demographic and structural shifts that have taken place across the country in recent years.
A meeting of the NFC Commission has been proposed for November 18, where detailed discussions on the new formula are expected to take place.
Reducing population share, adding new performance-based factors
One of the major proposals under consideration is to reduce the weight of population share in the NFC formula from the current 82% to a lower percentage. Instead, the government is exploring ways to include additional factors such as:
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Education and literacy levels
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Health indicators
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Provincial tax collection performance
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Environmental and development measures
Officials said these criteria would help ensure a more balanced and equitable distribution of national resources across provinces, rewarding good governance and fiscal responsibility.
New base population, revised fiscal powers
The population base for the proposed formula is expected to be updated to 241.5 million, reflecting Pakistan’s most recent demographic estimates.
In addition, the new framework will seek to redefine the financial powers of both the federation and provinces, ensuring greater clarity in responsibilities and fiscal autonomy.
Officials added that the government aims to establish a performance-based resource allocation model that promotes accountability and long-term sustainability.
National interest, consensus-driven approach
Finance Ministry sources emphasized that any changes to the NFC formula would be made after broad consultation and consensus with all stakeholders, including provincial governments.
They reiterated that the government’s ultimate goal is to design a formula that promotes fiscal balance, equitable development, and national cohesion.
“The new NFC award will not just distribute resources -- it will set the direction for Pakistan’s economic governance and intergovernmental cooperation in the years ahead,” one official remarked.
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