The inaugural meeting of the 11th National Finance Commission (NFC) will be held today at the Ministry of Finance, where the federal government and provinces will begin reviewing the formula for resource distribution across Pakistan.

Chaired by Finance Minister Muhammad Aurangzeb, the session is expected to introduce significant proposals, including a new share for Islamabad.

The meeting will be attended by the finance ministers of all four provinces along with one technical expert from each province, according to the Ministry of Finance. Both federal and provincial governments will brief the NFC on their financial resources and fiscal challenges.

A strategy for negotiations on the new NFC Award will be finalized, while the agenda also includes forming various working groups to support technical discussions. Schedule and timelines for upcoming NFC meetings are also expected to be decided.

Current NFC structure and proposed revisions

Under the existing NFC Award, the provincial share in the divisible pool is 57.5%, while the federal government receives 42.5%.
Khyber Pakhtunkhwa (KP) currently gets an additional 1% share for the war on terrorism.

In the new formula, several major changes have been proposed:

The federal government’s financial resources may be reduced from 4.7% to 6% before distribution.
The weight of population may be reduced from 82% to 60%.
Provinces may receive 20% weight based on income generation.

These adjustments are likely to change provincial shares significantly.

Expected impact on provincial shares

According to the proposals, Punjab’s share may decrease by 10%, Sindh’s share by 0.5%, KP’s share could increase from 1% to 2.6%, Balochistan's to 3%. Islamabad could be given a 5% share for the first time under the NFC.

The federation has argued that it requires greater resources for defense, loan obligations, major national projects, and security-related expenditures. Sustained fiscal capacity, officials say, is essential for disaster management and national security.

Provincial demands

Sources confirm that the KP government has finalized its list of demands for the meeting. These include increasing the war-on-terror share from 1% to 3%, including former FATA districts in the framework of the 7th NFC Award, revisions in the gas excise duty structure, and possible changes in the round-the-clock levy framework.

These demands are expected to play a central role in provincial negotiations.