Pakistan plans to revise NFC award to meet IMF demands: soruces

ISLAMABAD: The Government of Pakistan is considering major changes to the National Finance Commission (NFC) Award after pressure from the International Monetary Fund (IMF) to reduce the federal deficit and manage debt, sources told ARY News.

According to official sources, the IMF has asked Pakistan to revise the NFC Award formula for better fiscal discipline. The changes could lower the current provincial share of 57.5 percent from the divisible pool. If provinces do not agree, the government may use the 27th Constitutional Amendment to implement the new formula.

Officials said the population-based share, now 82 percent, could be cut. The new NFC Award may include factors like poverty levels, tax performance, and population density. Provinces will also need to raise more of their own revenue instead of depending on federal transfers.

Pakistan is also considering giving the Benazir Income Support Programme (BISP) to provinces and moving the Annual Development Plan under their control. These measures are part of IMF’s conditions to cut federal spending and create fiscal space.

Finance Minister of Pakistan Muhammad Aurangzeb recently reviewed the 7th NFC Award data, including provincial tax shares and BISP allocations. He asked officials to prepare working papers for the next meeting.

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The first NFC Award meeting with provinces has been delayed and may now happen in September or October. Khyber Pakhtunkhwa has written to the Prime Minister of Pakistan to call the meeting soon.

Sources say the federal government of Pakistan may ask provinces to accept a smaller share of funds. Final plans will need the Prime Minister’s approval before talks with provinces.

IMF pressure shows the strong link between reforms and financial support. Changing the NFC Award will be politically sensitive, but officials say it is needed to meet IMF conditions and stabilise Pakistan’s economy.