• By: Shahid Ali Khan

The National Finance Commission (NFC) awards in Pakistan play a pivotal role in the equitable distribution of financial resources among its provinces. These awards are crucial mechanisms designed to ensure a fair allocation of funds, aiming to address disparities and promote balanced development across the nation’s regions.
The NFC operates under constitutional provisions, specifically Article 160, mandating the formation of the commission every five years. This periodic reassessment aligns with the evolving socio-economic landscape and the changing needs of the provinces, ensuring an updated approach to resource allocation.
Historically, the distribution of funds was predominantly based on population statistics, leading to concerns about the neglect of critical indicators like poverty, backwardness, and revenue generation in certain regions. Recognizing this imbalance, the 7th NFC award in 2010 marked a significant departure from the population-centric approach.
Introducing a multiple indicators formula, this award incorporated various factors: population (82%), poverty and backwardness (10.3%), revenue collection and generation (5%), and inverse population density (2.7%). This redistribution aimed to address grievances by considering a more holistic set of criteria for resource allocation.
However, despite the shift in focus, concerns persisted regarding the overwhelming weightage given to population figures. While this alteration was a step forward, calls for further refinement and inclusivity in the formula have been voiced to better reflect the diverse needs of the provinces.
Moreover, certain historical imbalances needed rectification. Notably, the exploitation of resources in regions like Balochistan, where the rightful share of royalties was long overdue.
Efforts were made in previous NFC awards to compensate for these discrepancies, highlighting the need to redress past grievances within the allocation frameworks. The dynamic nature of Pakistan’s socio-political landscape also poses challenges for subsequent NFC awards. The 18th amendment increased provincial responsibilities, demanding greater resources, while the merger of erstwhile FATA into Khyber Pakhtunkhwa (K-P) necessitates reevaluation based on population, area, and poverty criteria.
Despite the necessity for an updated award, the complexities are compounded by financial constraints faced by the federal government. Crafting a consensus-driven formula that satisfies the evolving needs of the provinces while accommodating fiscal limitations remains a daunting task.
The 9th NFC award faces the uphill challenge of balancing these divergent demands. It necessitates a delicate balance between addressing provincial grievances, acknowledging changing demographics and needs, and navigating fiscal realities to establish a fair and acceptable framework for all stakeholders.
So the NFC awards stand as a cornerstone of Pakistan’s federal fiscal structure, striving to foster quitable development among provinces. The challenge lies in evolving these mechanisms to reflect the nation’s changing socio-economic landscape while ensuring a fair and just distribution of financial resources.

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