Pakistan mulls revising NFC award to align with IMF conditions: sources

The Government of Pakistan is weighing significant revisions to the National Finance Commission (NFC) Award following IMF pressure to curb the federal deficit and address mounting debt.

Official sources said the IMF has recommended changes to the NFC formula to improve fiscal discipline, which may reduce the provincial share of 57.5 percent from the divisible pool.

If provinces resist, the government could push the changes through the 27th Constitutional Amendment.

The population-based share, currently 82 percent, is also under review, with new criteria such as poverty rates, tax performance, and population density being considered.

Provinces may be asked to generate more of their own revenue instead of relying heavily on federal transfers.

Additionally, plans are under discussion to devolve the Benazir Income Support Programme (BISP) and shift responsibility for the Annual Development Plan (ADP) to provincial governments.

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.

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.