Aligning Resources, Provincial Needs and Defense Imperatives in NFC Award

The National Finance Commission (NFC) Award, established under Article 160 of Pakistan’s 1973 Constitution, is the key framework for dividing financial resources between the federation and its provinces. It upholds fiscal federalism by ensuring equitable revenue sharing and enabling provinces to manage education, health, and infrastructure. The 7th NFC Award of 2009 enhanced provincial autonomy by broadening the resource distribution formula and increasing the provincial share of divisible taxes to 57.5%. However, since then, challenges such as weak revenue generation, uneven provincial capacity, and political deadlock have stalled progress. The newly constituted 11th NFC Award (2025) has reopened debates on balancing national and provincial needs, particularly as the federal government advocates a “need-based” formula that prioritizes defense, debt servicing, and national projects before provincial allocations—reflecting Pakistan’s fiscal strain and growing security imperatives amid regional tensions.

Proponents of a revised, need-based NFC Award argue that fiscal stability and national security must precede provincial disbursements. While provinces remain central to service delivery, Pakistan’s defense and strategic responsibilities require assured funding to safeguard national sovereignty, especially given India’s expanding military and technological capabilities. Defense spending, they contend, is not a luxury but a necessity in an era of hybrid and cyber warfare. Thus, the NFC formula should integrate both developmental and defense needs, ensuring that the federal government retains adequate fiscal space without undermining provincial development. A rebalanced, cooperative approach—anchored in transparency and shared responsibility—would strengthen both the federation and the provinces, aligning Pakistan’s fiscal architecture with its security and developmental priorities for a stable and unified future.

In numerous developed nations, the federal government assumes a central role in ensuring balanced financial allocations to provinces or states while simultaneously managing its own expenditures in a responsible manner. These governments strive to preserve a strong sense of national unity and economic equity by distributing resources fairly across diverse regions. One of the primary strategies employed is to allocate financial shares to states or provinces based on need, population, and economic disparity, ensuring that less wealthy areas obtain adequate support to finance public services, infrastructure, and development initiatives. Countries such as Canada and Germany serve as concrete examples where the federal framework includes fiscal equalization mechanisms. These mechanisms ensure that more affluent provinces contribute to a pool that aids less prosperous regions, enabling a more balanced national economic environment.

Simultaneously, developed countries often exhibit fiscal discipline by curbing non-development and luxury expenditures at the federal level. This involves reducing unnecessary bureaucratic costs, extravagant official benefits, or redundant government programs that do not contribute substantially to economic growth or public welfare. Instead, budgetary emphasis is redirected toward essential services, productive investments, and strategic national interests. By controlling non-essential spending, the federal government not only sets an example of efficiency but also releases funds that can be reallocated to development, innovation, and support for inter-state initiatives.

Regarding national priorities, developed countries generally place strong emphasis on defense and technological advancement. The United States is a prime example, where a considerable part of the federal budget is directed toward sustaining a capable and modern military, as well as funding advanced research in defense technologies. Similarly, nations like South Korea and Japan invest heavily in technological innovation, supporting both national security and economic competitiveness. These investments are not viewed merely as expenses but as strategic imperatives that enhance national resilience and global stature. Defense spending is meticulously managed to ensure national security, while investment in science and technology underpins long-term economic vigor and leadership in innovation.

Collectively, the approach of these developed countries demonstrates a balanced and strategic utilization of federal powers and resources. By equitably distributing funds across provinces and states, minimizing unproductive federal expenditure, and prioritizing national defense and technological progress, they attain both internal cohesion and external strength. This model illustrates how a federal government can function as a unifying force, promoting nationwide development without neglecting its sovereign responsibilities.

The debate surrounding Pakistan’s National Finance Commission (NFC) Award must progress beyond a simplistic struggle between the federal government and the provinces. It is essential that all stakeholders—federal and provincial—address this issue with a sense of national duty, strategic vision, and fiscal sophistication. The reality is that Pakistan is not merely managing internal development needs; it is also maneuvering through a complex and increasingly perilous regional security landscape. The country’s defense requirements are not discretionary expenses—they are fundamental to its survival, sovereignty, and deterrence posture in the face of evident and persistent threats, particularly from an increasingly militarized and aggressive India. The provinces must comprehend that their development, security, and stability are inherently connected to the strength and preparedness of the federal defense establishment. Defense is not solely a federal priority; it is a national imperative that supports every other social and economic objective.

Therefore, while it is entirely reasonable for provinces to demand their fair share of national revenues for education, health, infrastructure, and poverty reduction, these demands must be situated within the wider context of the federation’s responsibilities, most importantly the defense of the nation. The NFC Award must embody a balanced approach—one that ensures the provinces are empowered to meet their service delivery obligations, but also ensures the federal government is not left financially incapacitated in performing its vital functions, particularly in maintaining and advancing the country’s military capabilities. Defense technology is evolving rapidly, and falling behind in this race is not an option for a nation like Pakistan that confronts existential threats. Investment in defense is an investment in national peace, economic stability, and long-term development. The armed forces are not the property of the federal government alone; they are the protectors of every province, every district, and every citizen of Pakistan.

Moreover, provinces should resist the inclination to politicize the NFC Award debate. Transforming it into a zero-sum political competition risks damaging the spirit of cooperative federalism and could foster further division at a time when unity is most critical. Political actors at the provincial level must transcend narrow interests and acknowledge the importance of a strong federation. The success of provincial development programs ultimately depends on national security and macroeconomic stability—both of which are responsibilities anchored at the federal level. In a country with limited fiscal space, shared sacrifices and a collective vision are imperative. A need-based NFC Award is not about depriving provinces; it is about responsibly allocating resources so that both development and defense can coexist without compromising one another. Only through such a balanced and mature approach can Pakistan secure its borders, uplift its people, and build a future grounded in strength, stability, and shared prosperity.