Federal government plans to cut provincial NFC funding share

Pakistan- (Special Correspondent / Web Desk) – Under pressure from the International Monetary Fund (IMF), Pakistan’s federal government is drafting a major economic plan. This strategy focuses on deep spending cuts to manage the country’s significant budget shortfall.

A central and controversial part of this plan is a proposal to change the National Finance Commission (NFC) Award. It suggests reducing the guaranteed share of funds that provinces currently receive. Instead, a new system would link a portion of this funding to each province’s performance in key areas like education, health, and environmental projects.

Unsurprisingly, this proposal has been met with immediate resistance from the provinces. The Sindh government has already officially rejected the idea, and other regions are expected to voice strong objections.

The plan also includes setting aside dedicated funds for the regions of Gilgit-Baltistan and Azad Kashmir. Furthermore, it proposes creating a separate allocation from the NFC pool for critical national projects, such as the construction of large dams like Diamer-Bhasha.

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These difficult choices are driven by alarming financial numbers. Last year, the fiscal deficit reached a staggering Rs. 7,444 billion. While this year’s estimate is slightly lower at Rs. 6,501 billion, the government’s massive spending on debt interest payments—a projected Rs. 8,207 billion this year—eats up most of its resources.

The ultimate goal of this overhaul is to free up money for debt repayment, reduce the massive budget deficit, and fulfil the conditions set by the IMF for continued financial support.