11th NFC Formed as Centre, Provinces Head for Fiscal Clash
President Asif Ali Zardari on Friday constituted the 11th National Finance Commission (NFC), setting the stage for tough negotiations between the Centre and provinces over a new resource distribution formula.
A notification issued by the Ministry of Finance confirmed the formation of the commission under Article 160 of the Constitution. The new body comes after the five-year term of the 10th NFC lapsed last month without a breakthrough, as provinces resisted talks fearing a loss of fiscal space.
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Under the 7th NFC award of 2010, provincial shares in the federal divisible pool rose to 57.5% without additional responsibilities, a move critics say fueled unsustainable federal deficits and rising debt.
The Centre is now seeking to claw back some of that space, proposing to link 10–15% of provincial transfers to improvements in health, education, population management, climate indicators, and provincial tax collection efforts.
Finance Minister Muhammad Aurangzeb will chair the nine-member commission, joined by provincial finance ministers and technical experts including Nasir Mahmood Khosa (Punjab), Dr Asad Sayeed (Sindh), Dr Musharraf Rasool Cyan (Khyber-Pakhtunkhwa), and Farmanullah (Balochistan).
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Officials said the federal government is also exploring whether provinces should contribute funds for large dams, deemed a matter of national security, and make explicit allocations for Islamabad Capital Territory, Gilgit-Baltistan, and Azad Jammu & Kashmir.
The commission’s terms of reference empower it to recommend new revenue-sharing formulas, grants-in-aid, borrowing powers, and financial responsibility for both federal and provincial projects.
Analysts warn that the talks are likely to be contentious, as the Centre argues for efficiency-based sharing while provinces remain protective of the fiscal gains secured in 2010.
