EDITORIAL: Two months after the inaugural session of the National Finance Commission (NFC) was held on December 4 amid heightened expectations that long-pending questions tied to the country’s fiscal compact would finally receive serious attention, there has been little to show by way of progress.
Of the commission’s eight technical working groups tasked with driving this process, only two have met once each, while the remaining six have yet to convene since their notification in December.
Consequently, the second NFC meeting — scheduled for the second week of January and meant to kick off monthly sessions leading to the long overdue 11th NFC award after over 15 years — shows little prospect of taking place anytime soon.
It scarcely needs to be stated that this inertia amounts to a serious dereliction of duty. Critical decisions requiring urgent engagement — from revisiting the formula for horizontal distribution and renegotiating the vertical split between the federation and the provinces, to untangling the complex technicalities surrounding the share of the erstwhile tribal districts — were always destined to be complicated, time-consuming and potentially contentious.
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But complexity is not an excuse for paralysis. Failing to even begin working on these issues is unacceptable, given the NFC award’s centrality to fiscal stability, inter-governmental trust and effective governance.
Even the two working groups that convened appear hampered by federal lethargy.
The clearest example is the group examining the merger of former Fata into Khyber-Pakhtunkhwa, which had sought detailed workings from the federal finance secretary showing how increasing KP’s share to accommodate the needs of the merged districts would affect the shares of the other provinces.
Weeks later those details are yet to arrive, preventing a second session and highlighting how even proactive efforts are stalled by federal inaction.
The other group, reviewing the divisible pool of taxes under the finance minister, has also made little headway. Tasked with recommending additions or exclusions to the divisible tax pool, the group has made little or no progress on a crucial aspect of the NFC process.
It is pertinent to note that the centre repeatedly complains about its shrinking fiscal space and the provinces receiving the lion’s share of the NFC award, with 57.5 percent of federal tax revenues flowing to them. That context makes the federal government’s own lethargy on this issue all the more difficult to justify.
If anything, it underscores the urgent need for prompt, focused work on the matter, given that any changes to the composition of the divisible pool will demand careful legal and constitutional scrutiny.
None of the other working groups has met so far, underscoring a troubling stagnation in efforts to modernise resource distribution between the federation and the provinces.
Local media reports suggest that finance ministry officials attribute the delays to the hectic travel schedules of the finance minister and the finance secretary, while also pointing fingers at the provinces, since most groups are chaired by provincial finance ministers.
Yet something as mundane as busy schedules of key federal and provincial personnel cannot excuse this standstill. Is there no mechanism for delegating at least preliminary responsibilities to junior officials, convening initial meetings, or seeking legal and technical opinions in advance? Several critical matters remain unresolved.
Beyond the vertical distribution of divisible resources and the criteria for horizontal allocation among provinces, issues such as the composition and utilisation of the national debt, strategies to boost the tax-to-GDP ratio and guidelines for sharing federal expenditures in provincial domains also demand resolution.
Every day lost in grappling with matters such as recalibrating the disproportionate weight given to population in resource allocation, for example, risks compounding the country’s fiscal vulnerabilities.
The NFC must overcome this lethargy, or it will directly translate into weakened fiscal governance, stalled development and mounting strains on the federal-provincial compact.
Copyright Business Recorder, 2026