NFC award

The Gilgit-Baltistan Assembly unanimously adopted a resolution urging the federal government to grant provisional provincial status and constitutional rights to the region. The resolution highlights historical administrative reforms and calls for equitable representation in national institutions while affirming Pakistan's stance on the Jammu and Kashmir dispute.

The World Bank's report on Pakistan's fiscal federalism is criticized for being a technocratic exercise that overlooks political economy factors. It highlights institutional weaknesses and recommends reforms like clearer expenditure assignments and stronger provincial revenue mobilization, but fails to address the political incentives driving fiscal imbalances and intergovernmental conflicts.

A World Bank report on the NFC Award post-18th Amendment highlights that 80% of provincial spending in health and education goes toward salaries, with minimal improvement in service indicators. Local government funding has declined significantly, and provinces have failed to establish fair distribution mechanisms, while political parties have entrenched power in their respective provinces through patronage systems.

The World Bank's study 'Strengthening Fiscal Federalism in Pakistan' critically evaluates the seventh NFC Award, highlighting issues like arbitrary resource distribution and increased provincial spending on wages and pensions without corresponding improvements in social services. While acknowledging some strengths, the report argues the NFC Award has contributed to a structural federal fiscal deficit and failed to align financing with public functions.

Pakistan has repeatedly entered IMF programs with recurring issues of a narrow tax base, economic distortions, and weak institutions. The article argues that systemic inefficiencies persist due to elite-driven policies designed to concentrate power and resources, exemplified by the petroleum levy which funds federal priorities without benefiting provinces.

Punjab's 2026-27 budget of Rs5.903 trillion projects a Rs910bn surplus, with a 7% salary raise for government employees and 3.5% pension increase. The budget allocates Rs750bn to education and Rs500.82bn to health, while targeting Rs1.21tr in provincial revenue. Development spending is reduced by 40% to Rs752bn, and the Punjab Revenue Authority faces a 55.4% higher collection target.

Provincial governments in Pakistan achieved a record surplus of Rs1,636.1 billion in 2025-26 due to increased revenue and prudent spending. However, experts highlight deeper fiscal challenges, including the need for federal-provincial fiscal reciprocity, revamping the NFC formula, and addressing bloated public sector expenses.

The federal government in Pakistan is demanding provinces freeze their share of federal tax revenues and return excess amounts to the center, amid an IMF-mandated fiscal crisis. Provinces resist, citing structural tax issues and constitutional concerns over the NFC award and 18th Amendment, which guarantee provincial autonomy.