National Finance Commission

KP's petition before the Federal Constitutional Court seeks Rs964bn as its claimed tax revenue share since the Fata merger in 2018, raising constitutional and fiscal questions about Pakistan's federal structure. The article highlights concerns over the National Finance Commission's dysfunction, the validity of an NFC Award based on outdated data, and the need to convene the Council of Common Interests to address provincial autonomy and resource distribution.

PPP Chairman Bilawal Bhutto-Zardari proposed abolishing the federal Ministry of Kashmir Affairs and enhancing constitutional empowerment for Azad Jammu and Kashmir (AJK). He emphasized greater regional representation in federal institutions, constitutional reforms via stakeholder consultations, and a Truth and Reconciliation Commission to address unrest in AJK.

The World Bank acknowledges Pakistan's 'meaningful' progress in fiscal federalism since 2010 but highlights deviations from international norms, including incomplete expenditure assignments, fragmented tax systems, and flawed federal-provincial transfer arrangements. The report criticizes the 18th Constitutional Amendment for complicating tax jurisdictions and notes that local governments remain fiscally dependent and institutionally unstable.

PPP Secretary General Nayyar Bokhari emphasized provincial autonomy must remain free from interference and stated there is no concrete information on a proposed 28th constitutional amendment. The amendment could potentially undermine financial autonomy and powers devolved to provinces under the 2010 18th Constitutional Amendment, which expanded provincial control over areas like health and local government.

The Khyber Pakhtunkhwa Assembly passed an Rs2.17 trillion budget for FY27, with Chief Minister Sohail Afridi emphasizing peace and development. The budget includes increased police funding, allocations for health and education, and projects like the Khyber Institute of Child Health. Afridi criticized the federal government for withholding NFC awards and delaying the Swat dam project.

Khyber Pakhtunkhwa Chief Minister Muhammad Sohail Afridi unveiled a Rs2.17 trillion budget for 2026-27, stating that funds for the federal government require approval from PTI founder Imran Khan. The budget includes no new taxes, a 7% raise in salaries and pensions, and property tax exemptions for properties up to 5 marlas. The province projects a Rs48 billion deficit to be covered by savings, not borrowing.

Health Minister Mustafa Kamal criticized the National Finance Commission (NFC) award's 82% population-based fund distribution formula, calling it flawed. He noted that Balochistan, the smallest province, receives the lowest share under the current system.

The National Assembly began debating the 2026-27 federal budget, with opposition leader Mehmood Khan Achakzai criticizing the government's freeze on provincial development funds, while Prime Minister Shehbaz Sharif defended the policy and highlighted projects in Balochistan. MQM called for stronger local governance and approval of the 28th Amendment.

Finance Minister Muhammad Aurangzeb will present the federal budget for FY2026-27 on June 12. The Pakistan Economic Survey for FY2025-26 will be launched after 2:20pm the next day. A consensus was reached between the federal government, PML-N, and PPP on the budget framework, including freezing provincial shares in the NFC award.

The budget for FY2026-27 is likely to be announced on June 12, with parliamentary sessions scheduled for June 10. Federal and provincial governments remain deadlocked over freezing provincial shares in the federal divisible pool, while the PML-N and PPP have reached a consensus on the budget framework.

Khyber Pakhtunkhwa Chief Minister Sohail Afridi and JUI-F leader Fazlur Rehman criticized the federal government’s handling of the National Finance Commission award, accusing it of neglecting the province. They highlighted issues like unfair NFC distribution, suspended wheat supply, inadequate gas allocation, and deteriorating security in southern districts.

The federal budget 2026-27 in Pakistan faces delays due to unresolved disputes between the Centre and provinces over fiscal allocations. The National Economic Council (NEC) meeting was postponed again, with provinces resisting a freeze on their National Finance Commission (NFC) shares, which could push them into deficit. The federal government seeks over Rs1 trillion for strategic needs, but provinces argue this would strain their budgets.