The inaugural meeting of the National Finance Commission (NFC), constituted three months ago, has been postponed once again, with the tentative date of Nov 18 also pushed back amid a downward revision in Pakistan’s economic growth forecast to 3.5 per cent for the current fiscal year, Dawn reported, citing sources.Â
According to the Dawn’s report, Prime Minister Shehbaz Sharif wants to initiate political discussions on key Centre–provincial issues before formally opening the financial negotiations at the NFC forum. The 11th NFC was notified on Aug 22, but its maiden session has repeatedly been deferred, first from Aug 27 to Aug 29, and later on the request of the Sindh government due to floods.
Repeated demands from the finance ministry, armed forces and the IMF to revisit the current distribution formula, which allocates 57.5pc of divisible pool taxes to provinces, have remained unaddressed.
Under the 7th Award, provinces receive their shares based on population, poverty, revenue collection and inverse population density. Punjab currently receives 51.74pc, Sindh 24.55pc, Khyber Pakhtunkhwa 14.62pc and Balochistan 9.09pc.
Sources said provinces had been informally informed of a planned November 18 meeting, but the Prime Minister’s Office later instructed that no date be conveyed until consultations with coalition partners were completed. While the prime minister has no formal role once the NFC is notified, the Centre is seeking political space amid coalition dynamics.
A proposal to revise NFC parameters was earlier linked to the 27th Constitutional Amendment, under which the federal government sought to reclaim devolved subjects and adjust provincial shares. The plan was dropped in negotiations with the PPP, though the prime minister continues to hint at further dialogue.
Meanwhile, the Centre has strengthened its own revenue through instruments outside the NFC, including the petroleum development levy (PDL) and provincial cash surpluses. Together, these are expected to contribute roughly Rs3 trillion this fiscal year, or about 2pc of GDP. The government has also secured Rs2.5bn each for this year and last year from the State Bank’s profits due to elevated interest rates.
However, the provincial surplus may come under strain due to an Rs275bn shortfall in Federal Board of Revenue collections in the first four months, a gap likely to widen as growth slows. Lower GDP growth directly affects tax revenue and therefore provincial transfers under the NFC, although higher inflation could partly offset this through greater sales tax receipts.
A planning ministry assessment submitted to the National Assembly showed that floods have reduced FY2026 GDP growth by 0.3–0.7 percentage points, cutting the outlook from 4.2pc to 3.5–3.9pc. Total economic losses were estimated at Rs822bn, with agriculture suffering Rs430bn in damages and infrastructure losses amounting to Rs307bn.
The finance ministry said the floods had pushed up inflation, which rose from 3–4.1pc in July–August to 5.6pc in September due to food price increases. Growth in agriculture is now projected at 3–3.8pc versus the 4.5pc target, with knock-on effects on industry and services due to supply chain disruptions.
Exports of rice could decline, while imports of cotton, wheat, pulses and construction materials may rise, widening the trade deficit and adding pressure on foreign exchange reserves. However, higher remittances are expected to help contain the current account deficit.
The finance ministry added that macroeconomic targets approved by the National Economic Council remain in place, though internal reviews continue to assess the impact of evolving domestic and external conditions.
