As Pakistan convenes its 11th National Finance Commission (NFC), experts warn that misleading narratives about revenue sharing are skewing public debate and distracting from structural fiscal challenges. Critics often argue that the federal government is cash-strapped because 57.5% of federal revenues are allocated to provinces.
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Analysis shows the federal government retains nearly 60% of total revenues, with a growing share collected outside the NFC’s divisible pool through levies such as the petroleum surcharge. Experts caution that treating these non-shareable revenues as politically expedient weakens federal-provincial fiscal mechanisms, undermines transparency, and erodes trust in the federal system.
Calls to tie provincial transfers to performance have also been criticised. Fiscal scholars note that the NFC’s purpose is revenue sharing, not federal oversight. Conditioning transfers on provincial outcomes would invert federalism principles, while one-sided accountability ignores the centre’s role in exchange rate management, taxation, and debt administration — areas that largely drive deficits.
Pakistan’s growing debt, they argue, stems from structural weaknesses at the federal level. Erratic exchange rate policies, low tax-to-GDP ratios, and weak enforcement of existing taxes have forced borrowing and worsened debt sustainability. Misattributing fiscal challenges to provincial allocations allows the federal government to avoid reforms such as rationalising expenditures, improving state-owned enterprises, and reforming pensions.
Experts recommend a permanent, technically grounded NFC to provide transparent, evidence-based revenue sharing. Strengthening subnational fiscal capacity through tax devolution to provinces and cities, digitalised revenue administrations, and linking local revenue mobilisation to service delivery are also key steps.
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By embedding technical rigour into revenue-sharing mechanisms and empowering lower tiers of government, Pakistan could ensure resources match responsibilities, enhance accountability, and strengthen trust in federalism. Experts stress that long-term, evidence-based reforms are critical for transforming headline-grabbing negotiations into disciplined fiscal policymaking.