Marriyum Aurangzeb terms NFC constitutional backbone of Pakistan’s fiscal federalism

2026-02-28 - 20:03

Senior Provincial Minister Marriyum Aurangzeb participated in the ‘Pakistan Governance Forum’ held in Islamabad organized by the Federal Planning and Development Division presenting a comprehensive analysis of the objectives, challenges and current fiscal realities of the National Finance Commission Award while emphasizing the need to protect the rights of smaller provinces. She stated that the NFC is the constitutional backbone of Pakistan’s fiscal federalism and fundamentally a trust compact between the federation and the provinces. She added that the NFC should operate as a true partnership between the federal government and the federating units ensuring transparency fairness and cooperation in all fiscal matters. She noted that any future NFC framework must begin with a realistic assessment of national debt servicing obligations defence financing requirements climate vulnerability and water security challenges which collectively place significant pressure on the federation’s fiscal space. She emphasized that these structural pressures must be factored into any sustainable resource distribution model. She added that fiscal strain at the center cannot by default translate into fiscal compression at the provincial tier particularly with respect to service delivery and human development infrastructure including health education and productivity sectors. The senior provincial minister stressed that sustainability of the NFC did not mean redistributing scarcity but increasing the national revenue pie so that both the federation and the provinces benefit more equitably and sustainably. She highlighted that expanding the tax base improving the tax to GDP ratio encouraging provincial revenue generation and promoting economic growth are essential to ensuring long term fiscal stability. She also recommended that future NFC allocations should incentivize provincial revenue generation, promote export growth industrial expansion formalization of SMEs and human development outcomes while encouraging Public Private Partnerships (PPPs) in service delivery frameworks at all levels to ensure efficiency innovation and broader citizen access. Highlighting mounting fiscal and data pressures she underscored the importance of maintaining strong and sustainable defence spending. She observed that strengthening the country’s defence system remains indispensable for national security and stability. She called for a careful reassessment of defence expenditures and data driven fiscal service financing to ensure sustainability without compromising essential national priorities. Emphasizing future readiness she advocated dedicated funding streams for climate resilience forest conservation preservation of archaeology and flood rehabilitation initiatives. She proposed institutionalizing the NFC by establishing a permanent Secretariat driven by data science with a systematic review and report back mechanism on performance indicators ensuring alignment of national and provincial priorities. She also called for a review of the weightage of population in the NFC formula and the introduction of climate vulnerability as a formal indicator to make allocations more equitable and forward looking. Marriyum Aurangzeb further recommended introducing sectoral and periodic review mechanisms to ensure continuous evaluation and reform alongside a consultative review of the population-based formula involving all stakeholders. Reaffirming her commitment to safeguarding the rights of smaller provinces she supported the adoption of a performance-based reward and incentive model to promote fiscal responsibility governance improvements and strengthened service delivery through PPPs.