Overview
- Finance Minister Muhammad Aurangzeb said on Wednesday the current National Finance Commission formula that gives 82 percent weight to population is not sustainable and must be reviewed.
- The existing 7th NFC Award uses population for 82 percent of provincial shares and adds poverty, revenue generation, and inverse population density as smaller factors.
- Senior ministers have argued the high population weight creates perverse incentives for provinces to favour larger populations, but the proposal to change the formula faces resistance from some provinces and the Pakistan Peoples Party.
- The government has taken tactical budget steps such as removing sales tax on contraceptives and says roughly $600 million to $700 million a year is available under the World Bank’s Country Partnership Framework to finance population-related interventions.
- Any change requires the constitutional NFC process and broad provincial consensus, so the next steps will be formal negotiations over horizontal criteria and measures to link transfers to development and demographic targets.