THE 11th National Finance Commission, meant to replace the seventh award finalised more than 15 years ago, appears to have been delayed again, despite a clear roadmap that was announced at its inaugural meeting in December. With the second NFC meeting, planned for the second week of January, nowhere in sight, the eight technical working groups constituted to give recommendations on issues related to the vertical and horizontal division of federal tax resources remain dormant. Only two groups have met — once each. This signals political reluctance to address the friction embedded in the country’s fiscal federalism. The NFC’s core challenge pertains to the settlement of what the centre calls a ‘structural imbalance’ created by the reduction of its share in the existing award, which has widened its budget deficit and driven up its debt burden. The provinces have strongly contested this argument, citing extensive data to support their stance.

Even though the Constitution requires the NFC to meet and finalise a new award for the distribution of financial resources from the federal divisible pool, this provision has never been implemented. That the current award has remained in force since the expiry of its constitutionally mandated term of five years in 2015 reveals the deep trust gap among stakeholders: the centre and the federating units. We can only hope that the current delay in the second NFC meeting and the lack of progress with regard to the working groups is on technical grounds and will be temporary. The economy has undergone massive changes in the last 15 years and faces formidable structural challenges which require redistribution of revenue and spending responsibilities among the centre and provinces through the new award. Blaming the existing award for our economic ills is like shooting the messenger. To overcome the challenges, the centre and provinces must step back from their current positions and make decisions that are in the best interest of the people.

Published in Dawn, February 4th, 2026