The National Finance Commission Award, mandated by Article 160 of the Constitution, is the central mechanism for distributing financial resources between the federation and its provinces. It embodies fiscal federalism by ensuring equitable revenue sharing and enabling provinces to finance education, healthcare, infrastructure, and governance. The landmark 7th NFC Award of 2009 expanded provincial autonomy by replacing the population-only formula with a multi-criteria one and raising the provincial share of divisible taxes to 57.5 percent. However, persistent challenges— such as limited provincial tax capacity, low national revenue generation, and intra-provincial disparities—v have hindered equitable development. Since 2009, political deadlock and economic instability have prevented a new NFC Award, with the federal government seeking a larger share to meet defence and debt obligations while provinces resist any rollback of their financial autonomy.
The 11h NFC, constituted in August 2025, has reopened critical debates on fiscal balance, equity, and national priorities. Its wide-ranging mandate includes reviewing vertical and horizontal resource distributions, revising tax and borrowing powers, and addressing cost-sharing for national projects. Amid Pakistan’s fiscal strain and security challenges, the federal government is advocating a “need-based” NFC framework that reserves a portion of national revenues for defence, debt servicing, and strategic imperatives before distribution to provinces. Proposals under discussion include reducing the population weight in the formula, linking transfers to performance and sustainability indicators, and extending allocations to regions like Gilgit-Baltistan and AJK. In light of escalating regional tensions— particularly India’s expanding military budget— Pakistan’s fiscal model must reconcile provincial equity with national security needs. A rebalanced NFC Award could thus serve as both a fiscal stabilization mechanism and a guarantor of national cohesion, ensuring that federal responsibilities are met without undermining provincial development.
It is crucial to emphasize that arguing for a larger federal share is not equivalent to denying provinces their lawful entitlements or developmental requirements. The provinces continue to be central to service provision in education, health, infrastructure, and agriculture. Their role must be further strengthened, but not at the expense of weakening national defence. What is needed is an equilibrium— one where provinces are motivated to generate their own revenues through improved tax collection, governance reforms, and expenditure optimization. The federal government, in turn, must reduce non-essential and luxurious spending, eliminate wastage, and exhibit fiscal accountability. However, there is a distinct difference between trimming unnecessary expenditures and reducing defence budgets, and the latter is simply not a viable option for Pakistan, given its security challenges.
Comparative data on defence spending at global and regional levels presents a stark picture. Pakistan allocates a notably smaller fraction of its GDP to defence than India, both in proportional terms and in absolute numbers. India’s defence budget is many times larger than Pakistan’s, and this disparity continues to grow. Furthermore, India is investing extensively in cyber warfare, space technology, missile systems, drone capabilities, and artificial intelligence— domains where Pakistan must also keep pace to maintain credible deterrence.
In this scenario, any proposal that Pakistan should curtail defence spending to accommodate other fiscal demands is strategically myopic and risks inviting existential dangers. Deterrence, by its very nature, must be proactive and credible. A weakened military stance will encourage adversaries and undermine the strategic balance that has been cautiously preserved for decades.
Moreover, the modernization and advancement of Pakistan’s defence capabilities is not a luxury— it is an imperative. Emerging threats such as hybrid warfare, cyber attacks, fifth-generation warfare, and drone incursions demand sophisticated technological countermeasures, high degrees of intelligence integration, and substantial investment in research and development. The function of the Pakistan armed forces is no longer limited to conventional warfare; they are engaged in border security, counterterrorism, peacekeeping, disaster response, and internal stability. All these roles require funding, planning, and strategic vision, which are dependent on a robust and predictable defence budget. Therefore, any fiscal framework that restricts the federal government’s ability to address these needs is intrinsically flawed.
There is also an ethical and political dimension. The federation of Pakistan is accountable for protecting the territorial integrity and political sovereignty of all its provinces and territories. The armed forces are not exclusive to one province or region— they are a national institution that defends every part of the country. As such, it is only reasonable that before provincial allocations are determined, the defence and strategic needs of the nation should be fully met. This does not imply depriving provinces of their equitable share, but rather structuring the NFC Award in a manner that reflects both the actual realities and the strategic essentials of the country. A need-based award would serve this objective more effectively than a rigid formula based predominantly on population statistics derived from outdated census data.
The time has arrived for Pakistan to embrace a fiscally rational and strategically prudent approach to resource distribution. This entails revisiting the NFC formula to include national needs such as defense spending, debt obligations, and strategic development, all while preserving sufficient and fair transfers to the provinces. It is not an issue of the centre versus the provinces; it is a question of collective national survival, development, and sovereignty. The federal government must steer the discussion on this matter with transparency, evidence, and a spirit of cooperative federalism. Concurrently, the provinces must acknowledge that the strength of the federation ensures their own security and prosperity. Without a robust and adequately funded federal government— particularly a competent defense establishment— the entire federation becomes susceptible.
Therefore, while it is entirely reasonable for provinces to demand their fair share of national revenues for education, health, infrastructure, and poverty reduction, these demands must be situated within the wider context of the federation’s responsibilities, most importantly the defence of the nation. The NFC Award must embody a balanced approach— one that ensures the provinces are empowered to meet their service delivery obligations, but also ensures the federal government is not left financially incapacitated in performing its vital functions, particularly in maintaining and advancing the country’s military capabilities.
Pakistan must reshape its fiscal discourse surrounding the NFC Award to ensure that it addresses both developmental and strategic requirements. The security environment mandates that defence not only be maintained but also reinforced and technologically upgraded. This can only occur if the federal government is allotted ample financial resources to meet its constitutional and security obligations. A need-based NFC Award, rooted in current fiscal realities and strategic exigencies, is the sole way forward for a strong, united, and secure Pakistan in an increasingly hostile region.
In numerous developed nations, the federal government assumes a central role in ensuring balanced financial allocations to provinces or states while simultaneously managing its own expenditures in a responsible manner. These governments strive to preserve a strong sense of national unity and economic equity by distributing resources fairly across diverse regions. One of the primary strategies employed is to allocate financial shares to states or provinces based on need, population, and economic disparity, ensuring that less wealthy areas obtain adequate support to finance public services, infrastructure, and development initiatives. Countries such as Canada and Germany serve as concrete examples where the federal framework includes fiscal equalization mechanisms. These mechanisms ensure that more affluent provinces contribute to a pool that aids less prosperous regions, enabling a more balanced national economic environment.
Simultaneously, developed countries often exhibit fiscal discipline by curbing non-development and luxury expenditures at the federal level. This involves reducing unnecessary bureaucratic costs, extravagant official benefits, or redundant government programmes that do not contribute substantially to economic growth or public welfare. Instead, budgetary emphasis is redirected toward essential services, productive investments, and strategic national interests. By controlling non-essential spending, the federal government not only sets an example of efficiency but also releases funds that can be reallocated to development, innovation, and support for inter-state initiatives.
Regarding national priorities, developed countries generally place strong emphasis on defence and technological advancement. The USA is a prime example, where a considerable part of the federal budget is directed toward sustaining a capable and modern military, as well as funding advanced research in defence technologies. Similarly, nations like South Korea and Japan invest heavily in technological innovation, supporting both national security and economic competitiveness. These investments are not viewed merely as expenses but as strategic imperatives that enhance national resilience and global stature. Defence spending is meticulously managed to ensure national security, while investment in science and technology underpins long-term economic vigor and leadership in innovation.
The approach of these developed countries demonstrates a balanced and strategic utilization of federal powers and resources. By equitably distributing funds across provinces and states, minimizing unproductive federal expenditure, and prioritizing national defence and technological progress, they attain both internal cohesion and external strength. This model illustrates how a federal government can function as a unifying force, promoting nationwide development without neglecting its sovereign responsibilities.
The debate surrounding Pakistan’s NFC Award must progress beyond a simplistic struggle between the federal government and the provinces. It is essential that all stakeholders— federal and provincial— address this issue with a sense of national duty, strategic vision, and fiscal sophistication. The reality is that Pakistan is not merely managing internal development needs; it is also manoeuvring through a complex and increasingly perilous regional security landscape. The country’s defence requirements are not discretionary expenses— they are fundamental to its survival, sovereignty, and deterrence posture in the face of evident and persistent threats, particularly from an increasingly militarized and aggressive India. The provinces must comprehend that their development, security, and stability are inherently connected to the strength and preparedness of the federal defense establishment. Defense is not solely a federal priority; it is a national imperative that supports every other social and economic objective.
Therefore, while it is entirely reasonable for provinces to demand their fair share of national revenues for education, health, infrastructure, and poverty reduction, these demands must be situated within the wider context of the federation’s responsibilities, most importantly the defence of the nation. The NFC Award must embody a balanced approach— one that ensures the provinces are empowered to meet their service delivery obligations, but also ensures the federal government is not left financially incapacitated in performing its vital functions, particularly in maintaining and advancing the country’s military capabilities. Defense technology is evolving rapidly, and falling behind in this race is not an option for a nation like Pakistan that confronts existential threats. Investment in defence is an investment in national peace, economic stability, and long-term development. The armed forces are not the property of the federal government alone; they are the protectors of every province, every district, and every citizen of Pakistan.
