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President Approves Change in 11th NFC: A Comprehensive Analysis

1. Introduction

The National Finance Commission (NFC) holds a central place in Pakistan’s economic governance, serving as the constitutional mechanism that decides how financial resources are shared between the federation and its provinces. The distribution formula not only impacts provincial budgets but also shapes the trajectory of development, governance, and political stability. Recently, President Asif Ali Zardari approved a key change in the composition of the 11th NFC, a decision that has far-reaching implications for intergovernmental financial relations.

2. What Has Changed?

The Government of Balochistan withdrew its earlier nominee for the NFC and proposed Mahfooz Ali Khan as its new representative. The President formally endorsed this change, replacing the previous nominee. This decision marks continuity in Balochistan’s representation since Mahfooz Ali Khan has previously served on the NFC multiple times, bringing with him vast institutional experience.

3. Who Is Mahfooz Ali Khan?

Mahfooz Ali Khan is a seasoned bureaucrat with over three decades of experience. His career includes senior positions such as:

• Provincial Finance Secretary,
• Additional Secretary at the federal level,
• Controller of Military Accounts,
• Accounts General, and
• Director General at the National Institute of Management (NIM), Balochistan.

Having already represented Balochistan in three earlier NFCs, this marks his fourth nomination—a reflection of his credibility, expertise, and trust of successive governments. His familiarity with the fiscal challenges of smaller provinces like Balochistan provides him an edge in negotiations.

4. Composition of the 11th NFC

The 11th NFC, constituted in August 2025, is chaired by the Federal Finance Minister, Muhammad Aurangzeb. Its composition is as follows:

• Federal Finance Minister (Chairperson)
• Four Provincial Finance Ministers (Ex-officio members)
• Four Expert Members (nominated by provinces):
  • Punjab: Nasir Mahmood Khosa
  • Sindh: Dr. Asad Sayeed
  • Khyber Pakhtunkhwa: Dr. Musharraf Rasool Cyan
  • Balochistan: Mahfooz Ali Khan

This blend of political representatives and technical experts ensures that both political interests and technical soundness are considered in fiscal decision-making.

5. Mandate of the NFC

Under Article 160 of the Constitution of Pakistan, the NFC is mandated to:

1. Recommend distribution of revenues collected through federal taxes between federation and provinces (vertical distribution).
2. Decide the allocation of funds among provinces themselves (horizontal distribution).
3. Suggest grants-in-aid to provinces in need.
4. Frame borrowing powers of both federation and provinces.
5. Review financial implications of national projects and trans-provincial schemes.

The NFC’s recommendations are binding once the President announces an Award based on consensus.

6. Key Issues Likely to Shape the 11th NFC

While the 7th NFC Award (2009) remains a historic milestone for increasing provincial shares, its formula—82% weight for population, 10.3% for poverty, 5% for revenue generation, and 2.7% for inverse population density—is now under scrutiny.

The 11th NFC is expected to revisit this formula with possible considerations:

• Population vs. Development Balance: Smaller provinces demand more weightage to poverty, backwardness, and revenue needs, while Punjab advocates retaining population as the dominant factor.
• Fiscal Discipline: The federal government, under pressure from international lenders like the IMF, may argue for performance-linked criteria, pushing provinces to improve tax collection and fiscal responsibility.
• Expenditure Responsibilities: Provinces seek more autonomy and resources for education, health, and infrastructure after the 18th Amendment.
• Debt & Deficit Sharing: With rising fiscal deficits, the federation may propose shared responsibility for managing debt and trans-provincial infrastructure projects.

7. Wider Context: Other Bills Approved

Alongside the NFC changes, the President also gave assent to important legislative bills, including:

• Criminal Laws (Amendment) Bill, 2025 – introducing reforms in criminal justice.
• Pakistan Land Port Authority Bill, 2025 – to regulate cross-border trade and transit routes.
• Petroleum (Amendment) Bill, 2025 – focusing on energy regulation and petroleum sector reforms.

These parallel approvals indicate a broader institutional reform agenda focusing on governance, accountability, and economic management.

8. Why This Matters

The approval of Balochistan’s nominee and the broader NFC deliberations hold significance for several reasons:

• Provincial Autonomy: Strengthens provinces’ financial independence and bargaining position.
• Fiscal Stability: The new award will determine whether Pakistan can strike a balance between provincial demands and federal fiscal sustainability.
• Political Harmony: Ensuring consensus in NFC negotiations is vital for national unity, particularly in a diverse federation like Pakistan.
• Economic Growth: Equitable distribution of resources will directly affect development priorities, infrastructure, and poverty alleviation.

9. Conclusion

The 11th NFC stands at a crossroads where constitutional principles, provincial aspirations, and international economic realities converge. The appointment of Mahfooz Ali Khan brings continuity and expertise to the table, but the real challenge lies ahead—negotiating a formula that ensures equity, sustainability, and national cohesion. With fiscal pressures mounting and provinces asserting greater autonomy, the NFC’s deliberations will shape not just financial governance but also the political stability of Pakistan in the coming years.

Advanced Vocabulary from the Article