NFC Award — a red herring

Pakistan has gone to the International Monetary Fund (IMF) 20 times before the National Finance Commission (NFC) award in 2010 and four times since 2010. Pakistan’s current financial woes did not begin with the NFC award, nor would they lessen by reducing the allocations to the provinces. Unfortunately, we continue to debate about dividing the pie because only economic growth is a sustainable solution for reducing the debt burden. Under the IMF’s standby agreement, Pakistan must achieve a primary budget surplus of 0.4 per cent of the GDP (or Rs401 billion). The IMF’s January 2024 report noted, “The authorities’ strong revenue performance in the first quarter of the current fiscal year, as well as federal spending restraint, has helped to achieve a primary surplus in line with quarterly program targets.” Pakistan’s budgetary position continued to improve in the second quarter, and the primary surplus was 1.7pc, compared to the target of 0.4pc. The risk of not meeting the target has diminished significantly.