Who framed the NFC?

In the case of the perennially broke federal government, the 7th National Finance Commission (NFC) Award has recently become the main suspect. The case against it: the Award short-changed the centre, the provinces squandered their windfall, and the cash-strapped Pakistani government can no longer indulge this bad deal gone worse. In the global context, this case holds water. An Organisation for Economic Co-operation and Development (OECD) study set the benchmark for subnational government revenue (tax, non-tax, transfers) at 21 per cent for lower-middle income, federal countries worldwide. Of course, there is significant variation around this mean. However, the fact remains that the 7th NFC Award’s formula for a 56pc to 44pc split of the federal divisible pool favouring the provinces appears globally exceptional. If we compare this split with the only other federal state in our South Asian neighbourhood, ie India, the 15th Finance Commission recommended a share of 41pc for states in federal taxes for 2021-26.