The World Bank urged Pakistan on July 2, 2026 [1], to revise its National Finance Commission (NFC) Award formula and reform fiscal resource distribution.
This request targets the core of how the Pakistani state allocates funds between the federal government and its provinces. Strengthening fiscal federalism is viewed as essential for sustaining economic growth and improving the delivery of public services across the country [2].
The World Bank said the current system requires updates to ensure a more equitable distribution of resources among the provinces [1]. By reforming the distribution mechanism, the lender suggests that Pakistan can better strengthen its revenue collection and create a more sustainable fiscal framework [2].
These recommendations follow a history of structural shifts in Pakistan's governance, including the 18th Constitutional Amendment in 2010 [3]. While that amendment aimed to devolve power, the World Bank said that gaps remain in the practical application of fiscal federalism [3].
The proposed changes to the NFC Award would focus on aligning financial allocations with current economic realities and provincial needs [1]. The World Bank said that a stronger fiscal federalist approach would allow provinces to manage their resources more effectively while reducing the burden on the central treasury [2].
Officials from the World Bank said that these reforms are necessary to bridge existing progress gaps [3]. The goal is to create a system where revenue generation and spending are better balanced to support long-term stability [2].
“The World Bank urged Pakistan to revise its National Finance Commission (NFC) Award formula.”
The call for a revised NFC Award suggests that the current financial relationship between Pakistan's federal government and its provinces is inefficient or outdated. By pushing for these reforms, the World Bank is signaling that macroeconomic stability in Pakistan depends not just on overall debt management, but on the internal mechanics of how tax revenues are shared and spent at the local level.
