Budgetary Consequences of the 7th NFC Award

The 7th NFC Award of 2009 has generally been recognised as a historic achievement of the present democratically elected government. Not only was consensus achieved after a gap of 12 years among the Federal and Provincial Governments but major strides have also been made in furthering the process of fiscal decentralisation in the country. The Federal Government will be transferring substantially more resources to the provinces by a major enhancement in the collective share of the latter from the divisible pool taxes. In addition, the provinces have agreed to a horizontal sharing formula that includes multiple criteria and promises greater fiscal equalisation in favour of the more backward provinces. Straight transfers have also been rationalised and the Federal Government has agreed to pay in instalments the substantial arrears that had accumulated under different heads.