NFC Award needs to curb population incentive: Ahsan

ISLAMABAD: Minister for Planning, Development and Special Initiatives Ahsan Iqbal on Tuesday called for amending National Finance Commission (NFC) Award to remove incentive that encourages population growth, which currently serves as major basis for distributing financial resources among provinces.

Speaking at the inaugural session of DataFest 2025, organised by Pakistan Bureau of Statistics (PBS) in collaboration with international partners, Ahsan Iqbal noted population factor currently carries an 82pc weightage in NFC formula. He said this system has turned population growth into a means for provinces to secure a larger share from Federal Divisible Pool (FDP).

He emphasised this approach must change so that population becomes a disincentive —not a reward — for gaining a higher fiscal share.

In a separate session, former Economic Advisor and Director General of NUST Institute of Policy Studies proposed a revised formula: population (based on 1998 census) 15pc weightage; population (based on 2023 census) 10pc; income gap 30pc; demographic performance 17.5pc; human development index (HDI) 10pc; area 7.5pc; tax effort 5pc; forest cover 5pc.

By contrast, existing 7th NFC Award (2009–10) allocates: population 82pc; poverty or backwardness10.3pc; revenue collection or generation 5pc; inverse population density (area) 2.7pc.

Ahsan Iqbal warned Pakistan’s 2.55pc population growth rate is alarming. If unchecked, population could surge to 380 million by 2047, while even a 5pc GDP growth rate would not be enough to raise per capita income, create adequate jobs, or reduce poverty meaningfully.

During a panel discussion titled “Rethinking NFC for Equity and Balanced Growth”, economists, technocrats, and policy experts agreed weightage of population in resource distribution should be reduced. They cited India as an example, where population accounts for only 15pc in its fiscal formula.

The UNFPA Country Representative in Pakistan Dr Luay Shabaneh shared international experiences, noting very few countries, except Brazil and India, include population as a major factor in their fiscal formulas. Pakistan, with an 82pc population weightage, stands out globally. Pakistan’s NFC formula is static and should instead be dynamic, adapting to evolving national needs, he added.

Dr Naeem-Us-Zafar, Chief Statistician of PBS, highlighted data remains underutilised in public investment decisions. He gave the example PBS has representation in Central Development Working Party (CDWP), main forum for approving development projects, but its data insights are seldom fully leveraged.

Dr Ashfaque H. Khan stressed the need to depoliticise the NFC Award, arguing population-dominated formula has politicised NFC process and population censuses, encouraging provinces to inflate population figures. He suggested forming a permanent five-member NFC chaired by a respected economist, retired judge, or civil servant of impeccable integrity.

Sakib Sherani, former economic advisor, described NFC as a political process plagued with misconceptions, particularly regarding 7th NFC Award. He pointed out FBR’s tax-to-GDP ratio has stagnated between 8.5pc and 10.33pc for the past 16 years. He questioned why provinces have failed to devolve resources to districts through Provincial Finance Commission (PFC) Awards.

Dr Waqar Ahmed, a noted economist, proposed establishing a permanent Fiscal Monitoring Unit to continuously review and assess NFC framework.