By Aasi, Islamabad
In 1974, the city of Bonn witnessed something remarkable. West Germany passed a law that took money from its richer states and handed it to poorer ones. Bavaria and Hesse screamed. They went to court, they fought it for years, but in the end they accepted the system. Today that same Germany, once split between East and West, stands among the world’s most balanced and powerful economies. The Germans call it Länderfinanzausgleich — financial equalisation between states. The question worth asking is: how did Germany solve this puzzle, and why have we failed to solve it in seventy-seven years?
I spent several nights thinking before writing this piece. I wanted to write about something that resurfaces after every federal budget, dominates television talk shows, ignites provincial resentment on social media, and then quietly disappears — until the next budget arrives. That subject is the formula by which Pakistan distributes its resources among its federating units, known to us as the NFC Award — the National Finance Commission Award. This is not a technical footnote. It is embedded in the very roots of this country, and until it is resolved with honesty, cracks will keep widening in the walls of the federation.
One Country, Six Parts, One Roof
Pakistan is a federation. A federation means different units come together to form one country, and in return they are promised that their resources, their identity, and their rights will be protected. Our history testifies that this promise has been broken before. In 1971, East Pakistan was lost precisely to this sense of deprivation. Today, when a young man in Balochistan, a resident of the tribal districts of Khyber Pakhtunkhwa, or a citizen of Gilgit-Baltistan and Azad Kashmir asks, “Where is our share?” — this is no longer merely a fiscal question. It becomes a question about the survival of the federation itself.
Let’s speak plainly, in the language of numbers. Look at this year’s provincial budgets: Punjab’s is the largest, followed by Sindh, then Khyber Pakhtunkhwa, Balochistan, Azad Kashmir, and finally Gilgit-Baltistan. This order roughly tracks population, since Punjab is home to more than half the country’s people. But the picture shifts the moment we look at how much each province collects on its own. Sindh, powered largely by Karachi’s port and commercial activity, actually outpaces Punjab in own-source tax collection, despite having a much smaller population. Khyber Pakhtunkhwa and Balochistan collect far less — not simply out of neglect, but because of decades of conflict, terrorism, underdevelopment, and a thin industrial base.
Here is where the real complexity begins. Pakistan’s major taxes — income tax, sales tax, customs duty, federal excise — are collected by the federal body, the FBR. The bulk of this revenue originates from the country’s industrial and commercial hubs: Karachi, Lahore, Faisalabad. But under the Constitution, this money is redistributed to all provinces through the National Finance Commission Award. This is precisely where the dispute begins: what should the formula for distribution actually be? Should it rest on population alone? Or should it weigh something more?
The Story Behind the Formula
It’s worth understanding where the current formula came from. In 2010, all provinces agreed on the 7th NFC Award — itself something of a political miracle. That formula assigned roughly 82 percent weight to population, about 10.3 percent to poverty and backwardness, 5 percent to revenue collection and generation, and around 2.7 percent to inverse population density. At the time, this was genuine progress, because before it, resources had been distributed almost purely by population, leaving smaller provinces chronically short-changed.
But sixteen years have passed, and there has been no revision — no 8th or 9th NFC Award. Sixteen years. In that time, the population balance has shifted, economic conditions have changed, climate disasters have repeatedly drowned rural Sindh and Balochistan, a fresh wave of militancy has returned to haunt Khyber Pakhtunkhwa — yet the distribution formula stands exactly where it stood sixteen years ago. Is this not collective negligence? Is it not proof that our rulers are better at burying problems than solving them?
Holding a Mirror to the Rulers
Here I must pause and say some uncomfortable things, because the duty of a columnist is not to wrap the truth in sweet words.
Our rulers — regardless of province, regardless of party — agree on one thing: prolonging their own hold on power. The biggest reason the NFC Award has never been revisited is that revisiting it carries political risk. Any leader who dares suggest changing the formula will instantly be branded a “traitor” or “an enemy of his own province.” So every government, every finance minister, defers the matter with a familiar refrain: “we’ll deal with it later.” This is the same political cowardice that, seventy-seven years on, still leaves Pakistan an incomplete federation.
I would also say this: the federal government’s conduct has been criminally careless. Billions in loans, development projects, and privileges have kept flowing to Islamabad and Punjab’s major cities, while remote districts of Balochistan still lack basic health centres, schools, or clean drinking water. This is not merely a statistical debate — it is a matter of life and death. When a Baloch mother loses her child because timely treatment was unavailable, she has no interest in NFC percentages and formulas. She only knows that the state did not stand with her.
On the other side, certain circles in Punjab and Sindh complain that their hard-earned money is being “handed out for free” to other provinces. This mindset is just as dangerous as the sense of deprivation it responds to. To forget that in a federation, wealthier regions support less-developed ones so the whole country can move forward, is to reject the very idea of national solidarity. In the United States, Texas and California; in Canada, Ontario and Alberta; in India, Maharashtra and Gujarat — all support less-developed states, and no one there treats it as a “sacrifice,” because they understand that a weak region drags down the entire national economy.
How the Rest of the World Solved This
I mentioned Germany at the start. Consider India next, where the Finance Commission redraws its formula every five years without fail. India’s commission weighs not just population, but income disparity, forest cover, tax effort, and demographic stability. A mandatory five-year revision means the formula moves with ground realities instead of freezing in place.
Canada’s equalization payments system is even more interesting. The federal government calculates each province’s “fiscal capacity,” and any province earning below the national average receives a top-up to close the gap. The goal isn’t to hand everyone identical sums — it’s to ensure every citizen, regardless of province, enjoys roughly comparable public services and living standards. This is precisely the philosophy Pakistan urgently needs today.
A Proposal for a Balanced Formula
Now let me get to the point of this column: a proposal that doesn’t stop at criticism, but points toward a solution.
I propose that the next NFC Award rest on five core factors, each carrying a defined weight:
First factor: Population, weighted at 55 percent. Population cannot be ignored entirely — a larger population means larger needs. But the current 82 percent weight is unjust, because it renders every other factor almost meaningless. Fifty-five percent strikes a more balanced note: it recognises population’s importance while giving other factors genuine weight.
Second factor: Poverty and backwardness, weighted at 20 percent. Regions lagging in education, health, and basic infrastructure deserve greater resources to catch up with the rest of the country. This is not charity — it is investment, because a neglected region can become fertile ground for crime, extremism, and instability, costs the entire country eventually bears.
Third factor: Revenue collection and economic performance, weighted at 15 percent. A province that collects its own resources efficiently, that modernises its provincial tax system, deserves encouragement. If performance is ignored simply because a province will receive funds regardless, that rewards inefficiency rather than correcting it.
Fourth factor: Area and geographic difficulty, weighted at 7 percent. Balochistan’s vast expanse, the mountainous terrain of Gilgit-Baltistan and Azad Kashmir — all raise the cost of development. Building a road across flat plains and across mountain ranges simply cannot cost the same.
Fifth factor: Security burden and climate losses, weighted at 3 percent, reviewed and reweighted every five years. Khyber Pakhtunkhwa’s border security situation, the flood-ravaged districts of Balochistan and Sindh — all deserve a dedicated, periodically updated compensatory weight based on fresh data.
This formula is not designed to weaken any one province relative to another. It is designed to lay the foundation for a system in which every province receives resources based on both genuine need and genuine performance.
Rebuilding Trust Comes Before Money
But here is the crucial point: however ideal a formula looks on paper, it will not work unless trust is rebuilt between the provinces. And rebuilding that trust requires three immediate steps.
First, revising the NFC Award must be made constitutionally mandatory — as it is in India — so that a new Finance Commission is convened every five years, regardless of the political weather, rather than left to any single government’s discretion.
Second, decision-making must become transparent. Citizens deserve to know exactly how much their province received, why, and where that money was actually spent. Even today, the average citizen has no clear idea how much their provincial government received from the federal pool, let alone how it was used.
Third, political parties must lift this issue out of election slogans and into genuine national dialogue. As long as every election cycle produces separate cries of “Punjab’s right,” “Sindh’s right,” “Balochistan’s right,” the very idea of the federation weakens. What is needed instead is a single national narrative — “Pakistan’s right” — within which every province feels secure.
The Question Every Pakistani Should Be Asked
I often wonder: had our founders not safeguarded the rights of different federating units in the 1940 Lahore Resolution, would this country even exist today? Quaid-e-Azam repeatedly stressed that Pakistan’s strength lay in provincial autonomy and harmony, not in the coercion of a rigid centre. Seventy-seven years later, as we still argue over the distribution of resources, one has to ask: have we truly understood the spirit of the Pakistan the Quaid envisioned?
Every Pakistani — whether fishing off the coast of Gwadar, herding livestock in the snow-clad valleys of Chitral, working a factory floor in Karachi, or sitting behind a desk in an office in Lahore — has a right to expect equal treatment from the state. The Constitution guarantees this right. In practice, it too often gets buried in files and sacrificed to political expediency.
Conclusion: Hope, and Responsibility
I do not want to end this column on despair, because despair solves nothing. Pakistan still has every capacity to bring its resource-distribution system up to the standard of the world’s best federations. What is required is simply this: that our rulers, federal and provincial alike, rise above ego and short-term political gain.
This column advocates for no single province, and no single party. It advocates for one truth alone: Pakistan is one, and its strength lies in its constituent parts trusting one another. The day Punjab understands that Balochistan’s progress serves its own interest; the day Sindh accepts that stability in Khyber Pakhtunkhwa guarantees its own security; the day the smaller provinces feel that the federation is truly their own home, not an outside power that arrives only to extract resources — that is the day Pakistan becomes a truly strong federation.
Economic figures can be revised. Formulas can be rewritten. But first, we must dissolve the resentment each province has nursed against the others. That is work no commission and no formula can accomplish — only our collective wisdom and good faith can. And on the day that resentment dissolves, no force on earth will be able to stop Pakistan’s economy from flourishing.
That is the foundation of a strong federation. That is the road to a prosperous Pakistan.
(By Aasi, Islamabad)
