THE provincial governments are under pressure to free up resources from their share of transfers under the NFC award to help meet defence and debt servicing requirements of the federal government. Conversations with those in the provincial governments who are familiar with these developments suggest they are preparing to accommodate this pressure, but in a way that does not require amending the constitutional clause which guarantees that the provincial share in the NFC award will not be reduced.
It is hard to make a case for sharing the costs of debt servicing with the provinces. Unless the centre is willing to agree that it will only take on additional debt with the approval of the provincial governments, it cannot ask them to share in the cost of servicing this debt. But defence expenditure is different. The provinces can be told that since they are beneficiaries of the protection provided by the armed forces, some portion of the cost of maintaining this protection must be borne by them. The room to debate this matter is now limited since the centre has indicated that it must get assent on this question, otherwise it will modify the Constitution to extract the resources it needs regardless.
The total amount being asked of the provinces is supposedly around Rs500 billion per annum. The provinces have to agree on two things. First, they have to agree on who will bear how much of the burden to free up this amount between them. Second they have to agree on a mechanism on how the freed-up funds will be transferred. The next NFC meeting is scheduled tentatively for Nov 27. If the provinces come to this meeting with their assent to free up Rs500bn from their share of NFC transfers for defence-related expenditures of the federal government, and a viable mechanism through which to do this, the need to amend Article 160(3A) will not be necessary and that part of the 27th amendment which seeks to amend this clause may get dropped.
What is most important for the provincial governments at this time is to provide their assent to the demand from the centre. Once that happens the rest is negotiation, and they can take more time to agree on the burden sharing between them and the mechanism.
What is most important for the provinces at this time is to provide their assent to the demand from the centre.
Here are a few things that could make their job a little simpler. A formula already exists to allocate the provincial share of the federal divisible pool among the provinces. Perhaps the same formula can be used to determine the burden each province must share to free up Rs500bn worth of resources from their NFC transfers. This would mean about half of the total would have to come from Punjab, a quarter from Sindh, 16 per cent from KP and around 10pc from Balochistan.
Second, some mechanisms already exist through which provincial government resources are paid out directly to the army. For example, every time a provincial government calls the army in aid of civil power they have to pay for the costs of the deployment from their own resources. What would be required now would be a series of modifications to make such a mechanism automatic, and some kind of legal cover so that a portion of the defence budget can be made part of the obligations that a provincial government has to meet. Once this is done, then a separate stream can be opened under NFC transfers, whereby the provincial government’s share of the defence budget would automatically be credited to the army’s account.
None of this requires a constitutional amendment. The NFC is enough of a forum to build the consensus and any necessary legislation can then be passed by the relevant assemblies relatively easily. The share of the provinces under NFC transfers will not be impacted. What will change will be the amount landing up in provincial government coffers under these transfers.
The impact of this will hit Punjab the hardest. The other provinces can still bear their share of the burden being demanded without having to modify their entire budget strategy. But Punjab is ruled by a chief minister who apparently wants to spend her way to the prime ministership and the enormous funds being spent on schemes to buy her popularity will take a huge hit. It could be an unrealistic expectation on her part already to think that she can buy the Punjab voter this easily. The strategy of buying the Punjab voters’ loyalty was followed by Nawaz Sharif in the years of his ascendancy. But there are reasons to believe it may not work this time round. Can Maryam Nawaz afford a Rs250bn hit to her budget while holding on to this ambition? She may well have no choice.
What the provinces are going to be wary of is ensuring that the amount stays at Rs500bn in the years to come. Having given their assent to shoulder some of the responsibility for meeting the costs of national defence, they will naturally worry that the amount could rise next year, and then again the year after and so on. How can they agree to this demand in a way that would also cap their share at the outset?
There is no easy answer here. Perhaps they can have the amount written down in the NFC award, so modifying it would require another award altogether. And the threat of a constitutional amendment is a heavy one and cannot be wielded easily and often. Once the amount is inscribed in the NFC, next to the same language that enshrines provincial shares in the federal divisible pool, or the proceeds of royalties from crude oil or natural gas development surcharge, it would provide a somewhat secure ceiling that would still require some effort at consensus building to modify.
The other clauses of the so-called 27th amendment are a different story. But for the NFC award, it is possible that an amendment may not be required provided the provinces agree to shoulder a part of the burden of defence spending.
The writer is a business and economy journalist.
Published in Dawn, November 6th, 2025
