The National Finance Commission changed the landscape of the resource distribution mechanism in Pakistan with its 7th Award in 2009. For the first time, the distribution formula shifted from 100 percent population criterion to Multiple Indicator Criteria (MIC). It included multiple indicators such as poverty and backwardness (10.3 percent), inverse population density (2.7 percent), and revenue generation (5 percent) – reducing the share of the population to 82 percent. Amidst the 7th NFC award, KPK was fighting a war on terror. The region had suffered endless terrorist attacks that needed to be countered. Consequently, the 7th NFC Award also formulated a special budget for KPK to fight the war on terror, as it was placed at the heart of the conflict. Legally, the NFC awards should be debated and revisited every 5 years. However, the 7th NFC award has been in place since 2009, for 15 years now. A new award has not been announced since then.
The NFC award is the resource distribution mechanism in Pakistan. It distributes resources vertically between federation and provinces and horizontally, among provinces. KPK, Sindh, and Balochistan were not satisfied with the previous awards which had population as the sole criteria, with each having their concerns. The 7th NFC Award facilitated the concerns and grievances of all the provinces opposing the original NFC mechanism: having the population as the sole criteria. The 7th NFC award allocated resources on the MIC formula. Balochistan is believed to be the greatest beneficiary as it now receives 9.09 percent compared to the prior 5.11 percent. KPK was given “grant for the war on terror”, which is 1 percent of the total divisible pool and equivalent to 1.8 percent of the provincial share in the net proceeds of the provincial divisible pool.
Historically, KPK has been the region most affected by terrorism, thereby the one-percent special budget was granted for counterterrorism operations. Since 2004, prolonged insurgency has widely damaged the province’s socio-economic condition. Notably, the region has faced massive infrastructural destruction, loss of economy, and strain on social services. Much of the province’s budget was spent on counterinsurgency operations. The province could not allocate finances to social needs of the province, as the largest chunk was consumed by the counterterrorism operations. As compensation for this sacrifice, KPK was given this special one percent to spend enough on these operations so that it can rebuild and rehabilitate. Since 2000, till date, KPK has faced 8458 terrorism incidents.
Over time, the security situation in KPK has improved comparatively. The number of attacks has reduced significantly, although sporadic threats still exist. The two military operations, Zarb-e-Azb and Radd-ul-Fasaad, severely weakened the militant groups. There is relative stability in the region and the urge for continued grant for war on terror has been reduced. However, the current scenario has changed the security dynamics. Today, Balochistan faces equally pressing challenges. The situation raises the debate of whether budgetary compensation should now be redirected to Balochistan.
Currently, the insurgency in Balochistan is affecting a huge area and its population, resulting in socio-economic loss. The insurgency is fueled by grievances over natural resource exploitation and lack of political participation. Many global actors are behind these attacks fueling the insurgency for their political purposes as the province has great geopolitical and geostrategic importance. The terrorists demand separation from Pakistan. Notably, there is a massive increase in the insurgent activities in the province. KPK has been receiving a substantial portion of the NFC award, however, it needs to be reassessed and should now be reallocated to Balochistan due to the province’s unique and growing security concerns and insurgent activities. The current security situation is the biggest rationale.
While KPK continues to face some security challenges, particularly related to cross-border terrorism, the need for large-scale financial support for counterterrorism activities has significantly reduced. Whereas the increasing terrorist activities in Balochistan requires the need for financial support. Over the years, Balochistan has experienced a combination of separatist movements, insurgent activities, and militancy that have hindered the development of the province. Unfortunately, Balochistan is not getting the same level of financial resources directed towards its security and development, despite facing security threats continuously, keeping in mind its geostrategic location.
Fostering economic growth in Balochistan would provide opportunities for the youth, address grievances, and reduce the appeal of extremist ideologies, benefiting Pakistan as a whole. It is time to reassess national priorities and ensure that all provinces, particularly Balochistan, receive the resources necessary to overcome their challenges and contribute to national growth.
The insurgent groups are engaged in violent activities, ranging from attacks on military and law enforcement personnel to sabotage of infrastructure projects, including the China-Pakistan Economic Corridor routes passing through Balochistan. The involved global actors aim to weaken the geostrategic location of the province by promoting instability in the region. Notably, the number of terrorism-related incidents has shockingly reached 451, alone in 2024. These incidents have caused severe instability, and the local population continues to suffer.
Additionally, the economy of Balochistan is stressed because of these incidents. The provincial government cannot allocate properly for the province’s development projects. One of the reasons for this insurgent uprising is the underdevelopment and the mismanagement of natural resources. The region’s economic neglect has contributed to feelings of alienation and resentment. With this reallocation, the province’s economic burden will be reduced, thereby helping the government focus more on addressing underdevelopment, education, and improving health facilities. Resultantly, it will help counter the insurgency in the long run.
Fostering economic growth in Balochistan would provide opportunities for the youth, address grievances, and reduce the appeal of extremist ideologies, benefiting Pakistan as a whole. It is time to reassess national priorities and ensure that all provinces, particularly Balochistan, receive the resources necessary to overcome their challenges and contribute to national growth.
