The federal government is expected to consult major political parties on a proposal to remove customs duty from the National Finance Commission (NFC) divisible pool as part of broader fiscal reforms linked to the upcoming budget, according to sources.

The proposal would allow customs duty collections to be retained by the federal government instead of being distributed as part of the revenue-sharing mechanism between the centre and provinces.

Sources said the federal government’s position is that customs duty should be treated as a federal revenue stream and used to meet national obligations, including debt servicing.

Officials are expected to brief coalition partners and other political stakeholders on the legal and constitutional aspects of the proposal before any final decision is made.

Despite the suggested change, sources maintained that the provinces’ share under the NFC Award would remain unchanged at 57.5 percent, alleviating concerns about a reduction in provincial transfers.

The discussions come as the government prepares the FY2026-27 budget and works to meet fiscal targets under its economic reform programme. Sources said roughly Rs. 1.7 trillion in customs duty revenue could be allocated to the federal government next year to help manage debt repayments.

The issue has gained urgency amid reported IMF expectations that provinces collectively generate a budget surplus of around Rs. 2 trillion.