Reconstituted NFC agrees to divide resources in line with 18th Amendment

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–Centre, provinces complain about being under-resourced

–Six sub-committees to handle differences between centre, provinces

–Provinces to be part of the dialogue with IMF on fiscal arrangements

ISLAMABAD: In the first meeting of 9th National Finance Commission (NFC) after its reconstitution last month, it was agreed that financial allocations should reflect the true spirit of the 18th Amendment.

The meeting was chaired by Finance Minister Asad Umar and attended by all members of the commission representing the four provinces on Wednesday. Both centre and provinces voiced concerns over the increasing expenditures and simultaneously being under-resourced.

During the meeting, the finance ministry, representing the federal government, briefed the members about the centre’s requirement of more share for the increased expenditures of defence and security for Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (GB). Similarly, all four provinces also presented their cases for further enhancement in their share.

Since the centre and provinces could not debate the next NFC Award in the inaugural meeting, the meeting decided to form six sub-groups to make proposals/ recommendations on the macroeconomic framework and benchmarking to be coordinated by Punjab, vertical distribution of the divisible pool taxes between federation and provinces, including needs of AJK and GB, to be coordinated by federal government, horizontal distribution of divisible pool taxes amongst provinces to be coordinated by Balochistan, straight transfers to be coordinated by Balochistan, measures required to be taken to simplify tax procedures and payment systems to facilitate businesses to be coordinated by Sindh, and integration/merger of erstwhile Federally Administered Tribal Areas (FATA) in Khyber Pakhtunkhwa (KP) to be coordinated by KP.

According to official sources, provincial ministers and finance secretaries updated the meeting on their fiscal position and also deliberated on issues faced by them in different spheres due to resource constraints. The ever-rising burden of pension payments, the allocation for erstwhile FATA and the need for improved coordination on data sharing were highlighted. They also shared with the meeting proposals on the transfer of funds as well as possible future models of revenue generation.

SINDH

Representing Sindh, Chief Minister Murad Ali Shah, who also holds the portfolio of the finance ministry, informed the meeting that his government was deprived of Rs104 billion due to low collections. According to documents available with Pakistan Today, the chief minister informed the meeting that the provincial government was facing issues like uncertainties in federal transfers, sticky and growing current expenditures, uncertainties in the planning of future fiscal frameworks causing compromises in development expenditures despite growth in province’s own revenue. The minister claimed the cumulative losses to Sindh during the past five years, if compared with projections of 7th NFC Award, were Rs333.9 billion. He also demanded that sales tax collection rights be given to the provinces.

Talking to the media after the meeting, he said that it was the responsibility of the federal government to bear the expenditures of FATA since the tribal areas were previously under the federal government. He said that Finance Minister Asad Umar has assured the members that distribution of resources would be in accordance with the 18th Amendment.

BALOCHISTAN

The member of the commission from Balochistan highlighted the fiscal challenges and the progress being made by the province through inter-provincial cooperation and support. He also emphasised better and increased use of automation for revenue generation.

He informed the meeting that increasing expenditures on salary, pension, grants, subsidies and expenditures on law and order were adding to the current expenditures of the province. Besides, the province was also facing challenges such as increased deficits, he added.

PUNJAB

Punjab Finance Minister Hashim Makhdoom Bakht said that Punjab had received Rs70 billion less than its share. He said that the revenue shortfall on the part of the centre had also caused a reduction in the share of Punjab.  He also said that a revenue authority was formed in Punjab to improve revenue collection. He said that out of the share of the province from the divisible pool, 50 to 60 per cent was being spent on salaries and other non-development needs.

KHYBER PAKHTUNKHWA

KP Finance Minister Taimur Saleem Khan Jhagra briefed the meeting about the requirement of additional share to the province in light of KP-FATA merger. KP raised the issue of net hydel profit and difficulties being faced on account of funding required for retirement benefits of employees.

INCLUSION OF PROVINCES IN TALKS WITH IMF

Finance Minister Asad Umar announced during the meeting that he wished to include provinces in the process of dialogue with the International Monetary Fund (IMF) with regard to the fiscal targets over the medium term. The meeting later decided that the provincial representatives would also be part of talks with IMF regarding fiscal arrangements.

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