ISLAMABAD: The newly constituted National Finance Commission (NFC) is likely to remain inconclusive due to the removal of Adviser to Prime Minister on Finance and Revenue Affairs Dr Abdul Hafeez Shaikh from the commission.
Earlier on July 22, Hafeez Shaikh was removed from the chairmanship of the commission after opposition from provinces and Balochistan High Court’s (BHC) verdict against the composition of the NFC.
According to an official at the Ministry of Finance (MoF), since Hafeez Shaikh’s removal from the commission, matters related to NFC require the approval of Prime Minister Imran Khan who is also now the chairman of the commission.
“Any progress on the newly constituted 10th NFC is unlikely in near future as the prime minister may not be able to chair every meeting and look into technical issues of the commission. This will cause a further delay in reaching consensus on a new NFC award,” he said, adding that the issue can be solved if Hafeez Shaikh becomes a federal minister. “If Hafeez Shaikh becomes a senator, he can then chair the commission.”
According to the MoF official, under the existing composition of NFC, letters to provinces are also sent through the Prime Minister secretariat. Recently the prime minister himself responded to a letter written by the Sindh chief minister who had raised objections on the new composition of NFC.
Since the last 10 years, the center and provinces have failed to reach a consensus which led to both the 8th and 9th NFCs being inconclusive and the extension of the revenue distribution mechanism set under the 7th NFC Award given by the Pakistan People’s Party (PPP) in 2010.
According to sources, the provinces are also largely in favor of keeping the mechanism of 7th NFC intact as they are wary of the likely change in their respective shares due to demographic fluctuations identified in the latest population census.
The 7th NFC award, after a thirteen year gap, became effective under PPP’s rule in 2010-11. The NFCs that followed remained indecisive. The award’s noticeable features include the vertical increase in provincial share to 56 per cent in the first year and to 57.5 per cent thereafter.
Under the fiscal mechanism in the 7th NFC award the federation withholds too little, compared to its colossal needs and financial commitments, forcing it to run a deficit. The federation has to service unilateral and bilateral debt after distributing the due shares of the provinces. The debt servicing only leaves behind a sum that finances a part of the military budget. Non-tax revenue and additional loans fund the remaining expenditures.