IMF urges Pakistan to reevaluate fiscal distribution framework

Calls for reopen discussions on National Finance Commission award amid concerns over federal-provincial imbalances.

The International Monetary Fund (IMF) on Thursday advised Pakistan to initiate dialogues regarding the National Finance Commission (NFC) award again. 

The aim is to rectify the persistent discrepancies in the fiscal resource distribution between the central and provincial governments.

In the preliminary talks for a loan installment worth $1.1 billion under standby agreement (SBA), IMF’s Mission Chief to Pakistan, Nathan Porter, highlighted the need for a fairer division of resources and responsibilities. Finance Minister Muhammad Aurangzeb was present to represent Pakistan.

According to a media report, the IMF pointed out the necessity to reevaluate the NFC award due to the uneven allocation of resources between federal and provincial entities.

The current distribution mechanism of NFC award, put into effect in 2010, augmented the provincial share of total federal taxes from 47.5% to 57.5%, without corresponding expansion of responsibilities. This has contributed to continuous fiscal disequilibrium and an escalation in public debt.

However , Pakistani officials told the IMF that reducing provincial shares would necessitate a constitutional amendment and consensus among all provinces for a new arrangement.

The 2010 NFC award, initially set for a five-year term, has remained unchanged due to lack of agreement on revising it.

Monitoring Desk
Monitoring Desk
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