The Federal Finance Secretary, Imdad Ullah Bosal, informed the Senate Standing Committee on Finance on Wednesday that the current National Finance Commission (NFC) Award has significantly distorted Pakistan’s fiscal position, pushing the federal government to rely on high-interest loans, some with rates as steep as 8%.
According to a news report, in a briefing chaired by Senator Saleem Mandviwalla, finance secretary explained that the NFC Award increased provincial shares of federal taxes to 57.5% while leaving the federal government with residual fiscal responsibilities. This imbalance, he said, has contributed to a substantial rise in public debt since 2009-10.
He revealed that discussions are underway with provincial governments to shift responsibilities for education, health, and the Benazir Income Support Programme (BISP) to the provinces. Despite this, the federal government intends to continue contributing to BISP funding.
Mandviwalla urged the government to initiate consultations for a new NFC Award and address resource distribution challenges between the federation and provinces.
The Finance Secretary also detailed Pakistan’s reliance on foreign loans, including a $7 billion International Monetary Fund (IMF) loan secured at an interest rate of 4.87%, repayable over ten years. He highlighted that commercial loans, including a $200 million loan from the Bank of China in September, carry rates as high as 8.5%.
Finance Minister Muhammad Aurangzeb confirmed that Pakistan had identified a $2.5 billion external financing gap for the fiscal year, which has now been filled. He assured that future borrowing would be undertaken at competitive rates.
However, due to its CCC-plus credit rating, Pakistan cannot access global capital markets for Eurobond issuances. Aurangzeb stated that efforts to upgrade the country’s rating are underway, and non-deal roadshows may commence next fiscal year to explore options like Panda bonds in Chinese markets.
Aurangzeb disclosed that Pakistan has requested an additional $1 billion to $1.5 billion from the IMF under the Resilience and Sustainability Facility (RSF). These funds are intended for long-term climate change mitigation reforms. Further discussions will take place during IMF negotiations in March.
Federal Board of Revenue (FBR) Chairman Rashid Langrial rejected allegations of merit violations in recent recruitment. Langrial emphasized that FBR had resisted external pressures and ensured transparent hiring for 196 positions in Grades 5 to 15.
He added that the hiring process for Grades 1 to 4 had been halted due to undue pressure. “FBR has recruited staff without fear or favor, which has aggrieved a few,” Langrial remarked.
