Delay likely in next NFC meeting as working groups struggle to finalize recommendations

The upcoming meeting of the National Finance Commission (NFC) is expected to be delayed as working groups tasked with drafting key recommendations have not yet completed their work, Business Recorder reported, citing sources.

The first meeting of the NFC, held on December 4, decided to form several working groups to discuss various aspects of the upcoming NFC award. A follow-up meeting was tentatively scheduled for January 8 or 15. 

However, BR reported, quoting sources as saying that the working groups have made limited progress, hindering the consolidation of recommendations within the proposed timeline. As a result, the next session of the NFC may be postponed until the preliminary reports are finalized.

The NFC is responsible for building consensus on the distribution of financial resources between the federation and the provinces, a process that requires extensive analysis and negotiations. Any delay in meetings could extend discussions on the next NFC award, which is crucial for federal and provincial fiscal planning.

The working groups formed by the NFC are focused on several issues, including national debt composition and utilization, sharing of financial expenditures between the federation and provincial jurisdictions, divisible pool taxes, resource-sharing percentages, measures to improve the tax-to-GDP ratio, direct resource transfers to provinces, and the integration of the newly merged districts (NMDs) from former FATA into the NFC.

The first meeting of the working group on the merger of former FATA with KP, held on December 23, aimed to formulate recommendations for the next NFC award. Khyber Pakhtunkhwa (KP) government officials reiterated their position that the existing NFC award must be revised to accommodate constitutional requirements following the merger. 

KP proposed that the merged districts be treated as a separate component in future NFC awards, with allocations based on population, poverty, and development indicators.

Earlier, KP Chief Minister Sohail Afridi accused the federal government of stalling development in the merged districts by failing to disburse funds under the NFC resource-distribution formula for the current fiscal year. 

However, the Federal Ministry of Finance rejected these allegations, stating that KP has received its due share, including additional allocations for the war on terror. Provincial NFC shares are disbursed fortnightly, with no outstanding liabilities, according to the ministry.