Islamabad:
The federal government has formally begun internal consultations to complete its attitude before negotiations on the New National Finance Commission award (NFC), with options considered to connect more than a tenth of provincial shares to their performance in social and environmental sectors.
According to official sources, the center also weighs proposals for earmarks part of the federal divisible pool for large dam projects as well as to make explicit allocations to Islamabad Capital Territory and other special areas.
A meeting of the government’s core minister team was held this week in the Q -Block – the seat of the Ministry of Finance. The collection participated in ministers for law, planning, economics, financial affairs in addition to the most important bureaucratic aids from the Prime Minister.
In the light of the discussions, it has been decided that the federal government would make a case to get a proportion of what had been given to the provinces 16 years ago, either by scaling expenses or taking a pie from revenue, the sources said.
The Ministry of Finance is preparing a paper to show what the federal government’s economy would look like in terms of public debt and budget deficit after five years. The theme of the paper will be that the existing 57.5% of the divisible pool that the provinces receive must be reduced and cuts must be placed on the expenses that are the province’s responsibility but are applied by the center due to its own coercion.
In a prelude to the NFC negotiations, Minister of Planning Ahsan Iqbal had written to the Prime Minister last month and encouraged him immediately to begin discussions to save the federation from acute tax stress.
The center gets only 42.5% share and is also responsible for the cost of Azad Jammu & Kashmir, Gilgit-Baltistan and ICT from the divisible pool to ensure full participation in national development for their citizens.
Due to limited fiscal space and higher expenses for debt service, the federal government is not left with enough fiscal space for development expenses. The Minister said the public sector development program (PSDP) is shrunken alarming – from 2.6% of GDP in 2018 to only 0.8% by 2025.
The Ministry of Finance informed the federal ministers this week that Sindh has raised objections to the proposals of the Planning Minister to turn NFC and similar objections also expected from Punjab, the sources said.
They said that during these kick-off meetings it has been discussed to connect the transfer of resources to the provinces with the improvement of the social and environmental indicators.
One of the original options is that at least 10 to 15% of the provincial shares of federal taxes should be associated with improvements in education, health, population management and climate indicators. The government also wants to incentive provinces for tax efforts by linking resources with tax efforts, the sources said.
One of the ministries has also suggested that part of the divisible pool be set aside before transfers are made with the aim of building megadam and financing of higher education. They said that dams are now a matter of national security and the provinces should contribute to it. Under 7. The NFC price, Khyber Pakhtunkhwa gets 1% of the divisible pool to mitigate the war’s impact on terror.
The federal government is also considering demanding explicit allocations to Islamabad Capital Territory, Gilgit-Baltist and Azad Jammu & Kashmir, which is the center’s responsibility.
Another essential consideration from the center is that the transfers to the provinces should also be connected with forward assignments to the local authorities, the sources added.
The federal government believes that there is inequality in the distribution of resources between the center and the provinces and among the provinces. However, it has not yet notified the new National Finance Commission, after the last lapseed a month ago.
The spokesman for the Ministry of Finance Qumar Abbasi did not comment on this article.
The sources said that in light of discussions held this week among the federal ministers, another meeting would take place at the beginning of the next week to store the center’s attitude before a formal meeting in the NFC is convened.
The constitution is mandated for NFC to be reconstituted every five years to ensure a fair and updated distribution of resources between the federation and the provinces. The constitution also binds that provincial shares cannot be reduced below 57.5% of the divisible pool that the government now wants to navigate by shrinking the size of the divisible pool.
One of the biggest proposals from the federal government will be to transfer the Benazir income support program to the provinces. For this financial year, RS722 billion is awarded to Bisp, which under the Constitution is the provincial topic.
The federal government may also suggest reducing the weight of the population in money distribution formula from 82% to any relationship, which is acceptable for large provinces, mainly Punjab.
Last month, Ahsan Iqbal wrote to Prime Minister Shehbaz Sharif that the review of the 15-year-old award was a must who has survived his five-year constitutional life and demanded a revision to facilitate “acute stress” of the federal government. The president of Pakistan expands the award each year due to a disagreement between the provinces and the center about the new formula.
82% of the NFC is distributed on the basis of the population among the provinces, which is an incentive to control the population and exaggerate the number. Pakistan’s annual population growth is 2.6%, which is near the annual economic growth rate and is very unsustainable. The current horizontal distribution is heavily weighted (82%) against the population.
The Minister has also proposed to include environmental resistance as a new criterion by adding indicators such as forest coverage, climate adaptation investments and replanting efforts. The recent flooding in Khyber-Pakhtunkhwa is also due to the rapid shrinkage of the forestry area, according to the climate experts.
