State Minister for finance, Rana Muhammad Afzal told Senate that a meeting to finalize new National Finance Commission (NFC) award is scheduled on Marc 1. He disclosed that earlier three meetings were held but participants could not reach at consensus. The Minister said that federal government was fully committed to finalizing the NFC award as soon as possible with the consensus of the provincial government. He said federal government is facilitating and steering the National Finance Commission (NFC) process for early finalization of the new award.
As per constitutional provision, new NFC is to be set at intervals not exceeding five years to finalize new award with consensus. The 7th landmark NFC award was signed on 30th December, 2009 which became effective from the fiscal year 2010-11. Hence 8th NFC award had to be finalized before the starting of fiscal year 205-16. But successive meetings of NFC could not produce consensus to finalize the 8th NFC award. Every year 7th NFC award was extended for allocation between the centre and the provinces. The Finance Minister of Punjab, Dr. Aesha Ghaus Pasha had made it clear that her province had already given liberal concessions to smaller provinces and can not afford more financial sacrifices. She was right in her tough stance because of the underutilization and misappropriation of public funds in Sindh and Baluchistan . In 2016, former provincial minister and sitting advisor to the Chief Minister of Baluchistan were arrested by NAB on corruption charges. Rs. 730 million were recovered from the house of finance secretary Mushtaq Ahmad Raisani.
Because of very narrow tax base, the amount of revenue generated from domestic sources is not sufficient to cater to requirement of current and development expenditures of the federal and provincial governments. The massive resource gap is filled with loans obtained from the multilateral donor agencies including the World Bank, Asian Development Bank and International Monetary Fund (IMF) besides raising costly commercial loans from European credit market. This time Pakistan’s lender of the last resort, the IMF has decided to target the NFC award, which is a constitutional mechanism designed to make our rather precarious federal structure work. The IMF management point of view is that devolution of greater percentage of finances has increased the quantum of financial resources waste, which is correct up to some extent. The NFC award itself continues to generate controversy every time it comes for a debate. The federal government shows reluctance to devolve more resources to the federating units and each province wants more. The result is a tense settlement that no one is happy with. If the IMF proposal of restructuring the National Finance Commission is pushed through there is a chance of more provincial grumbling in the already tensed NFC award meetings.
The IMF has asked for the creation of a council of fiscal technocrats under the council of common interest, a joint contingency fund and a permanent national tax commission to oversee the areas where federal and provincial jurisdiction meets. The first two conditions are akin to financial emergency which is also being suggested by the former Federal Finance Minister and renowned economist, Dr. Hafeez Pasha. As compared with the finance teams of other provinces, the NFC members from KP failed to articulate forcefully the case of the province for more financial resource in the previous meetings due to lack of proper home work and understanding of financial matters. In such a scenario the creation of council of fiscal technocrats under the Council of Common Interest suits KP province because it does not have tough negotiating members like Dr. Aesh Ghaus Pasha from Punjab, Syed Murad Ali Shah from Sindh and Dr. Qaisar Bengali from Baluchistan. Hopefully, this time KP members for the NFC meeting will do proper homework.
