ISLAMABAD:
The federal government on Thursday postponed the first meeting of the National Finance Commission (NFC) at the request of Sindh that sought adjournment due to the flood situation, while Balochistan technical member also bowed out even before the commission met.
The Finance Ministry issued a notification to delay the meeting hours before the commission was planned to hold its maiden session in Islamabad.
“It is informed that upon receiving the request from the government of Sindh, to postpone the inaugural meeting of the 11th NFC due to impending flood situation, the NFC meeting scheduled to be held on Friday (today), is postponed,” according to the NFC Secretariat of the Finance Ministry.
Vast parts of the country have been inundated in one of the worst floods in recent years, inflicting, so far, the damages from the northern mountains to the plains of Punjab. Sindh is prepared to soon brace the flood waters.
The NFC comprises nine members with federal Finance Minister Muhammad Aurangzeb as its chairman and two members from each of the provinces. But the NFC Secretariat has informed eight members about its decision to cancel the meeting.
It did not notify Balochistan’s technical member Farmanullah about the decision. The Finance Ministry said that Balochistan technical member excused to join the commission due to his other commitments.
Nasir Mahmood Khosa, former secretary and former World Bank executive director, is technical member from Punjab. Sindh has retained Dr Asad Sayeed while Dr Musharraf Rasool Cyan is representing Khyber-Pakhtunkhwa. Balochistan had brought in Farmanullah as its technical member, who has been excluded from the latest NFC notification.
The president of Pakistan has constituted the 11th NFC to decide a new formula for distribution of federal taxes between the Centre and the provinces and among the provinces.
Under the 7th NFC award of 2010, the provincial share had been increased by 10% to 57.5% of the total Federal Divisible Pool without giving them additional responsibilities. This contributed to a massive increase in the public debt due to the unsustainable budget deficit that the federal government has been running since 2010.
Finance Minister Senator Muhammad Aurangzeb is the chairman of the nine-member commission. The four provincial finance ministers are the permanent members, while every province has a right to nominate one technical member.
Successive central governments also unduly retained some of the expenditures to achieve their political objectives in the provinces. The Federal Board of Revenue (FBR) miserably failed to increase the tax-to-GDP ratio to 15% by 2015.
It still remains stuck at 10.2% of the GDP, which is the 2010 level despite the massive tax burden shifted to the people. The FBR has also missed the last fiscal year’s IMF’s target to increase the tax-to-GDP ratio to 10.6%.
Sources said that the federal Finance Ministry and the provincial finance departments were scheduled to give presentations on the fiscal positions. The Finance Ministry has also sought the help of the World Bank to prepare macroeconomic projections for next five years.
However, a recent report by the International Monetary Fund (IMF) paints a healthy picture of the economy in 2030, which weakens the case of the Finance Ministry for cutting provincial shares to meet the expenses.
The projections made by the FBR and the Planning Commission have also shown healthy trends in the year 2030, said the sources. The Planning Commission has shown over 6% growth and massive jump in exports and remittances under its new Uraan Pakistan plan.
According to the IMF report, in the year 2030, Pakistan’s total revenue would increase to 16% of the GDP and its expenditure would be restricted to just 18.8%. This represents a highly manageable fiscal deficit of 2.8% of the GDP, showed the IMF report.
Likewise, the public and publicly guaranteed debt, currently standing at 78% of the GDP, is shown by the IMF declining to 64% in the year 2030.
The sources said that due to years of narrative built by the federal institutions, the provincial governments are under pressure to give up some of their shares, either in the shape of revenues or picking some responsibilities of the expenditure.
One of the big-ticket items is Rs722 billion in the federal budget for the Benazir Income Support Programme, which is a provincial subject. The sources said that the federating units may take the responsibility provided they would manage the beneficiaries instead of the Centre.
The sources said that one province may object to the NFC notification, which mentions certain areas that according to it do not fall in the NFC domain.
The NFC notification states that the Commission will discuss and decide issues relating to sharing of financial expense incurred or to be incurred by the Federation in respect of subjects and matters falling within the domain of the provinces and issues relating to sharing of financial expense incurred or to be incurred by the Federation or the provinces or both in respect of trans-provincial matters.
