ISLAMABAD, April 19: The provinces will no longer receive funds from the federal divisible pool from the next financial year due to an increase in their share in the revised National Finance Commission (NFC) award announced last year.
Official sources told Dawn on Wednesday that instructions had been issued to the provincial governments to prepare their development budgets without seeking any resources from the federal Public Sector Development Programme (PSDP).
“It was decided that in view of an increase in the share of the provinces from the federal divisible pool in the new NFC award, no provincial nature of project would be financed/co-financed from the federal PSDP from the next financial year(2006-07),” said an official summary made available to this correspondent.
However, it said that ongoing commitments to financing/sharing of cost of provincial projects from the federal PSDP would continue. The Planning & Development Division may also issue these instructions to all provincial governments and federal ministries separately.
According to the summary, it was observed that frequent requests were being received from the provinces for financing/sharing of cost of the provincial projects through the federal PSDP. The Executive Committee of the National Economic Council (ECNEC), which will meet here on 22 of this month under the chairmanship of Prime Minister Shaukat Aziz, has been informed about details of the decision under which provinces would not be eligible for the federal PSDP funding.
The share of provinces from the federal divisible pool has been increased from 42.7 per cent to 45.83 per cent which will continue to increase by one per cent annually and in five years will touch 50 per cent of the federal resources.
In addition, the summary said, under the new funding arrangements, an increase has been affected in the subventions for the provinces. Therefore, in view of the increased share of the provinces in the federal resources, the provinces should now finance provincial nature of projects/ programmes from provincial annual development programmes (ADP) resources, it added.
“All provincial governments, government of Azad Jammu & Kashmir(AJ&K) and Northern Areas administration have just been officially informed that they should not expect any federal funding and that they will have to learn to live within their financial means,” a source said.
