THE politics of recent days notwithstanding, the moment when all the parties in parliament will have to sit down and work together for national progress is fast approaching. One recent reminder of the responsibilities of the incoming government came from the interim finance minister who stressed the importance of finalising the new National Finance Commission award as soon as possible. The NFC award has been delayed for far too long, and not finalising a new one was among the PML-N government’s biggest policy failures. The new government will have to take on the task and see it through to completion in its first year, unless it too wants to limp along with a fiscal framework hamstrung by an ad hoc arrangement governing the NFC award.

As the interim finance minister warns, though, far more than fiscal transfers may be at stake. Social-sector spending is the domain of the provincial governments, and the majority of the resources with which this is undertaken is transferred from the centre via the NFC award. Additionally, the award and its generous transfers to the provinces have become the subject of much debate in recent years, with powerful quarters like the IMF and the security establishment questioning whether such large transfers are sustainable and healthy for the federation. Of course, the Constitution allows no path to reduce these transfers, but a new award can find ways to ensure that the resources that are given are better utilised and targeted. The new award also needs to program better incentives for the federating units to coordinate their social service delivery programmes, and in some cases, work closely with federal authorities to fashion a national response to issues such as climate change that cannot be left to each federating unit to tackle individually. Between realigning the underlying incentive structure and revisiting the federal transfers, there is much for the new government to do, and it will take every ounce of political capital and skill to steer the negotiations. No ‘Islamic welfare state’ can be created without navigating the politics of the NFC award, and the provinces controlled by those parties that may not be part of the government at the centre cannot move forward with their own mega projects and social service programmes without a revamped NFC arrangement. All parties vying for control at the centre should bear in mind their shared responsibility to work together once the new government is in place.

Published in Dawn, August 6th, 2018