Provinces’ stance on the NFC

Published February 4, 2019
Prime Minister Imran Khan in a group photo with Chief Minister Sindh Syed Murad Ali Shah, Chief Minister Punjab Sardar Usman Buzdar, Chief Minister Khyber Pakhtunkhwa Mehmood Khan and Chief Minister Balochistan Jam Kamal Khan at PM Office. — APP/File
Prime Minister Imran Khan in a group photo with Chief Minister Sindh Syed Murad Ali Shah, Chief Minister Punjab Sardar Usman Buzdar, Chief Minister Khyber Pakhtunkhwa Mehmood Khan and Chief Minister Balochistan Jam Kamal Khan at PM Office. — APP/File

THE provinces are not inclined to lay their cards on the table at this point as they are probably still in the process of articulating their stance on the vertical and horizontal sharing of resources and the special separate pool for security and other needs.

The marathon meetings for the eighth National Finance Commission (NFC) Award are expected to kick-start this week.

Many members of the proposed meeting expressed cautious optimism but conceded that the process may be long as both inter-provincial and the centre-provinces resource sharing arrangement might have to be altered.

Beside other factors the new population census and the merger of FATA with Khyber Pakhtunkhwa necessitate it. They declined to specify a time period for striking a new deal.

Whatever the outcome, Finance Minister Asad Umar can duly claim credit for not shying away from a contentious issue and calling the meeting; unlike his PML-N predecessors who preferred to defer the crucial agenda in their five year tenure. The landmark seventh NFC Award was successfully concluded and implemented under PPP rule in 2010. The eighth Award was due in 2015.

When reached for comment Mr Asad revealed nothing beyond telling Dawn that the federal government will finalise the agenda today (Monday the Feb 04) for the meeting a day after.

Punjab Finance Minister Makhdoom Hashim Jawan Bakht told Dawn over phone from Lahore that two preparatory meetings were held in Punjab to take stock of the provincial financial status and articulate the case of the biggest province.

He said, “Now we have a fair idea on how to proceed. We intend to share our perspective and engage positively with other members. After we become cognizant of each other’s fiscal position and needs in the initial meetings we will be in a better position to start negotiating on the new formula.”

A member of the Sindh hierarchy privy to NFC related meetings in the province had a realistic take on the situation. He argued that the country’s thrust towards financial devolution must continue. “It is a very serious matter and needs to be approached thus.

“I believe public gesturing hardens the stance of the negotiating partners and does not serve the purpose. All members should show restrain and come to the negotiating table with an open mind and in positive spirit to appreciate and understand the position of others. All the talk about provincial rights becomes just rhetoric if not backed by a move towards financial autonomy,” he observed.

Continuing, he said: “Yes I firmly believe that the last NFC did improve the relationship between provinces and served well the demands of the federation, where each federating unit is required to take ownership of the national agenda of development and progress.

“Despite shortcomings and an uneven trajectory, each of the four provinces did way better in generating resources at a sub-national level than any point in over the past eight years.

“We need to remember that the resource generation as percentage share of GDP increased by a bare 2.1 per cent from 9.1pc in 2010 to 11.2pc in 2018, with a miniscule 0.6pc of the population paying taxes. In contrast provincial revenue generation jumped in double digits though from a very narrow base,” he claimed.

The marathon meetings for the eighth National Finance Commission Award are expected to be kick-started this week

“The domestic resource base is limited and public expectations are high as the new PTI government settles in power. The preliminary meeting this week will set the tone, defining the expected pace of progress with collective and coordinated effort of the centre and the four provinces to match public aspirations,” a senior bureaucrat who participated in the 2009-10 NFC process remarked.

The whole point of this exercise is to strike a better balance in fiscal transfers between the provincial and the federal government in what is referred to as vertical transfers, and remove anomalies in horizontal fiscal imbalances between provinces in a country marred by regional disparity.

Mehfooz Ali Khan, member of the Balochistan team, told Dawn that his province will assert to a fairer share of resources to catch up in development with the rest of the country.

“Is it not ironic that the province that has been energising Pakistan with its gas continues to be the most backwards? On the poverty index all 10 worst performing districts are in Balochistan that also include Murad Jamali which has massive gas reservoirs,” he noted.

“Balochistan also deserves to get a bigger share from the CPEC pie. The projects initiated or completed were conceived without provincial involvement. It is perfectly understandable if they have failed to generate social capital. It is important that policies and projects for this troubled province reflect the collective preference of the alienated people of the province.

“To deal with fallout of terror attacks an additional one per cent was given to KP last time round. If you look at the number of attacks and casualties, Balochistan fared worse than KP over the past five years, so in all fairness that one per cent should now be diverted for rebuilding Balochistan.

“Besides, it is as much a right of the Baloch people to have access to social and physical infrastructure cover as anyone in any other part of this country. For development at a higher pace Balochistan needs a higher share of the federal resource pool. How that can been done is what we have to figure out during NFC deliberations going forward,” he told Dawn over phone from Quetta.

Taimur Saleem Khan Jhagra, Finance Minister KP, was confident of his team and the homework being done. “We are ready to project the perspective of this province on the pressing fiscal situation.” He said he would like to steer the direction of talks towards increasing the size of the pie instead of haggling on the share.

“We need to urgently figure out how to mobilise more resources at all tiers of the government. Yes the FBR has to figure out how to go about it but so do all the four provinces. We are also required to set our spending priorities right by increasing the development budget to spread social sector cover to all vulnerable people,” he told Dawn over phone from Peshawar.

On the question regarding coordinating with other provinces, he said he is not in favour of antagonistic politics in NFC. “We are all in it together. We sail or sink together. So instead of playing politics we have to collectively work on solutions for problems that this country is facing. After the preliminary meetings we will be in a better position to comment on the strategy going forward,” he concluded.

Published in Dawn, The Business and Finance Weekly, February 4th, 2019

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