PESHAWAR: The Khyber Pakhtunkhwa government on Thursday signed the memorandum of understanding (MoU) regarding fiscal responsibility after the federal government agreed to address its ex-Fata funding and other issues.

The centre had agreed in the Memorandum of Economic and Fiscal Policies inked with the International Monetary Fund last month to present a MoU duly signed by provinces for the provision of around Rs750 billion cash surplus by them.

However, KP had announced that it would sign the document only the centre agreed to finance the Sehat Card programme for tribal areas transferred to the province, increase the region’s current budget, transfer net hydel profit to the province on a regular basis, and revive the National Finance Commission.

A senior official of the provincial government confirmed to Dawn that the province had signed the MoU and shared it with the centre.

MoU signing was required for future IMF lending

The development came after the KP and federal finance ministers met and discussed the province’s demands shared with the centre on June 29.

The joint secretary of the Finance Division wrote a letter to the KP finance secretary saying the issues were discussed at length in the meeting and it was agreed to resolve them through mutual consultation at the earlier.

He also promised ‘full support in regard to the province’s demands’.

In the letter, the joint secretary called for the signing of the MoU, which, he said, was a pre-requisite for the revival of the IMF loan programme.

“Being a national issue, the signing of the MoU may be expedited,” he said.

On July 6, provincial finance minister Taimur Saleem Jhagra wrote a letter to his federal counterpart highlighting the province’s demands.

Mr Jhagra said both the province and centre had agreed that the signing of the MoU would be followed by the resolution of the province’s genuine issues the centre.

“The finance division will lead thisprocess, and we would prefer the outcome to bein the form of a written agreement,” he said.

The provincial finance minister called for an increase in “monthly allocation and release for tribal areas current budget to ensure it covers the actual cost of pay, pension and non-salary cost incurred, including the continued need to scale up the delivery in the region.”

He complained that it was staggering that a budgetary allocation for tribal districts was set by the centre without any engagement formal or informal with the province.

Mr Jhagra insisted that the allocation of Rs60 billion for tribal districts in the current fiscal was insufficient to even cover the salary bill of the region’s employees.

He also highlighted funding issue regarding the transfer of the Sehat Card programme for tribal districts to the province and claimed that the centre chose to unilaterally deprive the six million residents of region of health insurance.

“Though KP has asked the State Life Insurance to continue health insurance for tribal districts at its expense, this arrangement must form part of the region’s current budget grant,” he said.

The minister also urged the federal government to agree to the budget expenses related to internally displaced persons of the province.

He said the centre should fulfil its commitment to the monthly transfers of net hydel profit to the province in line with a memorandum of understanding signed in 2016.

Mr Jhagra also called for the immediate revival of the National Finance Commission.

“The MoU targets and conditions will be subject to the full extent of KP budgeted receipts of Rs1.322 trillion being received or generated by the province,” he noted in the letter.

Published in Dawn, July 8th, 2022