THE PPP has aptly advised the central government to worry about improving its tax collection rather than eying the provinces’ share of tax revenues.
Reacting to recent reports that the IMF wants Pakistan to restart discussions on the 2009 NFC award to correct the ‘imbalance’ in the centre-provinces distribution of tax resources, PPP Senator Sherry Rehman rejected suggestions that the global lender was interfering in the constitutional framework of resource allocation.
“Why would the IMF want to put itself in the middle of changing the NFC formula of Pakistan?” she asked. Her reading of the situation is accurate.
Even if the lender wants the provinces to reduce their expenditure to produce a fiscal surplus and share more financial responsibilities with the federation to narrow the nation’s burgeoning consolidated fiscal deficit, it would not want to be seen getting caught up in constitutional issues.
She also correctly blamed the consistently lower than 9pc federal tax collection — as a ratio of GDP — for the country’s fiscal dilemma and the accumulation of a mountain of debt to the tune of $271bn.
The fact of the matter is that some forces favouring a strong centre and weaker federating units have been actively campaigning against, and are demanding an immediate rollback of, the landmark 18th Amendment to the Constitution and the current NFC award, which have accorded the provinces unprecedented administrative, political, and fiscal powers.
The campaign appeared to pick up momentum over the past several years as the country’s fiscal predicament worsened. Nevertheless, robust resistance from the smaller provinces and certain political parties, particularly the PPP, and constitutional protection for the existing resource-sharing formula have kept such forces from undoing the changes.
The argument that increased provincial autonomy and an enhanced provincial share from the federal tax pool is dangerous for federalism must not be entertained, as the issue touches upon matters related to the future of the country.
Any attempt to roll back provincial autonomy and financial powers would lead to greater friction between the centre and provinces, as well as among the federating units, which would harm the state’s federal complexion.
Pakistan was envisaged as a federation by its founding fathers, who had promised an autonomous and sovereign status to the constituent units in the Lahore Resolution.
However, the dominance of the bureaucracy and successive military rulers favouring a highly centralised state structure prevented the country from becoming a proper federation until the 2008 parliament rectified the situation.
It is true that the federal government and provinces still have many unresolved constitutional, administrative and fiscal issues, but the rollback of the existing political and fiscal powers enjoyed by the latter should not be among them. Pakistan’s future lies in more democracy and more federalism and not in a centralised state structure.
Published in Dawn, March 17th, 2024
