ISLAMABAD: The centre and the four provinces have agreed not to spend their due share of the federal divisible pool to jointly limit country’s consolidated fiscal deficit and meet the requirements of the International Monetary Fund (IMF).

At a meeting of the National Finance Commission (NFC), led by Finance Minister Ishaq Dar, it was informed that for not spending their constitutionally protected shares running into tens of billions of rupees, the federal government would keep on rewarding the provinces out of its federal budget.

The biggest beneficiary of tight spending policy turned out to be Khyber Pakhtunkhwa (KP), led by Pakistan Tehreek-i-Insaf of Imran Khan.

The belated meeting of the NFC was called to review implementation status of the NFC spending in the second half of the previous fiscal year (January-June 2014).

Mr Dar, who is also chairman of the NFC, told the provincial finance ministers and private members that the federal government would honour its commitment given at the forum of the Council of Common Interests (CCI) to financially reward the provinces for presenting cash surplus to national exchequer.

As a consequence, the KP was given the highest reward of Rs1.016bn followed by Rs999.9m to Punjab.

A minor reward of Rs18.021m was announced for the Sindh government while Rs533.725m reward was given to Balochistan.

Although, it was not publicly disclosed how far the provinces remained short of spending their divisible pool shares, the size of reward by the centre gave an indication of bigger savings by the provinces. The 7th NFC award currently in its terminal year committed 51.74pc share to Punjab, 24.55pc to Sindh, 14.62pc to KP and 9.09pc to Balochistan.

The meeting deliberated the draft report for second half of the last fiscal year and unanimously approved it for presentation to the parliament and the provincial assemblies. The participants, including five finance ministers, provincial finance secretaries, respective provincial members, also reiterated the need to broaden the tax base to increase the overall collection and also increase the tax-to-GDP ratio.

According to the report, FBR reported a collection of Rs2254.5bn during fiscal year 2013-14. The meeting was informed that out of this amount, Punjab was given a share of Rs637bn, Sindh Rs302bn, KP Rs202bn and Balochistan Rs123bn.

In addition to this, the shares on account of royalties and grants provided to provinces were Rs8.8bn to Punjab, Rs82.6bn to Sindh, Rs29.97bn to KP and Rs14.9bn to Balochistan.

The meeting also had detailed deliberations on the reporting mechanism of the FBR. The provinces were asked to put forth suggestions and comments for modification in the system that would be discussed in the next meeting.

Published in Dawn December 9th , 2014