9th NFC: Experts say no changes expected in resource distribution formula
Say no radical adjustments will be made amid proposals to include security as new benchmark for distribution
CREATIVE COMMONS
LAHORE:
Balochistan’s Member National Finance Commission Dr Kaiser Bengali has said that no radical changes are expected in the existing resource distribution formula between the centre and provinces amid proposals to include security as a new benchmark for resource distribution among provinces.
“We are not expecting radical changes by the 9th National Finance Commission (NFC),” said Dr Bengali on Saturday while speaking at a conference on Pakistan’s economic challenges and perspectives, organised by a German institute in Lahore.
He said that tight federal fiscal position and absence of commitment to compensate those who would be affected by any major change in distribution formulas were the main reasons.
Bengali represents Balochistan as its technical member on the nine-member 9th NFC.
His comments come two days before the third meeting of the 9th NFC takes place in Islamabad on Monday. In a related development, the Punjab government has replaced its technical member Naveed Ahsan with Ali Cheema who has an academic background.
Ahsan was facing health issues, according to an official of the Punjab government.
The third meeting has been called to further review the reports that had been prepared by three provinces and the federal government on various aspects of revenues and expenditures.
There is expectation that Finance Minister Ishaq Dar may again take up his demand for allocating 3% of the divisible pool for a National Security Fund. The Council of Common Interests (CCI) on Friday referred the matter of setting up the National Security Fund to the NFC, which it said was the right forum.
There is a need to include spending to fight war on terrorism as fifth benchmark for distribution of resources among the provinces (horizontal distribution), said Dr Hafiz Pasha, former federal finance minister while giving his views on the outcome of the last NFC award and prospects of the next award.
Present system
Currently, the centre keeps 42.5% of the divisible pool and transfers the remaining 57.5% resources to the four provinces. This 57.5% is further distributed among the provinces on the basis of population, poverty, resource generation and inverse population dynasty. Dr Pasha proposed that security should be the fifth determinant.
His proposal is different from what Finance Minister Ishaq Dar proposed. Dar wants that provinces should give up 3% of the divisible pool in favour of the centre. If Dar’s suggestion is accepted, the divisible pool would shrink to 96%, as 1% of the divisible pool was given to Khyber-Pakhtunkhwa in the last award to mitigate the impact of war on terrorism on the economy of the province.
To a question whether the security related spending should be charged from the divisible pool or made part of the horizontal formula, Dr Pasha said that the provinces’ constitutionally guaranteed 57.5% shares should not be affected by any new arrangement.
Dr Pasha also proposed that the security should be a joint subject of the Centre and the provinces, unlike the current arrangement where the federal government exercises exclusive rights.
Dr Pasha emphasised that the Centre was violating the Constitution, as it has not fully implemented the 18th Amendment in the constitution. The 18th Amendment had been introduced to give effect to the last 7th NFC Award.
He said the the federal government should transfer vertical projects along with resources to the provinces. Secondly, the Higher Education subject should also be transferred to the provinces except regulatory function, along with its annual budget.
He said that the Centre should honour its commitments given under the 18th Amendment and 7th NFC, even if this results into increasing provinces’ share in federal divisible pool from 57.5% to 60%.
Dr Kaiser Bengali said that the sequencing of the 18th amendment and 7th NFC award was wrong, suggesting that the Constitution should have been amended before finalisation of the last award. He foresees no further requirement to amend the constitution for NFC purposes due to expectations of status quo.
Similarly Dr Pasha said that the provincial revenues on account of straight transfers have been adversely affected after the federal government introduced petroleum levy and Gas Infrastructure Development Cess.
Dr Pasha also urged the provinces to make the local bodies effective, as required under Article 140-A of the Constitution.
The Centre was also violating the Article 172 (3) of the Constitution, as it was resisting joint ownership of oil and gas by the provinces and the Centre, said Idrees Khawaja, a professor at Pakistan Institute of Development Economics.
Published in The Express Tribune, December 18th, 2016.
Balochistan’s Member National Finance Commission Dr Kaiser Bengali has said that no radical changes are expected in the existing resource distribution formula between the centre and provinces amid proposals to include security as a new benchmark for resource distribution among provinces.
“We are not expecting radical changes by the 9th National Finance Commission (NFC),” said Dr Bengali on Saturday while speaking at a conference on Pakistan’s economic challenges and perspectives, organised by a German institute in Lahore.
He said that tight federal fiscal position and absence of commitment to compensate those who would be affected by any major change in distribution formulas were the main reasons.
Bengali represents Balochistan as its technical member on the nine-member 9th NFC.
His comments come two days before the third meeting of the 9th NFC takes place in Islamabad on Monday. In a related development, the Punjab government has replaced its technical member Naveed Ahsan with Ali Cheema who has an academic background.
Ahsan was facing health issues, according to an official of the Punjab government.
The third meeting has been called to further review the reports that had been prepared by three provinces and the federal government on various aspects of revenues and expenditures.
There is expectation that Finance Minister Ishaq Dar may again take up his demand for allocating 3% of the divisible pool for a National Security Fund. The Council of Common Interests (CCI) on Friday referred the matter of setting up the National Security Fund to the NFC, which it said was the right forum.
There is a need to include spending to fight war on terrorism as fifth benchmark for distribution of resources among the provinces (horizontal distribution), said Dr Hafiz Pasha, former federal finance minister while giving his views on the outcome of the last NFC award and prospects of the next award.
Present system
Currently, the centre keeps 42.5% of the divisible pool and transfers the remaining 57.5% resources to the four provinces. This 57.5% is further distributed among the provinces on the basis of population, poverty, resource generation and inverse population dynasty. Dr Pasha proposed that security should be the fifth determinant.
His proposal is different from what Finance Minister Ishaq Dar proposed. Dar wants that provinces should give up 3% of the divisible pool in favour of the centre. If Dar’s suggestion is accepted, the divisible pool would shrink to 96%, as 1% of the divisible pool was given to Khyber-Pakhtunkhwa in the last award to mitigate the impact of war on terrorism on the economy of the province.
To a question whether the security related spending should be charged from the divisible pool or made part of the horizontal formula, Dr Pasha said that the provinces’ constitutionally guaranteed 57.5% shares should not be affected by any new arrangement.
Dr Pasha also proposed that the security should be a joint subject of the Centre and the provinces, unlike the current arrangement where the federal government exercises exclusive rights.
Dr Pasha emphasised that the Centre was violating the Constitution, as it has not fully implemented the 18th Amendment in the constitution. The 18th Amendment had been introduced to give effect to the last 7th NFC Award.
He said the the federal government should transfer vertical projects along with resources to the provinces. Secondly, the Higher Education subject should also be transferred to the provinces except regulatory function, along with its annual budget.
He said that the Centre should honour its commitments given under the 18th Amendment and 7th NFC, even if this results into increasing provinces’ share in federal divisible pool from 57.5% to 60%.
Dr Kaiser Bengali said that the sequencing of the 18th amendment and 7th NFC award was wrong, suggesting that the Constitution should have been amended before finalisation of the last award. He foresees no further requirement to amend the constitution for NFC purposes due to expectations of status quo.
Similarly Dr Pasha said that the provincial revenues on account of straight transfers have been adversely affected after the federal government introduced petroleum levy and Gas Infrastructure Development Cess.
Dr Pasha also urged the provinces to make the local bodies effective, as required under Article 140-A of the Constitution.
The Centre was also violating the Article 172 (3) of the Constitution, as it was resisting joint ownership of oil and gas by the provinces and the Centre, said Idrees Khawaja, a professor at Pakistan Institute of Development Economics.
Published in The Express Tribune, December 18th, 2016.