Economic crisis: solution lies in the Constitution

Economy of the country is facing crisis and needs immediate injection of $12.5 billion

We have been told that the economy of the country is facing a crisis and needs immediate injection of $12.5 billion in order to avoid non-payment of debt. This comes from the government’s mouth and everyone starts harping on the reasons of debt and crisis of the economy.

There’s a scant discussion on the role and scope of the federal government under the Constitution and the amount it needs to perform its constitutional role.

Under the Constitution there’s succinct division of powers scheme between the federal and provincial governments. The federation has two executive bodies: the federal cabinet and the Council of Common Interests (CCI). They share executive authority over the subjects of the Federal Legislative List part I and part II, respectively. All other subjects not enumerated in the List of schedule IV of the Constitution belong to the provinces.

If we would have only a cursory look on the matters listed in the Federal Legislative List part I, it would show that the federal government has four main responsibilities: defence, foreign affairs, finance (tax collection) and communications. However, instead of limiting itself to its role under the Constitution, the federal government has unconstitutionally or unnecessarily established more than 34 ministries and 43 divisions.

Article 154 of the Constitution says that only the CCI would exercise executive authority over institutions and subjects in the Federal Legislative List part II, which include oil and gas corporations, railways, WAPDA, ports, census bureau, inter-provincial co-ordination, regulatory authorities, public debt, economic co-ordination and planning on scientific research. The CCI would have a permanent secretariat to manage these institutions and both the CCI and the federal cabinet are responsible to parliament.

Essential tasks of governance such as, health, education, land and its administration, local government, agriculture, housing, water and irrigation, justice, law and order, forests, industries and labour, ecology and environment and host of others, belong to the provinces.

In fact, the federal government has a supportive role in the Constitution. It needs to support development of industry and education, health and housing, etc, in the provinces through foreign policy, defence, effective means of communication and tax collection.

However, instead of having four main responsibilities under the Constitution, the federal government has created 34 ministries and 43 divisions. Most of its ministries are either established on CCI matters or provincial subjects. This is not only a flagrant violation of the Constitution but rather requires huge loans to fund more than 30 ministries and divisions.

At present the federal government has a whopping budget of around Rs5,300 billion. It has an income of Rs3,000 billion. It spends Rs1,600 billion on debt servicing and Rs1,400 on defence (including civil pensions). This means its whole income of Rs3,000 billion goes to two heads of defence and debt servicing and it has a deficit of Rs2,300 billion. It needs to raise this amount through loans.

The provinces which have huge responsibilities of development, industrialisation, education, health, housing, justice, law and order, agriculture and land management do not collectively have a budget of Rs5,000 billion. Although the federal government has no constitutional role of social sector development, it prepares an annual development budget for which it needs heavy loans.

There’s no economic crisis in the country if the federal government abolishes ministries on provincial and CCI matters, and limits itself to its constitutional role. Apart from defence, which is catered above, it would only need Rs200 billion instead of a whopping loan of Rs2,300 billion to perform its constitutional role.

If the federal government restricts itself to its constitutional role, it essentially needs to have ministries of defence, foreign policy, finance and communications. Its main workforce of the FBR is financed directly from the NFC bi-annually at source deduction of one per cent of the tax revenue. The federal government only needs to finance the Foreign Ministry and Communications and it requires not more than Rs200 billion for these subjects. The CCI institutions are mostly statutory bodies or corporations earning themselves. The federal government doesn’t need to have its annual public sector development programme as it has no such responsibility under the Constitution.

The federal government would be doing service to the nation if it restricts itself to its constitutional role of four ministries as even export, import is part of the finance ministry and postal service of communications. In this way, it would have a budget of Rs3,200 billion instead of Rs5,300 billion. It would not need to borrow and the country would be saved from the trappings of debt. If the federal government decides to restrict itself to its constitutional role and abolishes more than 30 ministries and divisions established on provincial and CCI subjects, it can borrow only Rs200 billions from donors or provinces. It needs no borrowing of Rs2,300 billion at all.

Instead of restricting itself essentially to four subjects, the federal government wants to usurp the role of provinces and of the CCI. The Constitution bars education, housing, health, environment, industries tasks at the federal level, which are solely a provincial domain. There’s no provision to create ministries on institutions of the CCI.

The federal government is averse to lose control of provincial subjects or transfer CCI institutions to the permanent secretariat of the CCI as envisaged under Article 154 of the Constitution. It has failed to establish a permanent CCI secretariat despite resolutions of the Senate. In effect the country doesn’t face an economic crisis but ‘lawlessness’ of the federal government.

Published in The Express Tribune, September 16^th, 2018.

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