NFC moot fails to smooth over sticking points

Asad Umar says efforts under way to complete process of 9th NFC award by Dec 31

Shahram Haq March 30, 2019
Finance Minister Asad Umar. PHOTO:AFP

LAHORE: The fifth meeting of the ninth National Finance Commission (NFC) award on Friday concluded without a consensus on the issues which were also discussed in the last month’s NFC meeting in Islamabad but were left unresolved.

Given these unresolved issues among the federating units, there are chances that the upcoming budget would be presented under the current NFC formula, the legal mandate of which is valid till June 2020.

Absence of Sindh Chief Minister Murad Ali Shah, who holds additional portfolio of provincial finance minister, also raised many questions about inter-provincial harmony and coordination with Islamabad.

In the previous meeting, Sindh CM had raised the issue of lesser fund transfer from Islamabad to all provinces and claimed that in the first six months of the current fiscal year, Sindh was paid Rs60 billion less than the corresponding period.

Chairing the meeting, Finance Minister Asad Umar laid stress on pushing the 9th NFC award talks forward with consensus among participants.

However, crucial issues like strengthening tax base with improvements in the Federal Board of Revenue; provincial autonomy in taking revenue generating decisions and financial arrangements for the erstwhile Federally Administered Tribal Areas (Fata) after their merger with Khyber Pakhtunkhawa remain unsolved.

SBP jacks up key interest rate by 50bps to 10.75%

“Efforts are under way to complete the process of 9th NFC Award by December 31, 2019, besides improving the federal and provincial governments’ coordination regarding collection of taxes,” Finance Minister Asad Umar told media after the meeting.

Umar said it is a good omen that the federal, Punjab, K-P and Sindh have been assigned coordination of one working group each, while Balochistan is tasked with coordination of two working groups.

“The meeting also examined the demands, suggestions and recommendations of all the five federating units and worked out further strategy and line of action,” he added. He said all the federating units took part in the deliberations to bring forth an improved NFC Award ensuring a win-win situation for all.

“Right now, a final date could not be given for the announcement of the new NFC award but the process of new NFC award would hopefully be completed by December 31, 2019.

“However, there are one or two matters upon which a principled stance is needed to be adopted. One of these matters is development and betterment of Fata after its merger into the K-P. There is a strong resolve of the nation to expedite developmental process in Fata,” he added.

Umar said coordination among federal and provincial governments for tax collection had weakened in the last few years. “We want to strengthen the coordination on tax collection among the federal and provincial governments,” he added.

Seeking anonymity, a member of one of the working groups told The Express Tribune that the issues of Fata along with tax simplifications are the key issues yet to be solved.  “A consensus has yet to be reached on how to fund Fata for interim period as the matter becomes a little complicated after its merger with the K-P,” the official said. He placed emphasis on greater consensus on FBR reforms.

He said the FBR is the base of revenue generation and due to its loopholes the targets of seventh NFC award were not achieved; so we have to make a realistic future planning,” he added.

“We all want that provinces should make their autonomous domains and expenditure decisions themselves. Apart from the federal transfers, provinces should raise money through their own resource mobilisation, so they may get better share in future awards. Provinces also need to harmonise their tax system with economic activities so the cost of doing business could go down,” he added.

The member said it is expected that by the end of this year, provinces and the Centre would arrive at a consensus on the 9th NFC award.  However, he said, it depends on the magnitude of changes the current government wants to make for the award. Little changes could result in much earlier results; extensive alterations could lead to delay.

Official statement

A press release said six sub-groups, formulated during the first meeting in February, gave presentation on various aspects of resources distribution as per the terms of reference assigned to the groups. The main focus of all sub-groups’ deliberations was transparency, harmonisation and sharing of data.

It was agreed that the sub-groups would continue their deliberations and present their reports in the subsequent meetings. The chairman, Asad Umar, suggested that deliberations should also include incentives for poverty alleviation and social sector spending.

The representative of the K-P proposed a framework for NFC deliberations aiming at equalising fiscal resources across federating units, equal access to public services for all citizens of Pakistan and expenditure efficiency at all levels of the federation.

All members agreed on the framework and lauded the K-P’s efforts in this regard. Umar emphasised the importance of a well deliberated and consensus based NFC award and said all federating units shared a huge responsibility in that regard.

The meeting agreed to make efforts to finalise the NFC award by December 31, 2019. It was also agreed to hold the next meeting, before end of April, 2019, which would focus on Fata and the taxation aspects of ease of doing business.

The chairman reiterated that provincial governments will be engaged in the fiscal related discussion with the IMF. He also suggested that each federating unit should nominate a focal person for data sharing to facilitate the working sub-groups.

He also laid stress on strengthening NFC secretariat and said necessary measures would be taken in that regard. Technical members from Sindh and Khyber Pakhtunkhwa volunteered to submit a proposal in this regard.