The five stakeholders agree to create a committee to finalize the modalities for increasing the provincial share.
Flanked by Sindh Chief Minister Murad Ali Shah, KP Chief Minister Sohail Afridi and others, Finance Minister Muhammad Aurangzeb addresses a meeting of the National Finance Commission. Photo: Express
ISLAMABAD:
Sindh on Thursday linked consensus on any new resource distribution formula to deliberations only within the National Finance Commission platform and sought to limit discussions to revenue sharing instead of including expenditure as part of the Centre’s desire to shift some of its tax liabilities.
The first NFC Kick meeting started on a positive note and all five players committed to reaching consensus with an open mind. However, according to meeting participants, there were also differences of opinion on what should be discussed within the NFC.
The inaugural meeting of the 11th NFC was chaired by Finance Minister Muhammad Aurangzeb and Khyber-Pakhtunkhwa recorded the first victory.
The five stakeholders agreed to set up a committee to finalize modalities for increasing the war-torn province’s share of resources due to the merger of 6.1 million residents of erstwhile FATA into the province.
Contrary to the Centre’s earlier desire to settle the issue of resource distribution through a fresh constitutional amendment by reducing the province’s minimum share from 57.5%, Sindh and Khyber-Pakhtunkhwa insisted on discussing this issue only on the NFC platform.
“Syed Murad Ali Shah emphasized that consensus can only be developed by deliberating in the forum of the National Finance Commission and that this commission must adhere to its mandate moving forward,” according to a consensus statement issued by the Finance Ministry after the meeting.
KP has already said that issues related to NFC should be handled by the NFC.
Sindh opposed the federal government’s proposal to discuss expenditure on the NFC platform and said the discussions should focus only on the scale of revenue, Muzzammil Aslam, KP’s financial advisor said after the meeting.
However, the Finance Ministry has proposed the way forward by shifting expenditure to provinces and also increasing revenue generation. The Sindh province did not want to discuss the spending issue and urged focusing discussions on revenue.
The federal government has said that the Center and provinces should cumulatively increase their tax revenues by around 6% of GDP. FBR Chairman Rashid Langrial also suggested that provinces increase their meager collection from 0.8% of GDP to 3%. He added that federal taxes are also expected to increase from 3.5% to 14% of GDP by 2028.
The additional 5.5 per cent of GDP fiscal space translates to around Rs 7 trillion at the current size of the economy and can resolve the Centre’s fiscal woes.
The federal government has shown that its fiscal position has deteriorated significantly and the overall budget deficit has widened from the pre-2010 level of 4% to 7% of GDP between 2011 and 2025.
The official document said Aurangzeb highlighted the constitutional importance and spirit of collaboration behind the NFC process.
The Federal Minister of Finance underlined the government’s commitment to transparent and sincere dialogue. Senator Aurangzeb highlighted the critical role of the NFC in ensuring equitable distribution of financial resources, promoting fiscal sustainability and supporting long-term economic growth. He expressed confidence that the Commission would engage in a meaningful and inclusive dialogue aimed at awarding a fair and forward-looking NFC award.
Khyber Pakhtunkhwa Chief Minister Sohail Afridi said a strong federation and strong provinces would ensure a strong and united Pakistan. He highlighted the sacrifices made by the people of Khyber Pakhtunkhwa province in the war against terrorism, which has unfortunately resurfaced.
Afridi further expressed hope that the 11th NFC will address the ultra vires of the 7th NFC since June 2018 and include the population and other variables of the newly merged districts in Khyber Pakhtunkhwa province and update the province’s share to give them proper representation and sought their positive response from other provinces on the matter.
The Finance Ministry announced that “it was also unanimously decided that a sub-group on merger of erstwhile FATA/newly merged districts, and its share in the divisible pool, would be constituted, which would facilitate early formulation of its recommendations for the NFC by mid-January 2026.”
The NFC also constituted half a dozen other working groups that would deliberate on the vertical distribution of resources, the horizontal distribution of resources and the variables for deciding provincial shares.
Punjab Finance Minister Mian Mujtaba Shuja ur Rehman said reaching a consensus would take a lot of effort from everyone. He stressed the importance of equitable distribution of resources and policy coherence between the federal and provincial governments.
Mir Shoaib Nosherwani, Finance Minister of Balochistan, said that he wants to achieve consensus and Balochistan’s cooperation with the federation and provinces has always been there and in future Balochistan will continue this path of cooperation and consensus.
The Commission also discussed the proposed schedule and schedule for future meetings and agreed to initiate the formation of technical subgroups that will undertake work on specific mandates relevant to the functions of the NFC.
The Commission has decided to continue its work through a structured series of meetings and technical consultations over the coming months, with the common goal of achieving a fair and sustainable NFC price for the people of Pakistan.
In its presentation, the KP government said the 11th NFC award should update the 7th NFC of June 2018 to make it constitutionally compliant. It should not only revise upwards the NFC share of KP by including the population, poverty and other dynamics of the merged districts in Khyber Pakhtunkhwa, but also take into account the difference during the period 2019-20 to 2025-26 which was not given to the province, according to the proposal.
The KP government has also demanded that its share in the war against terrorism be tripled to 3%, due to the recent rise in terrorist incidents and high poverty levels in the province.
Khyber-Pakhtunkhwa Chief Minister Sohail Afridi said the federal government owes the province Rs 1.3 trillion under the NFC and pointed out that the erstwhile tribal districts, administratively merged in 2018, are yet to be financially integrated.
The KP government said that the province’s share in the total registered foreign workers is more than 30% of the total registered Pakistani workers abroad. Given that KP’s share of Pakistan’s total population is only about 17%, the significantly larger share of KP workers seeking employment abroad indicates that employment opportunities in the province are lower than in the rest of Pakistan, but earn foreign exchange for Pakistan.
He also added that 18.8% of the total household income in Khyber Pakhtunkhwa comes from foreign and domestic remittances, compared to the national average of 8.6%.
