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ISLAMABAD:
The Pakistan Peoples Party Parliamentarian (PPPP) reiterated its position on Tuesday regarding the National Finance Commission (NFC) Award formula, saying it is the constitutional right of the provinces, and should not be changed.
The party leadership has been openly opposing the International Monetary Fund’s (IMF) suggestion that Pakistan should revisit the NFC formula to address the ongoing imbalance in the distribution of fiscal resources between federal and provincial governments.
IMF Mission Chief to Pakistan, Nathan Porter, had recently raised concerns over the distribution of resources and responsibilities and underscored the need for a more equitable arrangement with newly-appointed Finance Minister Muhammad Aurangzeb during Pak-IMF talks for a $1.1 billion loan tranche.
“NFC award is a constitutional right of provinces,” PPPP spokesperson, Shazia Marri said. The PPPP spokesperson’s statement has come on the heels of PPP Vice President, Senator Sherry Rehman’s views through which she objected to the IMF demand, wondering why the global lender would push the Centre to encroach on the provincial share.
Apart from objecting to IMF’s demand, Shazia stated that PPP Chairman Bilawal Bhutto Zardari aims to redirect privileges from the wealthy towards providing relief for the poor. The spokesperson emphasized the importance of adopting President Asif Ali Zardari’s vision of ‘trade not aid’, stating that PPPP seeks both political and economic stability in the country.
The PPP leader highlighted the importance of encouraging farmers, noting their potential to make the country self-sufficient in food production. She pointed out that during the tenure of former premier Benazir Bhutto and President Zardar, the country achieved self-sufficiency in wheat production. “The development of Pakistan and the prosperity of the people should be the priority of all of us,” Shazia said.
“There is no indication that the IMF is proactively seeking to meddle in Pakistan’s constitutionally agreed resource allocation frame,” Senator Sherry had said, adding “Why would the IMF want to put itself in the middle of changing the NFC formula for Pakistan?”Sherry emphasised that rather than focusing on provincial shares, attention should be directed towards recognising the provinces’ superior performance in tax collection compared to the federal structure.
“Rather than encroaching on provincial shares, the federal government should be concerned about improving tax collection through the Federal Board of Revenue (FBR),” she said.
“Since the 7th NFC Award, FBR taxes have remained stagnant in the range of 9% of the GDP, whereas provincial taxes have increased from 0.3% to over 1% of the GDP,” she had pointed out.
“In addition to increasing the tax net, the provinces had also been surrendering a large surplus to the federal government over the last two years.”
The current formula, established in 2010, resulted in provincial shares increasing from 47.5% to 57.5% of total federal taxes, without a commensurate transfer of additional responsibilities. This has led to a sustained fiscal imbalance and a rise in public debt.
The 2010 NFC award had been agreed for a period of five years but since then there has not been any consensus to revisit it. Addressing the challenge of garnering provincial support for reforms, particularly within a politically diverse landscape, presents a formidable task for the coalition government.
Before the PPP’s reaction, the Pakistani authorities had already informed IMF that the provincial shares cannot be reduced without bringing a constitutional amendment and making all the provinces agree to a new formula.
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