Though considered pivotal for economic policy and sustainable growth, the federal approach towards policy and fiscal coordination between the federation and the provinces has often suffered setbacks because of unilateral ad hoc decisions/moves.

The moves are deviations from the institutional process and framework provided by the Constitution for coordination, such as the National Economic Council (NEC), the National Finance Commission (NFC) and the Council of Common Interests (CCI).

The NEC is mandated to formulate plans concerning finances, commerce, social and economic policies — and ensure balanced development and regional equity — guided by principles of policy laid down in the Constitution.

As far back as 2010, the five-year 7th NFC award initiated multiple criteria for horizontal distribution of resources — poverty and backwardness, population, collection and generation of revenues and population density. Further evolution of the initial distribution formula has been frozen.

Participatory federalism would be strengthened if the widest possible consensus was achieved through multiple-party dialogue that focused on reforms

The CCI, created to promote the common interests of the provinces, works in fits and starts. Surprisingly, the approval of the population census was timed to delay elections.

Why are these institutions not functioning smoothly as mandated? One may trace the fault lines at the policymaking level shaped by power politics, unconcerned with the common good.

As Finance Minister Shamshad Akhtar says, we are left with a huge potential for rationalising public expenditure arrangements between the federal and provincial governments to promote efficiency and effectiveness of public expenditure.

To move in that direction, the caretaker government has taken ad hoc initiatives that lack an integrated, comprehensive approach embodied in NEC, NFC and CCI mandates.

Major partners in the PDM government did not honour crucial points of the agreements reached with minor parties

On October 26, Federal Secretary Finance Imdad Ullah Basal presented proposals to the provincial finance secretaries to virtually shed the federal government’s responsibility for provincial projects included in its Public Sector Development Programme (PSDP). The provincial nature of schemes accounts for 33 per cent of the total PSDP for the current fiscal year (CFY).

The proposals were met with reservations by the provincial representatives. While the Sindh government had no objection to discontinuing the Sustainable Development Goals (SDGs) programme, it pointed out that the programme was part of international commitments, for which Rs6.6 billion had already been released in the first quarter of CFY.

The Sindh’s finance secretary expressed strong reservations about transferring earmarked projects on the following grounds. Sindh had a huge development portfolio of Rs735bn, including foreign-funded projects to the tune of Rs266bn. The annual development expenditure had already been committed, and handling of transferred federally funded projects would not be possible at this stage.Then were the severe floods of last year. He said the issue would be referred to the Sindh cabinet, though the provincial chief minister personally disapproved of the move.

Punjab asked the federation to share the list of projects with the appropriate forum for the provincial government to take a decision. Khyber Pakhtunkhwa and Baluchistan adopted a similar stance as Punjab, adding that their provincial Annual Development Plan(s) were already overburdened. The federal finance secretary said the provinces were free to implement or discontinue the transferred projects.

The federal government would reportedly reduce its development spending by Rs200bn to Rs250bn through rationalisation of ongoing schemes, including a cut in flows to projects at the initial stages.

Under the proposals for transfer of provincial projects, 137 schemes with zero financial progress are to be dropped from PSDP; some 49 projects that have made zero to 20pc progress are to be shifted to respective provinces; another 20 projects with 80pc progress are to be completed in CFY through re-appropriation.

On the political front, PML-N and MQM-P are holding a dialogue to determine what constitutional changes will be brought if (our) government comes into power, says PML-N leader Saad Rafique. He adds that the dialogue with MQM- P and other parties in Sindh is focused on reforms after the polls.

“We just want a Sindh-specific multi-party alliance [for polls], which should work together on multiple agendas. We want to address issues in both urban and rural Sindh. It is not only about Karachi or urban Sindh, where things have been ruined, but also about the problems of rural Sindh. There’s frustration in rural Sindh as well. We want to address that, too,” says Mr Rafique. The PML-N has appointed a Sindhi-speaking retired FIA official as head of its provincial branch.

However, the PML-N approach suffers from some confusion. Without any agreement on policy or programme, about two dozen ‘electable(s)’ from Balochistan have joined the party, expecting Nawaz Sharif to come into power after the elections. The PML-N has yet to announce its election manifesto, as stated, in tune with the times.

Any electoral alliance or seat adjustments should prudently be preceded by a common agenda between different political parties that can be presented to the voters for approval. It is equally important that any proposed agenda should enjoy national consensus with the mainstream parties on board to make it more meaningful.

If the widest possible consensus can be achieved through multiple-party dialogue focused on proposed reforms, it would be a significant step towards strengthening participatory federalism. But no less significant is that the evolved agenda be fully implemented so that the entire exercise does not turn into futility.

It may be recalled that the major partners in the PDM government did not honour crucial points of the agreements reached with minor parties.

Published in Dawn, The Business and Finance Weekly, November 20th, 2023