ISLAMABAD: With two smaller provinces — Khyber Pakhtunkhwa and Balochis­tan — pitching demands for higher resources to address their peculiar deprivations, the inaugural meeting of the 10th National Finance Commission (NFC) on Thurs­­day constituted six sub-groups to prepare sectoral recommendations.

Presided over by Finance Minister Dr Abdul Hafeez Shaikh, the meeting did not set a schedule for future meetings or deadlines for completion of studies on six thematic topics and agreed to hold discussions in future if certain terms of reference (TORs) of the NFC were outside its constitutional mandate.

The participants also noted mounting pension liabilities as a major concern and agreed to adopt a common way forward through detailed consultations. Sindh disagreed to share expenditure for tribal region and showed reservations over some TORs.

Secretary Finance Kamran Ali Akmal will coordinate two working groups on National Economic Deve­lopment Framework or Macroeconomic Framework and vertical distribution (between the centre and provinces) of resources under the divisible pool. All the provinces would be part of the group.

Each provincial finance minister will coordinate four other groups with representation from all stakeholders. Sindh would lead the group on straight transfers, given its higher share on account of oil and gas related resources. The group on horizontal distribution of resources (among the four provinces) will be conducted by Balo­chistan because the province demanded 15pc share out of the divisible pool instead of existing 9.09pc.

KP was assigned the leadership role on development and upgradation needs of the merged districts of formerly Federally Adminis­tered Tribal Areas (Fata) and thus additional resource requirement. Punjab would be leading the group on ease of doing business and tax harmonisation across the country.

Some provinces express­­ed reservations over one or two items of the TORs, particularly relating to sharing of fiscal responsibilities on debt servicing, mega federal development projects, security and Fata merger.

It was agreed not to make it a sticking point and make up minds for discussions on the issue for the next meeting.

Mr Hafeez told journalists that all participants had a consensus that the NFC was a constitutional forum which should move forward on important issues in an amicable manner to meet expectations of all of its participants. He said the meeting was explained that all TORs of the NFC were in line with the constitutional parameters and any adjustment has to remain within those boundaries.

In response to a question Sindh Chief Minister Murad Ali Shah said the story of insufficient capacity for utilisation of additional re­­sources under the 7th NFC award was no more relevant but disbursement of funds under the provincial shares by the federal government was such that his province had to invariably face a situation on 30th of each month as to how much overdraft was required to pay salaries.

Mr Shah said the actual problem was that FBR collections in last two three years had been lower than fiscal year 2017 at around Rs3.9tr while the requirements of all provinces and even the centre had gone up.

Published in Dawn, February 19th, 2021