EDITORIAL: The federal cabinet took note of the absence of any mechanism to evaluate how provinces spend money from the divisible pool for the benefit of the people which was identified by the Minister for information Shibli Faraz as money spent on providing social sector services to the people of their province including clean drinking water, healthcare etc. Faraz further contended that subsequent to the passage of the 18th Constitutional Amendment in 2010, which rendered the reduction of the share of any province in the National Finance Commission (NFC) award relative to the previous award unconstitutional - para 160 (3A) - issues had been raised whose resolution was absolutely essential.
Pakistan is a federation and the NFC award in 2010 was considered a landmark in the country’s history as it not only sought to financially empower the provinces through: (i) allocation of greater share from the divisible pool with multiple criteria with Punjab agreeing to multiple indicators including poverty (long standing demand of Balochistan), revenue generation (long standing Sindh demand), population and inverse population density (against the focus on population alone as in previous awards); and what is ignored not only by those who were party to the 7th NFC award, the PPP and the PML-N administrations, but also by the incumbent government (ii) that a basic premise of the 7th NFC award was to increase tax revenue by one percent per annum. Had the government achieved this target then revenue would have been 20 percent of GDP or around 4.4 trillion rupees additional revenue collections instead of the 9 percent of GDP achieved; and (iii) failure to slash current expenditure notwithstanding the credible claims by the government that there has been a marked reduction in the outlay for the cabinet in general and the Prime Minister House’s and Presidency’s annual budgets in particular and freezing of civilian and military salaries this year because government data (summary of consolidated federal and provincial budgetary operations) reveals that total current expenditure rose from 1.58 trillion rupees in July-September 2019 to 1.96 trillion rupees in the comparable period of this year.
The preset government would have to amend the constitution, which requires a two-thirds majority that the government does not presently enjoy, in order to reverse article 160 (3A). Its main architect Pakistan People’s Party’s Raza Rabbani has repeatedly argued that the 18th Constitutional Amendment was a careful balancing of not only economic but also simmering political reservations of the smaller provinces on previous NFC awards and any attempt to amend it would restore those reservations.
The International Monetary Fund (IMF) in its June 2019 documents on the 6 billion dollar Extended Fund Facility (EFF) programme sadly mentions the need to revisit the award in para 16: “in the context of the ongoing NFC award the federal and provincial governments will seek to make progress on measures aimed at better rebalancing inter-governmental relationships and improve inter-provincial horizontal equity.” Opposition leaders as well as several government ministers accused the signatories to the agreement on Pakistan’s behalf, as signing off on a clause that violated the constitution; however the parliamentarians were assured that no such agreement had been reached – a claim that is contrary to the Fund’s document uploaded on its website. One would hope that the Prime Minister looks into this aspect of the agreement signed with the Fund and takes appropriate mitigating measures.
The federal government also extends funds to provinces over and above their NFC awards leaving little for itself, Faraz added. Precisely, how a provincial government decides to spend its revenue stream is its prerogative. Political parties’ manifestos with respect to expenditure priorities are quite distinct - the PPP focused on spending on the farm sector (with allegations that the beneficiaries were mainly its own parliamentarians), the PML-N on physical infrastructure (with accusations of nepotism in the award of contracts and a cut) while the PTI government’s focus is on Ehsaas Programme. Thus to dictate expenditure priorities to any party is unlikely to bring them on the same page. The only way to influence provincial expenditure is to garner public support for one set of allocations over another. Political parties, particularly PML-N, PPP and PTI, must not lose sight of the fact that only healthy relations between Islamabad or Centre and provinces can ensure unhindered development across the country.
Copyright Business Recorder, 2020
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