EDITORIAL: Minister for Finance Muhammad Aurangzeb while presiding over a meeting on National Health and Population Policy for 2025-34 emphasized the need to reduce the weightage of population in the National Finance Commission (NFC) award, which currently stands at 82 percent with only 18 percent for other factors; notably area, poverty and revenue generation capacity.
Rewarding population in a country where the growth rate continues to strain the healthcare system while compromising the ability to feed, clothe, house and provide water and energy to the rising numbers.
High population also contributes to ecological degradation, increases risks of large scale disasters, and last but not least, leads to a worsening law and order situation.
This lopsided weightage in the NFC was secured on 30 December 2009 in the seventh NFC award after considerable debate between the then two major national parties; notably, the PPP at the centre and the PML-N in Punjab, with the latter finally conceding to reduce population share from 100 percent to 82 percent with 10.3 percent allocated for backwardness, 5 percent for revenue (Sindh’s demand) and 2.7 percent for Inverse Population Density in return for reportedly changing the constitution to allow for a third time prime minister.
It is relevant to note that nearly all subsequent finance ministers, including Ishaq Dar, who reportedly negotiated the seventh award on behalf of the PML-N, reject the award between the federal government and the provinces on the grounds that this has disabled the federal government from meeting its annual expenditures, which has raised the country’s indebtedness manifold – a charge that ignores the fact that parliament approved the eighteenth constitutional amendment in the first quarter of 2010, which should be considered in conjunction with the NFC award, that envisaged devolution of subjects to the provinces including education, healthcare, etc., which disturbingly are not fully devolved to this day.
The NFC award determines the distribution of resources from the divisible pool of taxes between the federal government and the province. Prior to 1996, the federal government’s share was 20 percent as opposed to the provinces’ share of 80 percent; however, in 1996 during civilian dispensation the federal government began to appropriate 62.5 percent of resources from the divisible pool while provincial share reduced to 37.5 percent – a distribution that changed late 2009 when the federal share was 42.5 percent and the provincial share was 57.5 percent.
Needless to add, the federal government has, under the auspices of the ongoing International Monetary Fund programme, pledged to reduce the federal workforce considerably and streamline ministries as well as devolve those subjects that were agreed under the eighteenth constitutional amendment.
While there is considerable resistance to this proposal by powerful labour unions in government offices yet one must appreciate this effort and hope for success in implementation. But this has to be accompanied by the penchant of the federal government to reduce its current expenditures that have been rising exponentially every year.
In the budget for 2024-25, current expenditure was raised by 21 percent from the previous year, a raise that is baffling, to say the least, given the extremely narrow fiscal space.
And it is this constant rise that has prompted administrations, including the incumbent one, to rename/misname some taxes in an effort to circumvent them being included in the divisible pool and notable amongst these is the petroleum levy which is levied in the sales tax mode but is parked under other taxes that are not part of the divisible pool.
There is, therefore, the need to revisit the devolution process and speed it up while at the same time the provinces should be held more accountable for their own revenue generation measures as well as current and development expenditures to limit the federal government’s expenditures to largely defence and debt servicing with the latter coming down every year as the need to borrow recedes.
Copyright Business Recorder, 2025
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