Finance Ministry may propose the creation of a 'special pool' in the 9th NFC Award to resolve the fiscal imbalance created under the 18th Constitutional Amendment and the 7th NFC Award. Sources in the finance ministry said that transfer of a significant amount of resources to the provinces without actually devolving some subjects under vertical programme has created serious fiscal problems for the federal government.
According to sources, the then caretaker Finance Minister Shamshad Akhtar proposed setting aside 6 percent of the divisible pool for development of special areas, social protection under Benazir Income Support Programme and for security spending.
If the federal government will provide some support to the vulnerable, the provinces also need to share the burden and one percent of the divisible pool may be proposed to be set aside for BISP, for providing support to the vulnerable, 2 percent for security-related expenditure and 3 percent for development of FATA.
As the Sindh government has nominated its non-statutory member to represent the province in the NFC meeting, sources further stated that Finance Ministry will raise these issues during negotiations on the 9th NFC Award to strike a balance between finances and responsibilities.
The International Monetary Fund (IMF) also highlighted the problem in the footnote of the final staff level report under Extended Fund Facility (EFF) dated mid 2016 that "the most recent National Finance Commission (NFC) award and the 18th constitutional amendment grant 57.5 percent of most revenues to the provinces, along with devolution of spending responsibilities and sales taxation authority in services in addition to the existing taxation authority in agriculture and property. In the current round of NFC negotiations, the federal government will seek an agreement to better balance devolution of revenue and expenditure responsibilities, in a way that is consistent with the objective of macroeconomic stability".
Minister for information told a media briefing after the cabinet meeting dated October 18 2018 that Prime Minister has directed to speed up the process of NFC Award and to give three percent share to the FATA under NFC Award by reducing the share of provinces.
Finance Minister Hafeez Sheikh was the first to complain about fiscal imbalance after the 7th NFC award during the Pakistan People's Party-led coalition administration and his successor Finance Minister Ishaq Dar who was one of the major negotiators of the NFC award tried to balance the books by projecting unrealistic provincial surplus in the budget. Provincial surplus has been estimated at Rs 285.6 billion for the current fiscal year.
The 7th NFC Award was implemented in 2010; it decreased the federal government share of the divisible pool to 42.5 per cent and increased the provinces' share to 57.5 percent.