Finance Minister Asad Umar has convened the first meeting of re-constituted 9th NFC on 6th February and negotiations may focus on creation of a 'special pool' for sharing responsibilities of social sector, security and development of special areas jointly from Divisible Pool.
The meeting to be chaired by Finance Minister Asad Umar will receive briefing on fiscal position by provinces as well as the federal government. The meeting will also have general discussion on strategy for deliberations over new NFC award. Invitations to all the members have already been issued to attend the inaugural session.
Sources in the Finance ministry told Business Recorder that Finance Division is considering to propose creation of a 'Special Pool' in the 9th National Finance Commission (NFC) Award to resolve the fiscal imbalance created under the 18th Constitutional Amendment and the 7th NFC Award.
They added that 7th NFC Award shifted the tilt of resources to the province without actually devolving some subjects under vertical programme which caused fiscal problems for the federal government.
Sources further stated that proposal to set up a special pool was brainchild of the caretaker Finance Minister Shamshad Akhtar who had suggested that 6 percent of the divisible pool should be set aside for development of special areas, social protection under Benazir Income Support Programme and security spending.
Senior officials of Finance Ministry revealed in background discussion if the federal government is providing support to the vulnerable, the provinces should also share the burden and agree on setting aside one percent of the divisible pool for BISP to provide support to the vulnerable, two percent for security-related expenditure and three percent for development of FATA. The upcoming meeting on NFC may hold discussion on creation of 'Special Pool' and setting aside resources from Divisible Pool.
The International Monetary Fund (IMF) had 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 NFC Award and the 18th Amendment increased the share of provinces to 57.5 percent 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, the Fund noted.
The government spokesman and minister for information also told media persons during a briefing on federal cabinet meeting held on October 18, 2018 that Prime Minister Imran Khan has directed to speed up the process of NFC Award and to give three percent share to the FATA under the NFC Award by reducing the share of provinces.
The previous finance ministers including Hafeez Sheikh started complaining about fiscal imbalance caused by the 7th NFC Award and stated that the federal government is unable to take care of its fiscal responsibilities. Former Finance Minister Ishaq Dar who was one of the negotiators of 7th award not only complained about the fiscal imbalance but also tried to balance the books by projecting unrealistic provincial surplus in the budget. The 7th NFC Award was implemented in 2010 and 9th NFC award has been overdue since 2015.