A meeting of the National Finance Commission (NFC) has agreed to include the provinces in the process of dialogue with International Monetary Fund (IMF) for fiscal targets over the medium-term. The first meeting of the 9th NFC award, chaired by Finance Minister Asad Umar, agreed to the suggestion of the federal finance minister for including the provinces in the process of dialogue with IMF with regard to the fiscal targets over the medium-term.
An official said that the fiscal deficit is a grave challenge and provinces' role becomes critical for achieving it after the 7th NFC award that shifted the tilt of resources to the provinces.
The meeting also formed six sub-groups to make proposals/ recommendations on; (i) macroeconomic framework and benchmarking, to be coordinated by Punjab, (ii) vertical distribution of the divisible pool taxes between federation and provinces including needs of AJ&K and GB to be coordinated by the federal government, (iii) horizontal distribution of divisible pool taxes amongst provinces to be coordinated by Balochistan, (iv) straight transfers to be coordinated by Balochistan, (v) measures required to be taken to simplify tax procedures and payment systems to facilitate businesses to be coordinated by Sindh and, (vi) integration/ merger of FATA in Khyber Pakhtunkhwa to be coordinated by Khyber Pakhtunkhwa.
Finance Minister Asad Umar welcomed the participants and stated that NFC has been tasked under the Constitution with amicable distribution of financial resources among the federation and the provinces, and as such its effective role has an important bearing on overall national cohesion.
He said that apart from distribution, the NFC should also address critical issues related to developing a sustainable fiscal structure for Centre as well as the federating units. It should also address the social development and poverty alleviation challenges and facilitate the private sector with a view to fostering economic development opportunities for the general public.
The finance secretary apprised the meeting about federal fiscal operations and net revenues of federal and provincial governments while provincial ministers and secretaries finance updated the meeting on their fiscal position and also in the process dilated on issues faced by them in different spheres due to resource constraints.
The increasing burden of pension payments, allocation for FATA and need for improved coordination on data sharing were also highlighted.
The provinces also shared with the meeting proposals on transfer of funds as well as possible future models of revenue generation. The representative from Balochistan highlighted the fiscal challenges and the progress being made by the province through inter-provincial cooperation and support. He also emphasised better and increased use of automation for revenue generation.
Khyber Pakhtunkhwa raised the issue of net hydel profit and difficulties being faced on account of funding required for retirement benefits of employees.
The secretary finance Punjab called for improved coordination between federal and provincial authorities for timely data sharing.
The member Sindh pointed out that less transfers were made under the heads for "Straight Transfers" and proposed that data on this account may be shared with provinces.
The participants laid emphasis on smooth vertical and horizontal transfer of funds. The participants also emphasised on the need to end regional disparities. The chairman Federal Board of Revenue (FBR) briefed the meeting on revenue generation/tax collection in the current financial year.
An official said that Chief Minister Sindh Murad Ali Shah inquired from the chairman about the projection of revenue for next five months so that provinces could make their adjustment accordingly.
The chairman FBR told the meeting that six-month revenue projection (January -June 2019) stands at Rs 2,603 billion.
The participants of the meeting were of the view that both, the federal government as well as the provinces, were under-resourced and that additional revenue is needed to meet expenses in different realms including socio-economic development activities. The need for more clarity on revenue projections by FBR was also emphasised because this would enable the provincial government to make adjustments in their planned expenditure accordingly.
It was also decided that the next NFC meeting will be convened after six weeks at Lahore, while NFC Secretariat at the Ministry of Finance will be further strengthened for better coordination amongst the sub groups.
Those who attended the meeting included Chief Minister Sindh, Murad Ali Shah, Finance Minister Punjab, Makhdoom Hashim Jawan Bakht, Finance Minister KP Taimur Saleem Khan Jhagra, federal secretary finance, provincial members, provincial secretaries finance and senior officials of the Ministry of Finance.