The Fiscal Coordination Committee (FCC) has approved grant of incentives to provinces for generating a budget surplus to assist the federal government in meeting the challenge posed by an unsustainable budget deficit. This was originally proposed by a sub-committee with the direction of further refinement, if required, in the procedure/ process in consultation with provinces.
A senior official said that the incentive was similar to what was decided by the Council of Common Interests (CCI) in 2013. The provinces were allowed rate of return on their surpluses, to be maintained for a minimum of three months, at the last T-Bill rate. The last incentive grant received by the provinces was in April 2016, said an official of Finance Ministry, with Punjab receiving Rs 574.6 million, Sindh Rs 440.7 million, Khyber Pakhtunkhwa Rs 411.3 million, while Balochistan's share was Rs 787.9 million - around five months before the completion of the $6.4 billion Extended Fund Facility Programme.
A meeting of the fiscal coordination committee was chaired by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh and attended by the four provincial finance ministers on Saturday. Chief Minister of Sindh attended as he also holds the portfolio of Finance.
The four finance ministers considered the incentive grant recommendations of the FCC sub-committee on Public Finance Management Reforms under Performance for Results Program. A statement issued after the meeting stated that the federal government will provide grants to provinces, through the incentive grant system, subject to fulfillment of certain baselines in the public finance management and social sector developments, especially in health and education sectors.
The meeting also reviewed the bi-annual implementation of the National Finance Commission Award for the period January-June, 2018 and approved the report for presentation to the Parliament and Provincial Assemblies.
The meeting was attended by senior officials of the Ministry of Finance and Finance Departments of the provinces and AJ&K attended the meeting. The Fiscal Coordination Committee is a forum constituted by the CCI for the purpose of ensuring cooperation and coordination among the federating units on fiscal matters.
Advisor to the Prime Minister on Finance along-with the Chief Minister Sindh and Provincial Finance Ministers of Punjab, Khyber Pakhtunkhwa and Balochistan also held a joint meeting with the IMF Mission led by Ernesto Ramirez Rigo.
Finance Ministry said that the participants exchanged views on the existing fiscal situation of the country in the context of the Fund program currently under discussion. The mission was apprised that the federal and provincial governments were constantly engaged in fiscal matters and the National Finance Commission (NFC) and the Fiscal Coordination Committee (FCC) forums were being used for ensuring maximum cooperation and coordination between the federal and provincial fiscal authorities.
The Provincial Finance Ministers apprised the mission of various initiatives taken in their respective provinces for resource mobilization at the sub national level to cater for the increasing developmental and social spending needs.
They further stated that the revenues from taxation had witnessed a marked improvement recently. The provinces also maintained that they were managing their expenditures prudently for better fiscal outcomes. They assured the mission that the provincial governments would support and complement the efforts of the federal government to adhere to the fiscal framework being discussed with the Fund.
The IMF Mission was encouraged by the shared thinking at the Federal and Provincial levels. The Mission leader appreciated the updates provided by the provincial governments. He highlighted the importance of a harmonized system of taxation that would contribute towards increasing economic activities and business growth in the country.
The meeting was attended by senior officials of Finance Division as well as Provincial Finance Departments. Talking to media persons after the meeting with the IMF and Advisor on Finance, Chief Minister Sindh Murad Ali Shah said that they have held separate meetings with the Adviser on finance and IMF mission and advisor acknowledged that pressure on provinces due to shortfall in tax collection.
Shah added that IMF mission has been informed that provinces tax collection is relatively better whereas Sindh tax collection is much better. Shah said that there is need on the part of federal government to increase the tax collection and improve the slow down of economic growth.
Chief Minister Khyber Pakhtunkhaw Teynour Jhagra that meeting with the IMF was very positive and stated that he was hopeful of an early agreement with the Fund. He said that provinces discussed with advisor on Finance on matter related to fiscal discipline. Hafeez Shaikh said that provinces gave their recommendations during the meeting of fiscal coordination committee and discussion with the IMF was held on measures to increase the tax collection and economic indicators.
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