Islamabad( The COW News Digital)Planning Minister Ahsan Iqbal has proposed to urgently review the National Finance Commission award and suggested freezing the population number at 241.5 million and including indicators such as water and climate vulnerabilities for the purpose of money distribution among the federating units.
Iqbal made the recommendations to Prime Minister Shehbaz Sharif, urging him to review the 15-year-old award that has outlived its five-year constitutional life and requires a revision to ease “acute stress” on the federal government. The president of Pakistan is extending the award every year due to a disagreement between the provinces and the Center over the new formula.
The recommendation has been made at a time when the 10th National Finance Commission has expired on July 21st and the Finance Ministry, which is the Secretariat to the Commission, is in the process of forming a new Commission.
Sindh has retained Asad Sayeed and Khyber-Pakhtunkhwa might again be represented by Musharraf Rasool Cyan in the 11th Commission. Nasir Khosa may represent Punjab as its technical member but there is no official notification yet, which has to be issued after the approval of the president of Pakistan. Balochistan has nominated Mr Farman.
The planning and development minister has proposed new multi-criteria, for the distribution of resources by focusing on development-oriented formula instead of demographic-dominated award.
The minister has suggested to the prime minister that the population numbers should be frozen at the latest census (241.5 million) and its weightage should be reduced from the current level to promote population stabilisation.
The 82% of the NFC is distributed on the basis of the population among the provinces, which is an incentive against controlling the population and exaggerating the number too.
Pakistan’s annual population growth rate is 2.6%, which is near the annual economic growth rate and is highly unsustainable. The current horizontal distribution is heavily weighted (82%) towards population.
While population is an essential indicator, this creates adverse incentives against population control and penalizes provinces with better demographic management, stated Iqbal.
The planning minister has also recommended including provincial revenue performance as a new criterion to distribute resources. He has written that there is a need to reward provinces with higher tax-to-GDP ratios and stronger digital tax infrastructure.
Provinces do not have incentives to expand their narrow tax bases and heavily rely on their shares under the NFC.
The minister has also proposed including environmental resilience as a new criterion by adding indicators such as forest cover, climate adaptation investments, and reforestation efforts.
According to another important recommendation, Human development outcomes should be linked with transfer of resources and the province should prioritize education, health, and gender equity.
The Constitution requires all the five governments to unanimously agree on the new formula and even if one government disagrees no change can be made in the award.
