The PTI-led Khyber Pakhtunkhwa government has warned that it will approach the Supreme Court if the center fails to convene the National Finance Commission (NFC) by April 2025.
The KP government has termed the existing NFC ultra vires to the Constitution and set April 25 deadline for the federal government to convene and finalise the NFC Award before the upcoming budget.
The finance department of the KP government organized a policy dialogue on the NFC Award and way forward here on Monday. Policymakers, economists and stakeholders attended the event to discuss the future prospects of the NFC.
It was argued during the discussions that the macroeconomic realities had changed manifold but the resource distribution formula remained stagnant for the past one and a half decade, requiring revision to incorporate changes that occurred on the macroeconomic front.
With major changes occurring on the macroeconomic front, the NFC formula has not been updated accordingly, hence the need to discuss the introduction of reforms on fiscal decentralisation.
Chief Minister Ali Amin Gandapur demanded that the NFC Award be updated to reflect post-merger scenario of erstwhile FATA with Khyber Pakhtunkhwa. In case of failure to convene the Commission, he warned KP would give a surprise in May 2025.
The Apex Committee, he said, had already accepted his request for initiation of working for re-constitution and convening the 10th NFC Commission, adding that he was optimistic about it.
He lamented that the federal government had not so far provided the due share in the operational and salaries expenditure to be given to the law enforcement forces working in ex-FATA. He was of the view that the KP’s share in the federal divisible pool (FDP) had gone up, as the population of the province had gone up by 5.7 million (3 percent surge) and its land area expanded by 22,000 square kilometers (3.8 percent) after the merger.
“Our share in the NFC Award should have gone up from 14 percent to 19.6 percent, yet the province has not received its due share,” he added. Out of total commitment for provision of Rs100 billion for accelerated development in merged districts, Gandapur said the center must have provided Rs600 billion in the last six years but only Rs132 billion was released.
In addition, the province receives only Rs66 billion annually instead of the committed Rs88 billion for operational expenses in these districts. The chief minister mentioned the provincial government’s efforts to raise resources and stated the provincial government increased its revenue by 55%, cleared Rs75 billion in outstanding dues from the previous administration, and established Pakistan’s first Debt Management Fund, initially allocating Rs30 billion with plans to raise it to Rs150 billion.
The chief minister criticised the federal government for avoiding its constitutional responsibility and warned that if a new NFC Award was not announced by April, KP will take decisive action in May.
Muzammil Aslam, Advisor to the Chief Minister on Finance, shared historical and constitutional context of the NFC Award, followed by a presentation from secretary finance, providing an overview of the NFC fundamentals.
The first panel discussion, moderated by Hassan Khawar who featured insights from experts and policymakers, focusing on the NFC formula and economic resource distribution.
Dr Ahsfaque Hassan Khan highlighted that population was always exaggerated for claiming higher share in NFC and stressed depoliticization of NFC. Tobais, lead economist from the World Bank stressed on improving the weaknesses in federal level and institutional improvement.
Dr. Luay Shabaneh from UNFPA, emphasised the linking of NFC with service delivery at the gross root level and separation of political issues from the division of resources.
Dr Kaiser Bengali, former Member NFC Balochistan, also explained that new factors needed to be added in the division of NFC share but there was a dire need for reducing the expenditures at the provincial level.
Asad Umar, former finance minister, stated that every effort was made at that time to bring consensus on NFC; however, the same could not be materialized due to political differences.
Shabbar Zaidi, former chairman FBR, explained that the federal government was grabbing illegal share in form of petroleum levy which was against law and justice. He also explained that the taxes at provincial level like property tax and excise had huge potential for generating revenues to the province.
