Sindh, KP fail to nominate members for NFC

ISLAMABAD: Despite a reminder sent by Minister for Finance Ishaq Dar, the PPP-led Sindh and PTI-led KP governments have not yet nominated their technical members blocking the way for the president of Pakistan to constitute the National Finance Commission (NFC).
The ongoing 7th NFC Award will cease to exist from the next financial year starting from July 1, 2015 so under Article 160 of the Constitution it is now obligatory to constitute the new NFC. The Article 160 of the 1973 Constitution reads out that within six months of the commencing day and thereafter at intervals not exceeding five years, the President shall constitute a National Finance Commission (NFC) consisting of the Minister for Finance of the federal government, the ministers of finance of the provincial governments and such other persons as may be appointed by the President after consultation with the governors of the provinces.
When contacted, Adviser to Finance Ministry Rana Asad Amin, who is also official spokesman, confirmed that Punjab and Balochistan had nominated their members but Sindh and KP did not yet send their nomination to the federal government.
Balochistan nominated Dr Kaiser Bengali in the NFC while Punjab nominated Ayesha Ghauss Pasha. Earlier, KP was represented by Senator Haji Adeel who belongs to ANP so it seems that PTI-led government will replace him. In the last NFC, Dr Kaiser Bengali had represented Sindh and after his nomination from Balochistan, the Sindh will have to nominate its new technical member for representing in the NFC.
When Balochistan’s nominated member Dr Kaiser Bengali was contacted on Monday, he said that the composition of NFC was already delayed so chances seemed dim for composition and then evolving consensus on resource distribution formula between center and provinces and then within the provinces.
The 1973 Constitution, he said, was silent about resource distribution formula after lapse of five years but the government might continue this de fecto NFC award for another one year in case of failing to reach at any consensus.
To another query regarding holding no meeting of Council of Common Interest (CCI), he said that it was clear-cut violation of the Constitution, which binds the government to hold CCI meeting quarterly but three quarters have passed without any meeting of this Constitutional forum.
The IMF in its latest report states that the NFC remained crucial to the fiscal reform process, especially by Commission (NFC) award granted 57.5 percent of the divisible pool of tax revenues to the provinces, up from 45 percent in 2007 and 37.5 percent in 1997.
Although provincial governments, according to the IMF, are responsible for the delivery of a range of public goods and services, the mismatch between expenditure and revenue decentralisation leaves the federal government with a chronic deficit.
Furthermore, revenue effort at the province level is extremely low (generating only 7 percent of total tax revenues), despite the large tax base that falls under their purview including income tax on agriculture and sales tax on services.
While provincial governments have supported fiscal consolidation by maintaining budget surpluses, balancing the devolution of revenue and expenditure responsibilities is a key to attaining sustainable intergovernmental fiscal relations. In this context, the authorities will expand the scope of the upcoming round of NFC deliberations to cover all areas of fiscal management and seek technical assistance from international partners to support this process.
The critical issues for long-term fiscal sustainability across all layers of government are (i) revenue mobilisation by federal and provincial governments in currently under taxed areas, such as agricultural, services and property taxes; (ii) additional financing of high-priority expenditure such as education, health and infrastructure, and (iii) robust public financial management, debt management and procurement systems, the IMF concluded.