ISLAMABAD: The IMF might provide technical assistance (TA) to the government on the resource distribution formula under the National Finance Commission (NFC) Award, keeping in view the experience of different comparable economies of the region and world.
The Ministry of Finance has prepared its preliminary report and found that the last NFC Award struck 15 years ago resulted in piling up of the overall debt burden of the country, mainly because the fiscal deficit widened in this period, leaving no other avenue but to borrow more to finance the emerging liabilities of the expenditure front.
The absolute numbers and as a percentage of GDP, the debt ballooned up to unsustainable levels. There is no other room but to tweak with the existing resource distribution formula on a vertical and horizontal basis.
Top official sources said that the Ministry of Finance has not yet made any formal request to the International Monetary Fund (IMF). One top official, when contacted by The News on Wednesday, stated that the IMF might be ready to provide technical assistance if requested by the Ministry of Finance. Neither side has yet conducted any discussions on the issues of distribution of resources into the Federal Divisible Pool (FDP) under the NFC Award.
The proposed 27th Constitutional Amendment would also tackle the resource distribution formula vertically among the Centre and the provinces and horizontally within the provinces. The Centre wants a slashing of the financial share of the provinces, which under the 7th NFC Award was increased up to 57.5 per cent and in totality it went up to 60 per cent after incorporation of subvention and grants on a per annum basis.
Now the Centre wants a reduction in the share of the provinces so that the share of the Centre could go up. However, under the 18th Constitutional amendments, there is a protection to the share of the provinces that it cannot be reduced, so in case of any reduction in the share of the federating units, this protection clause of the 18th Constitutional amendment will have to be altered to enable a reduction in the financial share of the provinces.
On a horizontal basis, the criteria of resource distribution within the provinces will be altered as it is the proposal to reduce the weightage of population, which is standing at 82 per cent. The weightage of other criteria included poverty and backwardness of 10.3 per cent, revenue collection or generation 5 per cent and Inverse Population Density (IPD) 2.7 per cent.
Out of the total Federal Divisible Pool (FDP), the provinces will get their 57.5 per cent share, out of which 51.74 per cent belongs to Punjab, 24.55 per cent to Sindh, 14.62 per cent to KP and 9.09 per cent to Balochistan.
