Govt striving for consensus on resource distribution

ISLAMABAD
In the aftermath of notifying reconstitution of National Finance Commission (NFC), the government has convened its maiden session on May 18, 2015 in order to make last ditch effort for evolving consensus on resource distribution formula among Center and provinces just ahead of next budget 2015-16.
“Yes, the Finance Ministry has notified the 8th NFC after presidential order and convened its first meeting on May 18, 2015 in Islamabad in order to make efforts for devising new resource distribution formula,” one top official of Finance Ministry confirmed to The News here on Wednesday.
The official said that the Finance Ministry on Tuesday notified reconstitution of NFC. Now the meeting was convened in third week of May because the country’s economic team was scheduled to hold next review talks with the IMF in Dubai from May 1 to 9, 2015 in order to convince the Fund for release of 8th tranche under $6.64 billion Extended Fund Facility (EFF).
However, Sindh’s Member into NFC and Senator Saleem Mandviwalla is not optimistic about any possibility for striking consensus over the formula going to be implemented from the next budget.
“It is most likely that the government will promulgate presidential order to extend the existing National Finance Commission formula for one more fiscal year 2015-16 as chances are quite bleak to evolve consensus just two weeks ahead of the next budget,” he said while talking to The News here on Wednesday night.
Sindh, he said, would raise the issue of import of LNG during the maiden session of NFC which was being imported at over 8 dollar while Sindh was giving royalty of just 2 dollars on its gas. He questioned that why such important issues were put outside the NFC domain?
He said that Sindh would also demand inclusion of revenue generation into resource distribution formula instead of giving more weight to only population criteria.
Into the NFC, Punjab will represent Ayesha Ghous Pasha, KP Professor Ibrahim, Balochistan Dr Kaiser Bengali and Sindh Saleem Mandviwalla.
As the budget preparation process for next fiscal year 2015-16 has already been kick-started, so hopes for achieving any consensus on 8th National Finance Commission Award seem quite difficult.
“It is highly likely that the President will have to issue interim order for continuation of existing NFC Award for another fiscal year in order to distribute the financial resources among the Center and four provinces,” said the official sources.
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.