ISLAMABAD   -  The federal government Wednesday asked the provinces to nominate their members for the reconstitution of 9th National Finance Commission (NFC) to devise a revenue-sharing formula between the Centre and the four provincial governments.

Federal Minister for Finance, Revenue and Econom0ic Affairs Asad Umar wrote letters to all the provincial chief ministers for the reconstitution of the 9th National Finance Commission (NFC). The NFC is required to be set up at intervals not exceeding five years under clause (1) of Article 160 of the Constitution. The federal finance minister and the finance ministers of the provinces are the statutory members of the NFC. It is customary to include one non-statutory member from each province.

Letters were dispatched to Sardar Punjab Chief Minister Usman Buzdar, Sindh Chief Minister Syed Murad Ali Shah, KP Chief Minister Mahmood Khan and Balochistan Chief Minister Jam Kamal Khan. The letter states that after general elections 2018, new governments are in place both at the federal and provincial levels, necessitating re-confirmation of non-statutory members from the provinces.

The federal finance minister asked the provincial chief ministers to either reconfirm the earlier nominated members or intimate any change in the nomination to enable the federal government to notify the 9th NFC and start deliberations.

The five-year constitutional term of the previous NFC award expired on June 30, 2015. The PML-N government had failed to constitute the new NFC award during its tenure despite the demanded of the provinces, especially Sindh and Khyber Pakhunkhawa. However, the previous government had not paid any heed to the concerns of the provincial governments for making fresh revenue-sharing formula in last couple of years.

The PML-N government extended the previous 7th award for consecutive three years. Under the 7th NFC Award, the federal govt is bound to transfer 57.5 percent resources to all the four provinces from federal divisible pool. Under the current award, Punjab gets 51.74pc share, Sindh 24.55pc, Khyber Pakhtunkhwa 14.62 percent and Balochistan 9.09pc under the divisible pool.

The International Monetary Fund (IMF) and economic experts believed the government would have to remove the flaws in the NFC award to control the soaring budget deficit of the country. Under the NFC award, the federal government is required to transfer 57.5 percent of the federal taxes to the four provinces. The federal government has to meet the expenditures of debt servicing, defence, development, pensions, salaries and others through the remaining 42.5 percent of the taxes. Ultimately, the federal government needs borrowing to meet the deficit which goes out of control.

The IMF and former finance minister Dr Miftah Ismail had already expressed reservations over the NFC award, a resource-sharing formula between the federal government and the provinces. According to the IMF, the 7th NFC Award resulted in an unbalanced and less flexible intergovernmental fiscal framework. It recommended that next NFC award should aim to strengthen macroeconomic stability and increase efficiency, flexibility and responsiveness of the fiscal framework. Although the constitutional nature of some parameters of Pakistan’s fiscal decentralisation framework constrains near-term options, improvements can be considered within the current legal framework.