ISLAMABAD  -   Meeting of the National Finance Commission held here Wednesday agreed that fiscal allocation among the centre and the provinces should reflect the true spirit of the 18th Amendment.

Finance Minister Asad Umar chaired the first meeting of the reconstituted 9th NFC Award.

Sindh Chief Minister Murad Ali Shah, Punjab Finance Minister Makhdoom Hashim Jawan Bakht, KP Finance Minister Taimur Saleem Khan Jhagra, Federal Secretary Finance, provincial members, provincial secretaries finance and senior officials of the Ministry of Finance attended the meeting.

The meeting also formed six subgroups to put forward proposals for Fata affairs, ease of doing business, macro-economic issues and horizontal and vertical distribution of resources.

The 9th NFC will be required to give 8th NFC award for five years.

The meeting discussed financial position of the provinces and the centre with various recommendations put forward for better distribution of national resources under the new NFC award. The meeting also emphasised on complete data sharing amongst the federal and provincial governments.

The meeting decided to form six sub-groups to make proposals/recommendations on macroeconomic framework and benchmarking, to be coordinated by Punjab; vertical distribution of the divisible pool taxes between federation and provinces including needs of AJ&K and GB to be coordinated by federal government; horizontal distribution of divisible pool taxes amongst the provinces to be coordinated by Baluchistan; straight transfers to be coordinated by Baluchistan; measures required to be taken to simplify tax procedures and payment systems to facilitate businesses to be coordinated by Sindh and integration of Fata in Khyber-Pakhtunkhwa to be coordinated by KP.

Asad Umar welcomed the participants to the meeting and said that the NFC had been tasked under the Constitution with amicable distribution of financial resources among the federation and the provinces, and as such, its effective role had an important bearing on overall national cohesion, he said. He said that apart from distribution, the NFC should also address critical issues related to developing a sustainable fiscal structure for centre as well as the federating units. It should also address the social development and poverty alleviation challenges and facilitate the private sector with a view to foster economic development opportunities for the general public.

The meeting also reviewed recommendations for better distribution of national resources under new NFC award. The last NFC award was signed in December 2009 that drastically increased the provincial share from the divisible pool. Under the 7th NFC Award, the federal government is bound to transfer 57.5 per cent resources to the four provinces from federal divisible pool. Under the current award, Punjab gets 51.74pc share, Sindh 24.55pc, KP 14.62 per cent and Balochistan 9.09pc under the divisible pool.

Federal Secretary Finance Arif Ahmad Khan briefly recounted the history of NFC awards and shared with the participants details on fiscal position of the federal government. He apprised the meeting about federal fiscal operations and net revenues of federal and provincial governments.

Provincial ministers/secretaries Finance gave the meeting update on their fiscal position and also in the process dilated on issues faced by them in different spheres due to resource constraints. The ever-rising burden of pension payments, allocation for Fata and need for improved coordination on data sharing were highlighted. They also shared with the meeting proposals on transfer of funds as well as possible future models of revenue generation. Representative from Baluchistan highlighted the fiscal challenges and the progress being made by the province through interprovincial cooperation and support. He also emphasised better and increased use of automation for revenue generation.

KP raised the issue of net hydropower profit and difficulties being faced on account of funding required for retirement benefits of employees. Secretary Finance Punjab called for improved coordination between federal and provincial authorities for timely data sharing. Member Sindh pointed out less transfers made under the heads ‘straight transfers’ and proposed that data on this account might be shared with the provinces. The participants laid emphasis on smooth vertical and horizontal transfer of funds. The participants also emphasised on the need to end regional disparities.

Chairman FBR on the occasion briefed the meeting on revenue generation/tax collection in the current financial year. The participants of the meeting were of the opinion that both the federal government as well as the provinces were under-resourced and that additional revenue was needed to meet expenses in different realms including socio-economic development activities. The need was also felt for more clarity on revenue projections by the FBR so that the provincial governments could plan adjustments in expenditure accordingly.

It was decided that the next NFC meeting will be convened after 6 weeks at Lahore. NFC Secretariat at the Ministry of Finance will be further strengthened for better coordination amongst the sub-groups. The meeting expressed agreement to Finance Minister Asad Umar suggestion for including the provinces in the process of dialogue with the IMF with regard to the fiscal targets over the medium term. Finance Minister called upon all the members to contribute their best towards formulating a new NFC award in future.