President Arif Alvi has constituted the 10th National Finance Commission (NFC) to determine the new resource sharing formula between the provinces and the centre. It is unfortunate that stakeholders have failed to arrive at a new arrangement since the 7th NFC award all the way back in 2010. The new clauses introduced by the president are likely to set the agenda for deliberations.
There is no denying the fact that the federal government has struggled immensely to meet debt obligations. Most of its funds are spent on debt servicing, leaving little financial freedom to undertake other projects. An increasingly belligerent India has now become the 3rd largest military spender in the world with $71bn spent in 2019, according to SIPRI Military Expenditure Database. Therefore, Pakistan simply cannot afford to ignore its national defence needs. Weakness here is bound to invite aggression.
That being said, the federal government should not look solely at provinces to cut their share to fill the gap. Even if they wanted to, there may be constitutional hurdles in place, which may be presented before the superior judiciary even if everyone agreed to play ball. To address that, the parliament is the appropriate forum, not the NFC, which is bound by constitutional rules that clearly define its limited scope.
As for the issue of loss-making public sector enterprise (PSEs), there is little sense in asking the province to share the burden. The aim should always be to either turn them around or privatise non-performing PSEs, which have been poorly run by successive federal governments. The same focus should be applied to highly inefficient bodies like the Federal Board of Revenue (FBR), which has consistently failed to improve the tax-to-GDP ratio. This is where the federal government was supposed to make up the shortfall. By failing here, and losing billions to PSEs, it is now desperately looking towards provinces to compromise. It is hoped that all stakeholders will be able to reach a new, equitable arrangement that will work for everyone.
