Dr Hafiz Pasha highlighted that despite the constitution mandating 57.5pc of the divisible pool for provinces, they received just 45.8pc last year after deductions for petroleum levies and cash surpluses
By S.M. Inam
ISLAMABAD: The federal government notified eight committees of the National Finance Commission (NFC) on Tuesday, including one tasked with overseeing debt utilization and the transfer of expenditures to provinces, following the attorney general’s support for the federal government amid objections from Sindh.
The development came as Pakistan’s leading fiscal expert, Dr Hafiz Pasha, highlighted concerns over provincial allocations. Speaking at a seminar organized by the Social Policy and Development Centre (SPDC), he noted that although the constitution requires 57.5% of the divisible pool to go to provinces, they received only 45.8% in the last fiscal year after accounting for petroleum levies and cash surpluses.
Finance Minister Muhammad Aurangzeb, who had initially confirmed attendance at the seminar, did not appear, instead meeting SPDC representatives at his office. SPDC Managing Director Asif Iqbal said the minister had expressed regret for not attending.
The finance ministry said the committees would address eight critical issues shaping the 11th NFC award. The last, seventh NFC award, had been agreed upon unanimously 15 years ago for a five-year period. A working group, headed by Punjab’s finance minister, was formed to make recommendations on sharing federal expenditures in areas under provincial jurisdiction. The formation followed a legal opinion from the attorney general, after Sindh objected, arguing expenditure-sharing fell outside the NFC’s mandate.
Sources indicated Sindh may seek its own legal opinion as the federal government continues spending in areas under provincial control. Dr Asad Sayeed, Sindh’s technical member on the NFC, said the federal government retained ministries linked to devolved subjects and spent Rs328 billion on them, according to a 2023 World Bank report.
Khyber-Pakhtunkhwa Finance Advisor Muzammil Aslam criticized federal policies, citing energy mismanagement that had contributed to over Rs5 trillion in circular debt in the power and gas sector and over Rs5.1 trillion in payments to Chinese power plants.
Other committees have been tasked with reviewing the composition of divisible pool taxes, vertical transfers between the center and provinces, measures to improve the tax-to-GDP ratio, straight transfers of resources to provinces, and the merger of the former FATA region and its NFC share. A separate committee will review national debt composition and its utilization.
