ISLAMABAD: As the federal government has removed Adviser to Prime Minister on Finance and Revenue Dr Hafez Shaikh from the newly-constituted National Finance Commission (NFC), Prime Minister Imran Khan would now chair the meeting of the commission as the minister in charge.
According to a source in the Finance Ministry, a summary for the meeting of NFC under the chairmanship of the prime minister has been prepared as the adviser cannot even attend the meeting now as a member due to the reconstitution of the commission following strong opposition from provinces like Sindh.
“The summary related to the first meeting of the 10th NFC is likely to be held at the Prime Minister Secretariat instead of the Finance Ministry. However arrangements related to the meeting are being made by the finance ministry,” the source said, adding that the summary was revised multiple times to confusion related to the new body of NFC.
Reportedly, the prime minister wants to hold an NFC meeting soon and has directed the ministry to complete the due process. PM Imran, according to the source, would be the second prime minister to chair NFC after the late Benazir Bhutto as the minister in charge. The NFCs are normally chaired by finance ministers.
Since the constitution does not allow advisers to chair the meeting, Pakistan People’s Party (PPP) and Pakistan Muslim League-Nawaz (PML-N) had strongly objected to the composition of the 10th NFC, in which the adviser on finance was empowered to chair the meeting.
The incumbent government did not make Shaikh a senator to enable him to chair the important body, they said. On July 22, 2020, Shaikh was removed from the chairmanship of the commission after opposition from provinces and Balochistan High Court’s (BHC) verdict against the composition of the NFC.
Since Shaikh’s removal from the commission, matters related to NFC require the approval of PM Imran, who is now also the chairman of the commission.
According to a Finance Ministry’s official, under the existing composition of NFC, letters to provinces are also sent through the Prime Minister’s Office (PMO). Recently the prime minister himself responded to a letter written by the Sindh chief minister, who had raised objections on the new composition of NFC.
While the NFC’s meeting is yet to be held, Pakistan PPP Chairman Bilawal Bhutto-Zardari has accused the Centre of withholding Sindh’s rightful share to NFC Award for last three years several times.
In the last 10 years, the Centre and provinces have failed to reach a consensus which led to both the eighth and ninth NFCs being inconclusive, and the extension of the revenue distribution mechanism set in the seventh NFC Award, which was given by the PPP in 2010.
According to sources, the provinces are also largely in favour of keeping the mechanism of seventh NFC intact, as they are wary of changes in their respective shares due to demographic fluctuations identified in the latest population census.
The 7th NFC Award, after a thirteen-year gap, became effective under PPP’s rule in 2010-11. The NFCs that followed remained indecisive. The award’s noticeable features include the vertical increase in provincial share to 56 per cent in the first year and to 57.5 per cent thereafter.
Under the fiscal mechanism in the 7th NFC Award the federation withholds too little, compared to its colossal needs and financial commitments, forcing it to run a deficit. The federation has to service unilateral and bilateral debt after distributing the due shares of the provinces. The debt servicing only leaves behind a sum that finances a part of the military budget. Non-tax revenue and additional loans fund the remaining expenditures.