NFC Meets: Pakistan's Fiscal Future Faces Rancorous Debate | Pakistan Today

The highly anticipated inaugural session of Pakistan's National Finance Commission (NFC) recently concluded, marking a critical step toward defining the nation's fiscal future. This pivotal gathering, which itself occurred three and a half months after the commission's formation, followed an even longer delay in its formal constitution – pushing its mandate to deliver a new financial award well past its original 2014 deadline. The initial agenda quickly revealed the complex and often rancorous debates lying ahead.

NFC Meets: Federal Demands Face Strong Provincial Rejection

Early in the proceedings, the federal government tabled a significant proposal: that provinces should assume financial responsibility for key national initiatives. These included the Higher Education Commission (HEC), the vital Benazir Income Support Program (BISP), and various other development projects. This proposition, however, met with immediate and unanimous rejection from provincial representatives, setting a contentious tone for the crucial discussions to follow.

Unpacking Islamabad's Fiscal Dilemma

Islamabad presented a stark justification for its demands, outlining a severe national debt crisis. The federal government highlighted how escalating debt servicing costs were consuming an overwhelming portion of national resources, pushing the country into a cycle where new borrowing was often required merely to manage existing debt obligations. To alleviate this pressure, a "special fund" was proposed, to be financed by deductions from provincial shares, specifically earmarked for these critical expenditures. Yet, this concept gained no traction among the provinces, signaling a deep divide.

The National Finance Commission operates on a consensus-based decision-making model, meaning every significant move requires agreement from all parties. This initial standoff, observed as theNFC meets, underscores the significant hurdles that must be overcome to achieve a new, equitable financial award for Pakistan.

Khyber Pakhtunkhwa's Unique Demands Amplify Fiscal Debates

Beyond the broader federal-provincial financial gridlock, the NFC has established several working groups to delve into specific issues, with one dedicated to Khyber Pakhtunkhwa (KP). KP has presented a series of significant demands, all of which advocate for a special allocation from the Federal Divisible Pool.

Addressing the FATA Merger and Terrorism Funding

A primary demand from KP revolves around securing additional funds to cover the expenses of the former Federally Administered Tribal Areas (FATA), which were integrated into KP in 2018. This merger occurred after the last NFC Award, and historically, the federal government bore these FATA-related costs directly from its share of the Divisible Pool. Consequently, KP now seeks to have this financial responsibility transferred back to the federal level, ensuring sufficient resources for the newly merged districts.

Another contentious item on KP's agenda involves continued and potentially increased financial support for counter-terrorism efforts. This particular demand, however, carries a degree of controversy, as the federal government has previously raised questions regarding the accountability and utilization of past allocations for terrorism-related expenditures in the province. This scrutiny adds another layer of complexity to the negotiation process within theNFC meetsframework.

Navigating Political Undercurrents and the Path to Consensus

The political landscape further complicates the NFC's mission. Given that Khyber Pakhtunkhwa is governed by a major national opposition party, its representatives are widely anticipated to be a significant obstacle in forging the required consensus. Reaching unanimous agreement, a prerequisite for any NFC Award, will likely require extensive negotiations and compromises.

Interestingly, despite the focus on new demands, there appears to be a notable lack of provincial initiative to build upon the innovations of the previous NFC. The last commission had, for the first time, introduced criteria beyond mere population size for the horizontal distribution of the Divisible Pool among provinces, aiming for a more equitable formula. The current silence on this front suggests a potential shift in priorities or a desire to revisit the foundational principles of fiscal sharing.

Setting a Timeline: A Race Against the Fiscal Calendar

Despite the challenges, the NFC has already scheduled its next meeting for mid-January. This proactive scheduling suggests an intent to maintain a steady pace, potentially allowing the commission to conclude its deliberations and finalize a new financial Award by April. Such a timeline would ensure the Award is ready just in time for the commencement of the upcoming fiscal year, a critical deadline for national and provincial financial planning.