Tackling federal-province share

February 11, 2019

Despite provincial opposition to finance additional federal responsibilities, the reconstituted 9th National Finance Commission (NFC) has agreed to base next resource distribution award on sixth population census of 2017.  Financial matters within federations if remain unsettled can trigger ill feeling with the federation. A positive reward criteria should be introduced in the NFC formula for improving social variables; provincial per capita income and efforts to improve social variables like, education and healthcare should be added and encouraged in the NFC formula. The important issue that remains is how to reduce the poverty gap in the least developed areas such as Balochistan, KPK’s FATA and the rest of Pakistan. The allocation and execution of development funds which if remain unchecked may lead to social problems such as deprivation among the youth and intra provincial conflict. With the induction of FATA there is need for NFC awards, its proper allocation and ratio to be adjusted. Balochistan has lot of potential for improvement. NFC award holds a strategic significance. The award held in 2009 meant to resolve disputes through an approved upgraded formula for distributing the resources. According the new formula the following weights were agreed: population 82 percent which was possible only after Punjab agreed to its reduction, poverty and backwardness given 10.3 percent, revenue collection or generation five percent and inverse population density 2.7 percent. The above formula meant that the share for Punjab plunged the most, while that of Balochistan rose meaningfully, Sindh’s share has like always remained nearly the same. The share for Sindh which has remained leveled since 1990s implies that Sindh has little motivation to progress. Punjab then was dissatisfied over total federal share nearing 44%. However, PML-N government which later came in center, switched stances, and their finance minister wanted greater share (6-7pc increase from 44pc) in the federation’s share on account of security needs and the needed funds for Gilgat Baltistan–Azad Kashmir region. Despite increase in the share of Balochistan, and urban Sindh, little improvement was registered in both these regions. Gilgit-Baltistan remained neglected according to some, while the issue to raise additional 6-7pc for security remained unsolved. The proposal to increase federal government share in NFC for security need, according to a few was raised for political reasons which led to undesirable tension between the political government and the security agencies. The NFC is the only forum which constitutionally allows the division of resources or finances among the federation and provinces. Introduced in the constitution under Article 160 it puts binding conditions on what resources, taxes, duties, or revenues could be placed in the divisible pool to be distributed among the provinces through a developed formula. So, tackling federal-province share within the constitution is a must.


The important issue that remains is how to reduce the poverty gap in the least developed areas such as Balochistan, KPK’s FATA and the rest of Pakistan.