ISLAMABAD: The International Monetary Fund has urged Pakistan to reopen discussions on the National Finance Commission (NFC) award, as per government officials.
This call was made during initial talks as part of the second review of the $3 billion standby-arrangement (SBA) between Pakistan’s finance ministry and the IMF mission to the country.
Approval from the IMF is crucial for Pakistan to access a $1.1 billion loan tranche. However, Pakistan is also looking towards securing a new long-term IMF program to bolster its economy in the future.
Nathan Porter, the IMF mission chief to Pakistan, expressed concerns about the allocation of resources and responsibilities during the discussions.
Government sources revealed that the IMF stressed the importance of reassessing the NFC award due to the discrepancies in resource allocation between federal and provincial authorities.
Under Article 160 of the Constitution, the president is authorized to endorse the distribution of revenues between the federation and provinces through an order known as the NFC Award, upon the recommendation of the NFC.
Previously, some politicians have advocated for a review of the NFC award, citing concerns about the diminishing funds left for the federal government after allocation to provinces.
The current formula, established in 2010, has seen provincial shares increase from 47.5% to 57.5% of total federal taxes, without a proportional transfer of additional responsibilities.
This imbalance has contributed to sustained fiscal challenges and a rise in public debt, according to reports.
The newly formed government informed the IMF that reducing provincial shares would require a constitutional amendment and unanimous agreement from all provinces on a new formula.
Although the 2010 NFC award was initially agreed upon for a five-year period, there has been no consensus to revisit it since then.
Sources suggest that the IMF’s demand for discussions on the NFC award is tied to the conditions for the new program, as Pakistan has met the requirements set during the last review of the $3 billion arrangement.
I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.
