DLP Report
PESHAWAR
Adviser to the Chief Minister Khyber Pakhtunkhwa on Finance Muzzammil Aslam, reacting to the 11th NFC, has said that the financial integration of (former FATA) merged districts should be included in the divisible pool, whereas at present the merged districts receive special grants from the federal government.
He said that this step would shift the burden onto the provinces and provide relief to the federal government.
Muzzammil Aslam said that it is hoped that the concerns of the smaller provinces, KP and Balochistan, will be addressed and that the horizontal distribution among the provinces (population, revenue, poverty, and reverse population density) should be improved or redesigned.
He said that new horizontal factors such as climate change, water resources, population control, provincial-level revenue collection, and indicators like the Human Development Index should also be included.
Mr Aslam said that resources included in the non-divisible pool, which the federation transfers to the provinces as subsidies without any set criteria, should be reviewed, as smaller provinces receive a smaller share compared to the larger ones. He said that the expenditures which do not fall under the federation’s responsibility but are being borne by it should be fully transferred to the provinces. And that new avenues should be identified to improve revenue-to-GDP and especially tax-to-GDP ratios.
The CM aide on finance maintained that a serious discussion on the Provincial Finance Commission (PFC) and a review of its current status is needed.
The current expenditures on local governments dominate the provincial budget, at least this is the case in KP yet the development aspect is not fully aligned. He said that the PFC’s own sources of revenue (property, municipal, and excise taxes) are almost neglected beyond the provincial headquarters (Karachi, Lahore, and Peshawar). These could prove to be game-changers for all provinces and consequently for local governments.
The finance adviser said that restructuring and rationalizing federal expenditures, currently a challenge for the federal government’s fiscal discipline, is essential.
Addressing the financial irregularities highlighted in the IMF’s recent corruption diagnostic report could provide the federation with additional resources, instead of tampering with the 57.5, 41.5, and 1 percent vertical distribution. Muzzammil Aslam said that an independent audit of provincial populations should be conducted. Apart from this, more points can also be included.
