Finance Minister reaffirms govt’s commitment towards working with IMF on reform agenda
ISLAMABAD
The International Monetary Fund (IMF) on Thursday called upon Pakistan to reopen discussions on the National Finance Commission (NFC) award, seeking to address the ongoing imbalance in the distribution of fiscal resources between federal and provincial governments.
During the opening round of discussions for a $1.1 billion loan tranche, Nathan Porter, the IMF Mission Chief to Pakistan, raised concerns over the distribution of resources and responsibilities, underscoring the need for a more equitable arrangement. Representing Pakistan in these talks was Finance Minister Muhammad Aurangzeb. The IMF emphasised the need to reassess the NFC award, citing disparities in resource allocation between federal and provincial authorities.
Finance Minister Muhammad Aurangzeb has expressed government’s commitment towards working with IMF on the reform agenda for economic growth and stability of Pakistan.
He expressed this resolve, while talking to IMF mission head Mr. Nathan Porter, who called on him in Islamabad today.
The IMF mission head congratulated the Finance Minister on his appointment.
Discussions were held on the overall macro-economic indicators, government’s efforts on fiscal consolidation, structural reforms, energy sector viability, and State Owned Enterprises governance.
The Finance Minister thanked the IMF for their continued support and hoped for productive meetings during the second review.
The IMF mission is in Pakistan to conduct the second review of the Standby Arrangement.
The current formula, established in 2010, resulted in provincial shares increasing from 47.5% to 57.5% of total federal taxes, without a commensurate transfer of additional responsibilities.
This has led to a sustained fiscal imbalance and a rise in public debt. The Pakistani authorities informed the IMF that the provincial shares cannot be reduced without bringing a constitutional amendment and making all the provinces agree to a new formula.
The 2010 NFC award had been agreed for a period of five years but since then there has not been any consensus to revisit it. Addressing the challenge of garnering provincial support for reforms, particularly within a politically diverse landscape, presents a formidable task for the coalition government.
Despite possessing a two-thirds majority necessary for constitutional amendments, securing agreement from all four provincial governments remains uncertain, with parties such as the Pakistan Peoples Party (PPP) advocating strongly for the NFC award.
The Khyber-Pakhtunkhwa government is controlled by the Pakistan Tehreek-e-Insaf (PTI).
