The four provinces have cumulatively received additional revenues amounting to Rs1.9 trillion in the past ten years under the 7th National Finance Commission award — up by nearly 300% — a huge sum that the Centre believes is not spent on the economic and social wellbeing of the people effectively.
This has caused a debate about the effectiveness of fiscal and administrative autonomy granted to the provinces post-18th Constitutional amendment and the 7th NFC Award, leaving the federal government in heavy indebtedness.
“The fiscal decentralisation has benefited neither the Centre nor the people,” said Federal Minister for Inter-Provincial Coordination Dr Fehmida Mirza on Thursday.
“The 18th Amendment was not for the benefit of the rulers as its objective was to provide its benefits to the people of Pakistan,” she said.
“The provincial governments have received trillions of rupees since 2010 but the money is not reaching to the people,” the minister added.
The additional resources are given under the 7th NFC Award that increased the share of the provinces from 46.5% of the FBR’s revenues to 57.5% in 2010.
The Ministry of Finance statistics showed that before the 7th NFC award, the four provincial governments received Rs643 billion in fiscal year 2009-10. The amount has tripled to Rs2.52 trillion at the end of last fiscal year – an additional transfer of Rs1.9 trillion in the past ten years.
“Where is this huge money going when the people in the provinces are not timely vaccinated and also do not get quality education?” questioned the minister, who also had set up an implementation of the 18th amendment committee as the then speaker of the National Assembly.
“In the absence of effective provincial finance commissions, the NFC money is wasted,” said Dr Mirza, who was the first woman speaker of the National Assembly.
She frequently referred to various articles of the Constitution that talk about social-economic right of the people, education for all and empowering the people through local government elections and the PFCs.
The trillions of rupees were transferred to the provinces as a result of the 7th NFC but the provincial governments did not set up the provincial finance commissions to spend the money on the people, said Dr Mirza.
The Centre had convened a maiden meeting of the NFC for Thursday that has now been rescheduled for 18th of this month.
The finance ministry data showed that Punjab’s share jumped from Rs325 billion in 2010 to Rs1.2 trillion by June 2020 – an increase of Rs872 billion or 268%.
Sindh’s share during the period increased from Rs197 billion to Rs630 billion – a jump of Rs433 billion or 220%.
Khyber-Pakhtunkhwa received Rs80 billion in 2010. However, the amount has increased to Rs402 billion at the end of the last fiscal year — a surge of Rs322 billion or 400%.
The Balochistan government was the major beneficiary. Its share in 2010 was just Rs40 billion that has increased to Rs291 billion –an increase of Rs251 billion or 628%. This is due to the fact that Balochistan receives its share on the basis of projected FBR’s revenues as against actual receipts.
“One needs to ask where the 10% additional allocations for less developed areas of the country are spent,” said Dr Mirza.
During the past ten years, the provincial tax collection increased from a mere Rs67 billion to Rs609 billion – an increase of 800%. However, this was because of the fact that under the 18th amendments, the right to collect taxes on services has been surrendered to the provincial governments.
Yet, the national tax-to-GDP ratio (federal and provincial both), which was 10.1% in 2010 remained shy of 11% as of end of last fiscal year. The provincial tax-to-GDP ratio was 0.4% in 2010 that is still 0.9% in 2020.
Dr Mirza said that the provinces have to work under the “cooperative federalism”, as Pakistan is not a confederation.
She emphasised the need of having effective local governments and meaningful provincial finance commissions.
Article 140-A2 of the Constitution of the Islamic Republic of Pakistan entrusts the provinces with the responsibility of establishing local governments that would have power to manage their financial matters along with other functions.
Dr Mirza said that the responsibilities were transferred to the provinces in 2011 without building their capacities first. As a result, the then federal government had to re-establish the divisions that had been transferred to the provinces under the 18th Amendment, said the IPC minister.
Both the committees set up to ensure implementation on the 18th Amendment and the legislative committee could not be able to diligently perform their tasks, said the minister.
The 18th Amendment has been used as a political slogan without the provincial governments fulfilling their responsibilities.
Dr Mirza, who was speaker of the National Assembly when both the houses of parliament passed the 18th Amendment with over two-thirds majority, said there were two basic objectives of the 18th Amendment.
The first objective was to restore the true spirit of the Constitution, and the second was to remove a sense of deprivation among smaller provinces and backward areas of the country. “Unfortunately, both the objectives could not be achieved.”