PESHAWAR: Adviser to the Chief Minister of Khyber Pakhtunkhwa on finance, Muzzammil Aslam, has emphasized the need to include the former FATA districts in the divisible pool to alleviate the financial burden on the federal government.
In response to the 11th National Finance Commission (NFC) discussions, Muzzammil Aslam stated that the financial integration of the merged districts should be incorporated into the divisible pool. Currently, these districts receive special grants from the federal government.
He argued that this change would shift some of the financial responsibility to the provinces and provide relief to the federal government.
Aslam expressed hope that the issues faced by smaller provinces, such as Khyber Pakhtunkhwa and Balochistan, would be addressed. He called for improvements or redesigning of the horizontal distribution of resources among provinces, taking into account factors like population, revenue, poverty, and reverse population density. Additionally, he proposed incorporating new factors into the distribution criteria, including climate change, water resources, population control, provincial-level revenue collection, and indicators such as the Human Development Index.
Furthermore, the Khyber Pakhtunkhwa finance adviser noted that resources currently allocated in the non-divisible pool, which the federation transfers to the provinces as subsidies without clear criteria, should be reviewed. He pointed out that smaller provinces receive a smaller share compared to larger ones. Aslam suggested that expenditures not under the federation’s responsibility should be fully transferred to the provinces and that new avenues should be identified to enhance revenue-to-GDP and tax-to-GDP ratios.
Muzzammil Aslam highlighted the need for a serious discussion regarding the Provincial Finance Commission (PFC) and a review of its current status. He mentioned that local government expenditures dominate Khyber Pakhtunkhwa’s provincial budget, but the development aspect is not completely aligned with these expenditures. He underscored that the PFC’s potential sources of revenue, such as property, municipal, and excise taxes, are often neglected outside major provincial headquarters like Karachi, Lahore, and Peshawar. Utilizing these sources could be transformative for all provinces and local governments.
Aslam further stated that restructuring and rationalizing federal expenditures, a pressing 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, rather than altering the current vertical distribution of 57.5%, 41.5%, and 1%. He advocated for an independent audit of provincial populations and suggested that additional points of consideration could be included. The overarching goal is to elevate underdeveloped areas to the same level as the rest of Pakistan, eliminate irregularities, and reduce the pressure on federal expenditures.
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