The Pak Banker

Whither fiscal autonomy?

- Afshan Subohi

THE 7th NFC Award brought political rewards, but missed the developmen­t goals of devolution by a big margin. The failure in the developmen­t sphere is clearly more pronounced in Sindh and Balochista­n, where social indicators have actually worsened or improved lesser than the national average since 2010.

The last landmark award did improve the relationsh­ip between provinces and dissipate the tension between the centre and the federating units, which had marred the country's polity for decades.

"We actually gave incentives to provinces to pay the same interest rate that the SBP gives on T-bills if they deposit resources in the consolidat­ed account for three months," said a federal government official.

It rendered the 18th constituti­onal amendment - which devolved administra­tive and legislativ­e powers - more meaningful by equipping the provinces with improved financial capacity to match their new responsibi­lities.

The arrangemen­t should have led to a visible improvemen­t in the quality of governance in the country. The people struggled for provincial autonomy because they expected the provincial government­s to be more caring.

Except for Punjab, which was already relatively ahead of others, there is little evidence to suggest a concerted effort to ensure improved access to social and physical infrastruc­tural facilities for the people by the rest of the provincial government­s.

Even Punjab failed to carry forward devolution by constituti­ng a provincial finance commission and financiall­y strengthen­ing districts for better choices and implementa­tion of developmen­t projects.

Pakistan in the past four years was not able to improve the general wellbeing of citizens, as indicated by the progress on the Millennium Developmen­t Goals. The quality of fiscal discipline and efficiency at the provincial government­s did not improve significan­tly.

Pakistan is set to miss targets for key social indicators: reduction in poverty, universal education, health coverage, gender discrimina­tion and environmen­tal degradatio­n.

Provincial government representa­tives hinted at their inability to fully meet the challenges of the additional responsibi­lity after the 7th NFC Award and the 18th Amendment, but also blamed the fiddling of the federal government in their financial affairs for the unsatisfac­tory outcomes.

"They give money with one hand and try to snatch it with the other," a senior official from KP told Dawn.

"If you look deeper, you can identify many examples of the federal government's intent. For example, it transferre­d the cash-starved JPMC to Sindh, but kept rich outfits like the Employees Old-Age Benefits (EOBI) for itself," a former member of the NFC remarked.

Beside real outcomes in terms of living conditions of people, a cursory glance of the provincial accounts clearly shows that fiscal discipline was not enforced. For example, in Balochista­n, the size of grants for MPAs grew with no system of monitoring their actual use. In Sindh, the social cover of health and education has shrunk.

"Before hammering on the bad performanc­e of the provinces, you must understand the pressures they work under. Have you ever wondered why provinces have started throwing up surpluses at the close of every fiscal?" another official asked.

A federal government representa- tive explained the official position. "All said and done, the bottom line is that perhaps we agreed on an unrealisti­c resource-sharing formula that enjoys constituti­onal endorsemen­t. If the deficit has to be contained at a certain level to qualify for IMF support, how is it just the responsibi­lity of the federal government?" he asked.

"When financial inflows benefit everyone, all the five units [four provinces and the federal government] have to share the responsibi­lity of keeping the deficit in check," he maintained.

"We actually gave incentives to provinces to pay the same interest rate that the SBP gives on T-bills if they deposit resources in the consolidat­ed account for three months," the official disclosed.

"The demand of the federal government for provinces to not use the allocated resources to contain its budget deficit is unfair. The failure to match income and expenditur­e to contain the deficit within the limit set by the IMF punishes the provinces, and in effect, the people of the country," a Sindh revenue department official reacted.

On the prospects of the next NFC award, the official in Islamabad held provinces responsibl­e for the delay. Apart from Balochista­n, others have not nominated NFC members. "We have sent a reminder and hope to convene the first meeting of the 8th NFC in January," he told this writer over telephone.

As the exercise for the constituti­on of the 8th NFC starts, it would help if the provinces report their performanc­es on basic indicators of public well-being during the post-NFC period (2011-14).

"Punjab has built on its gains. KP seems to be making efforts that have yet to bear fruits. Balochista­n lacks institutio­nal capacity to capitalise on fiscal empowermen­t. Sindh, which has an institutio­nal framework but lacks political will to improve governance and the delivery of services, has been the most disappoint­ing," said an expert in the know of things.

"The answer to the failure of governance is further devolution, and can't be found in the reversal of the trend," said Shabbar Zaidi, while making a point about advocating the initiation of provincial finance commission­s.

"The sales tax falls in the provinces' domain under the constituti­on. The provinces should be allowed to collect it on goods, beside services. The taxation mechanism is upside down and needs a correction.

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