Mohsin Siddiqui (Chief Reporter)
The federal government is contemplating sharing the burden of debt servicing and electricity circular debt with the provinces. This consideration comes after the provinces firmly refused to revisit their share under the National Finance Commission (NFC) Award, which was increased to 57.5 percent in 2010. The federal government is left with a mere 42.5 percent of the divisible pool, making it challenging to sustain interest payments and manage the burgeoning circular energy debt.
The discussions with officials from the finance ministry revealed a general consensus that provinces should shoulder some of the federal government’s financial burdens, particularly concerning debt servicing and electricity circular debt. This suggestion arises from the increased provincial share under the 2010 NFC Award.
With the federal government’s share significantly reduced, maintaining financial sustainability has become increasingly difficult. The rising interest payments and the ever-growing circular energy debt are no longer manageable solely by the federal government. The fiscal strain necessitates a re-evaluation of financial responsibilities between the federal and provincial governments.
Former State Minister for Finance Dr. Aisha Ghaus Pasha highlighted the complexities of reaching a new consensus on the NFC Award. She stated that an agreement among all provinces and the federal government is essential, yet highly unlikely. The provinces remain steadfast in their stance, unwilling to compromise on their enhanced share from the divisible pool.
Dr. Pasha acknowledged the federal government’s concerns about its decreasing share under the 2010 NFC Award. However, she proposed alternative solutions to address this issue. Instead of revisiting the provinces’ share, she suggested the federal government should consider devolving various ministries and divisions as outlined in the 18th Constitutional Amendment.
Dr. Pasha recommended several measures to improve the federal government’s fiscal health. These include reducing government expenditure by rightsizing the administration, implementing pension reforms, and enhancing debt management strategies. By adopting these measures, the federal government could alleviate some of its financial pressures without altering the current NFC Award framework.
She further advocated for fiscal decentralization to the district level, arguing that greater accountability in expenditure could be achieved. Despite being envisioned in the last NFC Award, fiscal decentralization remains incomplete as resources have yet to be transferred to the district level. Dr. Pasha emphasized that this transfer requires strong political will to materialize.
