FinMin Muhammad Aurangzeb hints at reviewing NFC award

WASHINGTON: Finance Minister Muhammad Aurangzeb has hinted at reviewing National Finance Commission (NFC) award, the allocation of revenues between the Centre and the provinces, once International Monetary Fund (IMF) approves the new loan programme, ARY News reported on Saturday.

Article 160 of the Constitution governs the NFC award. Section 3A of the article says: “The share of the provinces in each award of National Finance Commission shall not be less than the share given to the provinces in the previous award.”

The traditional population-based criteria for the horizontal distribution of resources amongst the provinces was changed to a multiple-criteria formula. According to this criteria, 82pc distribution was made on population, 10.3pc on poverty and backwardness, 5pc revenue collection/generation, and 2.7pc on inverse population density.

Recently, reports circulated that IMF had asked Pakistan to reopen discussions on the NFC award, seeking to address the ongoing imbalance in the distribution of fiscal resources between federal and provincial governments.

Speaking to a Turkish news outlet, finance minister Muhammad Aurangzeb – who is in the US capital with his team to participate in the IMF and World Bank’s meetings – noted that Pakistan needs to review it in the context of 18th amendment where a lot of stuff has been devolved to the provinces.

“It is a discussion which we will have with the provinces… in terms of either expenditure sharing or requesting them to incentivise to bring up the tax base, because the reality is, after the 18th amendment and the NFC award, some of the sectors which need to be brought in a much bigger way into the tax net are actually provincial markets,” he said.

“Whether it’s agriculture, real estate, property construction, we can help support systems, but it is for them to actually go ahead and do it,” Aurangzeb said, adding he has already engaged with the chief ministers of Punjab and Sind provinces with respect to starting the dialogue.

Referring to new loan programme, Aurangzeb said Pakistan is requesting a “larger and longer” multi-billion-dollar loan programme from the International Monetary Fund (IMF) and discussions are underway with the Fund’s officials.

The finance minister said once the mission is back in Islamabad “we are going to agree on the priorities and the principles.”

Earlier in the day, it was reported that Pakistan has made a formal request to International Monetary Fund (IMF) for seeking the next bailout package in the range of $6 to $8 billion under the Extended Fund Facility (EFF).

According to sources, Pakistan has submitted two applications seeking assistance from the International Monetary Fund (IMF) under two heads – extended fund facility (EFF) and additional climate financing.

Pakistan has submitted two applications seeking assistance from the global lender under two heads – extended fund facility (EFF) and additional climate financing.

The international lender has reportedly approved Pakistan’s request for to USD 8 billion loan under Extended Fund Facility (EFF).

Islamabad is currently awaiting the release of $1.1 billion under the stand-by arrangement (SBA) which was inked during the last days of the PDM-led coalition government and remained effective from July 1, 2023 to March 31, 2024.

Pakistan hopes to agree the contours of a new International Monetary Fund loan in May, Finance Minister Muhammad Aurangzeb told Reuters, and has kicked off talks with ratings agencies to lay the groundwork for a return to international debt markets.