A few days ago, the federal government was struggling to get the budget approved. One major reason was the need to meet IMF conditions. Another was the disagreement between the Centre and the provinces over the distribution of tax revenues. Since the 18th Amendment, the provinces’ share in national resources has increased, while the federal government’s share has declined. This has remained a source of tension for some time. Before this budget, too, there was no significant progress on a new National Finance Commission award.

For the first time in this budget, the provinces helped the federal government meet its expenses through grants as federal govt is facing difficulties in meeting defence and debt related expanses. To make this possible, cuts were made in provincial Annual Development Programmes, or ADPs. Punjab faced the largest reduction in its development budget, while Sindh and Khyber Pakhtunkhwa also saw cuts in their ADPs.

The 18th Amendment, the NFC Award and the financial resources available to the provinces are now once again at the centre of national debate. One important reason for this renewed discussion is the World Banks’s report “Strengthening Fiscal Federalism in Pakistan”. The report says that after the NFC Award, provinces did receive greater financial resources, but a large part of this increase was spent on government........

© The Friday Times