No immediate change to NFC under fiscal pact: Aurangzeb

ISLAMABAD: Without changing the NFC at the first stage, Minister for Finance Mohammad Aurangzeb Wednesday said the National Fiscal Pact among the Centre and the provinces would create a fiscal space by shifting the provincial nature development projects to federating units.

He further said that the National Fiscal Pact would focus on three major areas, including raising tax revenues through close coordination such as slapping Agriculture Income Tax (AIT) by the provinces, devolving expenditures such as shifting provincial nature development projects to the federating units from the Public Sector Development Program (PSDP) and thirdly improving governance through collaborative efforts.

“At the first stage, there will be no changes in the National Finance Commission (NFC) Award at the moment but the fiscal space will be created through shifting provincial nature projects from the PSDP to the federating units. For instance, the Higher Education Commission (HEC) related spending will be shifted to the provinces. Benazir Income Support Program (BISP) has not yet been taken as discussions are still underway,” he said while talking to a select group of reporters after launching the Pakistan Economy Dashboard.

The National Fiscal Pact, he said, was a step in the right direction. The minister said that the federal government’s PSDP stood at Rs1,100 billion but the two largest provinces’ ADPs were more than Rs2,000 billion. After this diversion of projects to the provinces, he hoped the fiscal space would be made available but he showed reluctance to share any projected figures.

Earlier, in his address on the launch of “Pakistan Economy Dashboard”, the minister said, “Pakistan’s economy is at a good place and there is a need to leverage this position for achieving permanence.” He mentioned that the stabilization was achieved and now the focus will be on the growth path. He said debt management rejected bids for provision of borrowing in recent weeks conveying a clear message that the government was no more a desperate borrower.

The inflation, he said, had receded more than expectation and the government was no more desperate for borrowing. The banks, he said, would have to go out for finding out borrowing from the private sector, which is known as the engine of growth. There is not only policy rate but it’s the KIBOR (Karachi Inter-Bank Offered Rates) which plays an important role for increased borrowing for the private sector.

The minister said there was a need to leverage hard earned macroeconomic stability for achieving economic growth on sustained basis. “We will continue undertaking structural reforms for improving tax to GDP ratio,” he said and added that there was a need to avoid the populist approach. He said it was a fantastic opportunity and termed it the “defining moment” for the country, as it could become the last program of the IMF. It depends upon how the country will execute these reforms agenda.

He said digitisation in the FBR could not succeed so far because the data was not integrated. He said a lesson was learnt through digitisation in the FBR as for finding out new filers in the tax system, the dots were not connected properly despite having all kinds of flow of data.

He said it was a good move where the government placed one window shop for sharing collaborative approach to share economic and social sector data of the last fifty years.

Ali Pervez Malik, Minister of State for Finance, said the IMF program under the Extended Fund Facility (EFF) would create solid grounds for improving economic fundamentals. He said the economy dashboard would help achieve an inclusive growth, overcome twin deficits and bring out the country from the mantra of boom and bust cycles.