Dr. Raza Rahman Qazi
The distribution of financial resources between various tiers of the government can always be a contentious issue. Relatively speaking, the challenge is not so daunting in culturally homogenous states like Germany and England. Multi-ethnic states like Pakistan and India have to deal with the political dimension as well.
In Pakistan, for instance there is a perception that Khyber Pakhtunkhwa and Balochistan have suffered on account of an unfair distribution of resources resulting in greater poverty and backwardness in terms of economic and social development.
Khyber Pakhtunkhwa’s case is rather unique. It is the only province whose area and population have increased on account of a constitutional amendment (when former Federally Administered Tribal Areas were merged into the KP in May 2018). KP has also suffered the most on account of terrorist and extremist violence.
The 18th Constitutional Amendment and the 7th National Finance Commission award resulted in a substantial increase in the provincial share of the federal divisible pool. The Concurrent Legislative List was abolished and the relevant subjects/ departments were devolved to the provinces. Simultaneously the provinces’ share in the divisible pool rose from 49 percent to 57.5 percent.
The 7th NFC Award gave the KP an additional 1.80 percent share on account of being most affected by terrorism, increasing its overall share to 16. 42 percent.
In May 2018, the FATA was merged into the KP so that its area and population increased significantly. (According to 2017 national census, the population of FATA was 4,993,044.) Considering population has been the main criterion in determining provincial shares (with an 82 percent weight), this should have been accompanied by an enhancement in the KP’s share. However, this did not happen. Instead, special grants for the FATA were proposed to be continued. Based on the existing population the province’s share should have increased to 19.6 percent. However, it has been receiving only 16. 42 percent.
In 2018, the federal government had promised to provide an additional 3 percent to the KP. However, when the federal government made a request to the provincial governments of the Punjab, Sindh and Balochistan to take a cut in their existing shares, the provincial governments refused to oblige. This has caused serious problems for the provincial government and the people of the KP.
The provincial government recently proposed a re-allocation of provincial shares to account for the population and area of the merged districts. The recommendation was approved at the 11th meeting of the provincial cabinet presided over by Chief Minister Ali Amin Gandapur.
Meanwhile, there has been a significant increase in poverty in the province generally and in the merged districts particularly. The incidence of poverty was nearly 50 percent according to 2016 Multidimensional Poverty Index report of Pakistan. The economic downturn over the last two and a half years has hit the people really hard.
The 7th NFC award gave a 10.30 percent weight to poverty/ backwardness of a province for the allocation of financial resources. The merger of FATA with KP has increased poverty and backwardness in the province since the FATA is the most backward region in the country.
According to some estimates, the economic losses in the KP due to terrorism and counterterrorism operations over the last 20 years amount to over $100 billion.
The KP government recently proposed a fresh determination of the provincial shares by a new National Finance Commission. The recommendation was approved at the 11th meeting of the provincial cabinet presided over by Chief Minister Ali Amin Gandapur.
According to the provincial government, its recommendations include an interim adjustment to bring the 7th NFC Award in compliance with the constitution and a recalculation of KP’s share by accounting for additional area, additional population and recent losses on account of terrorism and militancy.
The federal government has been providing traditional grants for the ex FATA districts. The provincial government claims that the deficit in financing of administration of the tribal districts during the last three years had totalled more than Rs 150 billion.
A realistic assessment of the KP’s share of federal resources is the need of the hour. Without it the province as well as the country will face monumental challenges.
