National Finance Commission Award And Fiscal Deficit
National Finance Commission Award And Fiscal Deficit: All economic ills in Pakistan are shaped by fiscal deficit as it has widened the gap between income and expenditure which has almost gone upto Rs 2trillion. Pakistani government is planning to fix a target for its revenue collections upto Rs 4.5 trillion for the year 2018-2019. The government has been claiming 5.8pc deficit for 2016-17 against the 3.8pc budgeted target. Fiscal deficit in the first quarter of 2017-18 has already crossed 1.2% of GDP compared to 1.3% of GDP in the same period last year stated by the IMF report.
Main Reasons of Fiscal Deficit
- 7th National Finance Commission (NFC) award gave 57.5% share to provinces the root cause of the fiscal problem.
- Due to the 18th Constitution Amendment which empowered provinces, financial resources were spend with any direction and learning
Due to the above reasons Ministry of Finance has claimed that the federal treasury got deflated. For the current fiscal year, the federal government under the National Finance Commission (NFC) Award is extending Rs2.4 trillion to the provinces and retaining just Rs1.6 trillion to manage other responsibilities.
Without addressing the NFC issue, fiscal problems will continue to surge and in the absence of a certain strategy, the current account deficit cannot be reduced which is widening due to unequal imports and declining exports.
The interim government and the new elected government will have a huge task to address the issue of double deficits. The manipulated figures would not do the help in tackling serious economic challenges.
Major economic indicators including imports and exports, fiscal and external deficits, revenues and FDI are deteriorating; the government is showing 14% industrial growth. But the origin of this growth has not been shown in statistical details.
In order to deal with the fiscal deficit issue political resolve with structural reforms might prove helpful. Experts also suggests that through better governance, simplifying the taxation system and introducing a value-added tax the government can attract more investment which might pave a way to take the country out of economic instability.
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