Centre vs provinces
DELAYS in budget announcements are normal. After all, it is not easy to satisfy different lobbies competing for a bigger share of the shrinking fiscal pie. But the current impasse is of a different order. It signifies a constitutional and political crisis that the government is struggling to contain. The immediate cause is clear, even if the government is reluctant to state it openly. Islamabad wants the provinces to freeze their share from the federal tax divisible pool unde
Pakistan's federal government is facing a fiscal crisis, leading to a standoff with provincial governments over revenue sharing. Islamabad is pressuring provinces to freeze their share of federal taxes and return any excess funds, in addition to a significant cash surplus they are already required to provide. Provinces are resisting this demand, which stems from the center's inability to broaden its tax base and meet International Monetary Fund (IMF) conditions. The federal government's strategy to meet IMF targets involves reducing provincial resources, as it avoids cuts to defense and civil service expenditures. This approach overlooks the fact that the center has expanded its revenue by collecting taxes outside the divisible pool, a practice that has reduced the share available for provinces.
This situation highlights a fundamental conflict over fiscal federalism in Pakistan, potentially undermining constitutional guarantees of provincial autonomy and impacting long-term economic stability.
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