Can institutional reform be financially sustainable?
A serious provincial-reform proposal needs a fiscal model before a political slogan can become an implementable design.
The NFC framework
Article 160 provides for a National Finance Commission and recommendations on distribution of specified federal taxes between the Federation and Provinces, grants-in-aid, borrowing powers and related financial matters.
Questions a province model must answer
- What recurring revenues would the proposed unit have?
- What expenditure responsibilities would it inherit?
- How would federal transfers be allocated?
- What happens to existing provincial assets and liabilities?
- What are the one-time costs of establishing institutions?
- How would equalization and less-developed areas be treated?
- What borrowing and debt-management rules would apply?
Revenue and expenditure are different questions
A territory may have substantial economic activity without having the same fiscal capacity as a government responsible for a full set of provincial functions. PPRI therefore separates economic size, own-source revenue, transfers and expenditure obligations.
Transition budget
A proposed reform should publish a transition budget covering institutional setup, buildings, personnel, information systems, vehicles, legal administration, security, records, elections and other one-time costs. Recurring expenditure should be shown separately.
Primary fiscal source: Ministry of Finance, Government of Pakistan, National Finance Commission material and Article 160 of the Constitution.