Gilani writes off Rs 17.5 billion Balochistan overdraft

ISLAMABAD: Prime Minister Yousuf Raza Gilani directed the authorities on Thursday to immediately freeze the payment of a Rs 17.5 billion State Bank overdraft payable by the Balochistan government and then write it off after six months as the Centre assured the province that a new five-year National Finance Commission (NFC) Award would be finalised before the announcement of the 2009-10 budget. Addressing a high-level meeting to look into Balochistan’s financial difficulties at Prime Minister’s House – Gilani said the federal government would now be responsible for the payment of the overdraft. “Moreover, from the next year, the Federal Public Sector Development Programme (PSDP) for Balochistan will be expanded considerably,” he said. NFC: Talking to Daily Times, the Balochistan finance minister confirmed that Adviser to Prime Minister on Finance Shaukat Tareen had “assured us that a new NFC award would be finalised before the budget of 2009-10”, at the meeting. According to official sources, the federal government is consulting provinces to develop a political-level consensus on a revenue-sharing formula for the federal government and the provincial governments. Similarly, the basis for revenue sharing among the four provinces is also being negotiated with the chief ministers. Punjab has already proposed that 20 percent revenue be shared among the provinces on the basis of multiple factors, while the remaining 80 percent be shared on the basis of population to boost the share of smaller provinces. Sindh, NWFP and Balochistan are likely to make final comments on the proposal during negotiations to be held over the next three months. The three provinces have been demanding that revenue be shared among provinces on the basis of multiple factors instead of population alone. The new NFC award, if agreed before the announcement of the budget, would be based on new projections agreed between the Centre and the federating units, said the official sources. The Centre has already re-constituted the National Finance Commission to finalise the next NFC award. The NFC would also finalise a new mechanism for provincial borrowing from the federal government and interest payments with revised terms and conditions. NFC would also facilitate the provinces to agree on a distribution mechanism for royalty on crude oil production and surcharge on gas production.