KP seeks greater input in fiscal policies – Pakistan

• Aurangzeb visits Peshawar to thank provincial govt for IMF support, agrees to ‘gradually’ end Fata tax exemptions
• CM’s aide tells minister newly-merged districts require immediate financial support

PESHAWAR: The Khyber Pakh­tunkhwa government on Wednesday asked the federal government to take it on board regarding financial decisions concerning the province, as it sought an interim arrangement for the share of erstwhile Fata region in the National Finance Commission Award.

Finance Minister Muhammad Aurangzeb reportedly agreed to the suggestion of the Khyber Pakhtunkhwa government to end tax exemptions for the merged districts in a phased manner to offset the impact of this decision.

Speaking to Dawn, KP Adviser to Chief Minister on Finance Muzzammil Aslam said they took up the province’s issues with the federal minister, but there was no agenda for the ‘productive and cordial’ meeting.

Mr Aslam said the issue of tax exemptions for the merged areas was taken up during the meeting and it was pointed out that the issue was hurting the economy. As per the CM’s aide, the KP officials said that the federal government should take the lead on this issue by taking all the stakeholders on board.

He said usually the federal government announced decisions in the budget without taking them on board, which often resulted in an uproar. He said that the KP side asked the federal minister to take the KP chief minister on board before making such a decision, who in turn could sit down with the relevant stakeholders to provide a conducive environment. He said the federal minister assured them that he would start this process from the finance ministry.

Mr Aslam said they also asked the federal finance minister for an interim arrangement for the merged areas’ share in the National Finance Commission Award. The minister said the issue of the funds would be taken up with the planning ministry.

Besides, Mr Aslam said that they also took up the issue of pension reforms and stressed the importance of consultations before announcing salary raises for government employees. He said the finance minister also thanked the provincial government for meeting targets under the IMF deal. During the meeting, Mr Aurangzeb also commended Khyber Pakhtunkhwa on its efforts to implement the National Fiscal Pact and Agricultural Income Tax. He assured the federal government would address Khyber Pakhtunkhwa’s concerns regarding the NFC Award.

Muzzamil Aslam expressed concerns over the federal government’s decision to withhold funds allocated for the merged districts under the Annual Development Program (ADP) and the Accelerated Implementation Program (AIP). He emphasised that the merged districts required immediate financial support to meet their expenses, which exceeded their allocated budget. He also stressed the need for provinces to be taken into confidence on tax collection, pension, and salary matters before the next budget.

The finance minister was accompanied by the state minister and FBR officials while the KP team included the provincial excise minister, chief secretary, and finance secretary among others.

Meeting with governor

Finance Minister Aurangzeb and Minister of State for Finance Ali Pervaiz Malik also visited the Governor House and discussed economic issues with Governor Faisal Karim Kundi, APP reported.

During the meeting, Governor Kundi raised concerns regarding the release of NFC Award funds and development funds for the merged districts by the federal government. The discussion also covered the business community’s and tribal residents’ reservations regarding the implementation of taxes in the merged districts.

Governor Kundi emphasised that the timely release of promised development funds was crucial to integrating the merged districts into the national development framework.

In response, Finance Minister Aurangzeb reaffirmed the federal government’s commitment to supporting KP’s economic growth. The meeting concluded with a shared commitment to ensuring economic stability and financial support for the province, particularly for the development of the merged districts.

Mr Aurganzeb also visited the Sarhad Chamber of Commerce and Industry and asked them to share their concerns and proposals in writing with them. SCCI president Fazal Muqeeem told Dawn they will share their proposals with the finance ministry over the coming days in a meeting in Islamabad.

In his address at the SCCI, the federal minister said the economy had stabilised due to the federal government’s policies and economic reforms. According to a statement issued by the finance ministry after the meeting, FM Aurangzeb said the government was moving forward under a comprehensive strategy to expand the tax net and make Pakistan an export-oriented economy.

The tax system has been simplified, and a tax policy office will be activated in a few days to facilitate traders, industrialists, and the business community. The minister said that information technology and digitalisation had been introduced in the FBR to ensure transparency in financial matters.

The finance minister said that the private sector has to play a leading role in promoting business and industrialisation in the country, especially in mineral-rich Khyber Pakhtunkhwa and Balochistan.

Published in Dawn, February 27th, 2025