FISCAL DECENTRALIZATION IN PAKISTAN, REVENUE TRENDS PROVINCIAL SPENDINGS AND NFC AWARD CRITERIA

Abstract

Fiscal decentralization, a concept being practiced globally, is defined as the transfer of responsibilities, with regard to revenue collection and expenditure, from federal to provincial governments, with a view to achieving economic efficiency and improving
governance. In Pakistan, this concept has been realised through the National Finance Commission (NFC) Award, which distributes federal revenue from its divisible pool among the federations and provinces. However, in contrast to NFC’s perceived aim of enhancing provincial autonomy and improving governance (through fiscal decentralization), provincial governments’ dependence on federal fiscal support has not been reduced, as desired. In addition to this continued dependence, provinces have also exhibited very marginal growth/development. Though NFC awards have been formulated very diligently, with the population as its bedrock. Yet, various provinces, besides claiming for unjust fiscal distribution, also point fingers towards the federal government’s various unmanaged/unaddressed issues, like population over-centricity (in NFC), undue federal liabilities, and continued financing of devolved ministries, as a reason for their below-par performance/ governance. Thereby, warranting fresh work on the NFC award, to include various essential futuristic factors, in addition to existing ones, retaining population at its axis. To analyse Pakistan’s fiscal decentralisation framework with special focus on revenue trends, social sector expenditures (health, education), and provincial contributions with a view to recommending a balanced cum futuristic distribution, for the next NFC award.