Fiscal Decentralization in Pakistan: 7th NFC Award as Case Study

Abstract

The globalization and its associated challenges have transformed the concept of decentralization from mere business of local government to a broader concept of Governance. By transferring payments to lower tiers of government, the central government actually tries to involve all federating units in economic development of the country. After independence, the Government of Pakistan adopted the colonial fiscal structure for payments and grants between the Centre and provinces but this mechanism could not be put into practice due to undemocratic political culture. The resource distribution formulas were often condemned by the smaller provinces being unjust. After enactment of 18th amendment to the 1973 Constitution, provinces were given more financial and administrative autonomy through 7th NFC Award based on the criterion of population, backwardness and inverse population density (IPD). This study finds that the constitutional reforms and 7th NFC award has strengthen the perception about provincial autonomy but due to capacity issues, benefits of fiscal decentralization could not be achieved in Pakistan.

Keywords: Fiscal Federalism and Decentralization, Provincial Autonomy, NFC Award, Pakistan.