PAKISTAN has recently constituted its 11th National Finance Commission (NFC) to develop a new Award for the sharing of divisible resources between the centre and the provinces. Fiscal federalism arrangements were last significantly reformed over 15 years ago and are overdue for an update.

Fiscal federalism arrangements determine how public money is raised, divided and spent across federal, provincial and local governments. They directly shape whether schools have teachers, whether health clinics have medicines, whether each tier of government is adequately resourced, and whether the 3.5 million Pakistanis entering Pakistan’s labour force annually can find productive work.

The 2010 reforms (the 18th Constitu­tional Amendment and the 7th NFC Award) were a step forward, shifting significant resources and responsibilities to the provinces. But as discussed in our new World Bank report, Strengthening Fiscal Federalism in Pakistan, they have not delivered as intended. The report provides recommendations to address these issues.

First, financing has not followed function. The federal government transferred a larger share of revenue to the provinces but did not reduce its own spending........

© Dawn