POLITCAL ECONOMY OF FISCAL DECENTRALISATION IN PAKISTAN: AN ANALYTICAL STUDY

Abstract

This paper examines the evolution of revenue and expenditures decentralisation in Pakistan. The paper discuses major issues regarding the financial distributions and expenditures obligations of both federal and provincial governments. The federal government collects the majority of tax and non-tax revenues and transfers a part of it to the provincial governments through the National Finance Commission (NFC) Award. A thorough look at the history of resource distribution suggests that the process of fiscal decentralisation has been less systematic and failed to pace with the fiscal and administrative demands of the provincial governments. Total Seven Awards after the independence of Pakistan, and with the exception of 1974 Award, the trend shows a consistent increase towards the fiscal decentralisation. Although since 1990 Award, the process of decentralisation has got momentum but a quantum jump towards true decentralisation is represented in 7th Award that was concluded in 2009. The last Award the expanded the divisible pool by bringing more taxes into its orbit increased the provincial share and included other criteria besides population for horizontal distribution. As a result the financial position of the provinces improved that resulted into more autonomy.