The unfortunate part of fiscal federalism in Pakistan is the treatment of local government”. So reads the latest paper on fiscal federalism by the Karachi-based Social Policy & Development Centre and quite rightly so.
The study mainly written by SPDC’s in-house economist, Mohammad Sabir notes that progress on Provincial Finance Commissions (PFC) that decide intergovernmental fiscal transfers from provincial government to local governments, remained poor. Only Punjab and Khyber Pakhtunkhwa have announced an interim PFC award, whereas Sindh and Balochistan have cared not to.
However, even those transfers are eye-wash. In the case of Punjab, about 86 percent of the recommended revenues is allocated to District Education and Health Authorities and “only 14 percent [is allocated] to elected representatives of local governments”. In the case of Khyber Pakhtunkhwa, a large part is allocated for the salary budget, whereas the non-salary/non-development budget is distributed without a formula that creates a risk of funding to be spent at the behest of political needs rather than socio-economic needs. Such division of resources reduces the scope for efficient devolution of service delivery at the grassroots level.
However, local government isn’t the only unfortunate element in Pakistan. Other aspects of fiscal federalism and intergovernmental mechanism at large to manage coordination, communication, cooperation and conflict resolution are equally unfortunate elements.
Take the case of Council of Common Interest (CCI), where the federal government has been found dragging the issues, leaving many subjects unresolved for many years. In fact, the CCI to this date is yet to get its permanent secretariat. And while the provinces are represented at the CCI, the structure of the CCI is such that the federal government needs the nod of just one province to have its way with whatever decision it wants to pass.
The story of NFC Award isn’t too different. To date, there is no consensus on whether the current deadlock over the passing of a new award is in fact a deadlock or not. Nor there is a consensus among leading voices whether it is the constitutional duty of the NFC to pass an award or not. Likewise, most policy wonks demand that allocations to provinces should be based on their fiscal discipline and/or their performance in socio-economic indicators, when in fact constitutionally the NFC is only supposed to be a forum for intergovernmental fiscal transfer rather than dictating the deeply political choices of provinces of how to collect revenues and how to spend.
Data to facilitate educated discussions on these affairs are also missing. At the one end, there are no official estimates of provincial GDP, provincial revenue potential and so forth. And at the other end, studies on the adequacy of PFC transfers, expenditure norms, cost of service delivery by provincial and local governments amongst pertinent issues are not available. The PML-N failed to progress in this direction in the last five years; one can only hope that matters related to political and fiscal decentralization will be picked up by whoever forms the next government, though right now there are no signs that it will.
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