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National Finance Commission Awards in Pakistan : A Historical Perspective

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  • Iftikhar Ahmed

    (PIDE)

  • Usman Mustafa
  • Mahmood Khalid

Abstract

This study explores the evolution of fiscal resource distribution in Pakistan. Pakistan is a federation comprising four provinces, federallyadministered areas, and the Islamabad Capital Territory. Being a central type of government, most of the revenues are collected by the centre and then redistributed vertically between the federal and the provincial governments, and horizontally among the provinces. Provinces then also redistribute revenues among lower tiers of the government, through a revenue-sharing formula. A thorough look at the history indicates that this process has been complex and has a far-reaching impact. A less systematic approach has been adopted to decentralise the financial matters. Over time, the divisible pool has expanded due to heavy reliance on indirect taxes as well as improvement in the collection. Population is the sole distribution criteria, adopted in all NFC awards from the divisible pool. This has raised friction among the provinces, necessitating inclusion of other potential variables evolved from international best practices. In addition to that, absence of technical experts and permanency of the NFC is another impediment. The NFC is supposed to provide the framework for amicable distribution of resources between the federal and the provincial governments for the joint goal of development and prosperity.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22181.

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Date of creation: Jan 2007
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Handle: RePEc:eab:financ:22181

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Related research

Keywords: NFC; Pakistan; fiscal federalism; Rule and Discretion; political economy; Population; Subventions; Doing the Business of Government;

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References

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  1. Muhammad Sabir, 2001. "Dynamic Consequences of the 1997 NFC Award: Provincial Social Sector Expenditures," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 40(4), pages 967-984.
  2. Mohammad Zubair Khan, 2006. "Intergovernmental Resource Transfers: Prospects and Issues," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, Department of Economics, The Lahore School of Economics, vol. 11(Special E), pages 41-48, September.
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Citations

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Cited by:
  1. Roy Bahl & Sally Wallace & Musharraf Cyan, 2008. "Pakistan: Provincial Government Taxation," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0807, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. Roy Bahl & Sally Wallace & Musharraf Cyan, 2008. "The Challenge of Intergovernmental Fiscal Relations in Pakistan: The Property Tax Division," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper0825, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  3. Usman Mustafa, 2011. "Fiscal Federalism in Pakistan: The 7th National Finance Commission Awardand Its Implications," PIDE-Working Papers, Pakistan Institute of Development Economics 2011:73, Pakistan Institute of Development Economics.
  4. Naeem ur Rehman Khattak & Iftikhar Ahmad & Jangraiz Khan, 2010. "Fiscal Decentralisation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 49(4), pages 419–436.
  5. Rashid Mehmood & Sara Sadiq, 2010. "Impact of Fiscal Decentralisation on Human Development: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 49(4), pages 513–530.

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