The Impact of Fiscal Decentralisation Through 7th NFC Award on Healthcare and Basic Education in Balochistan, Pakistan

The 7th National Finance Commission (NFC) Award, passed and implemented in 2009, not only has changed the distribution criteria among the provinces by including more indicators – poverty, reverse population, revenue share and population, though the latter with lion share (82%) – it also enhanced the vertical share of the provinces in divisible pool. The 7th NFC has significantly affected the landscape of resource distribution with positive consequences in Pakistan with postitive consequences on the principles of its federal structure. Owing to this, the provinces in Pakistan now have far better fiscal space with significant autonomy to allocate resources to critical social and economic sectors pertaining to services delivery to the people. Balochistan like other provinces witnessed a quantum jump in receiving transfers from the divisible pool and straight transfers which could potentially be translated into better social services delivery. This study evaluates the effectiveness of the 7th NFC Award on two sectors – health and education – in Balochistan by using a balanced panel dataset 1985-2014. A rich and unique dataset is gathered from various sources of the Government of Balochistan, and is analyzed by using different statistical techniques and econometric models. The empirical results show that while in post 7th NFC Award, where the share of Balochistan in divisible pool and straight transfers has increased many folds, the quality and quality in health and education sectors despite receiving large-scale budgetary allocations failed to witness a marked improvement. The results further demonstrate that while the infrastructure of healthcare and education sectors has shown a slight improvement, the same has not been translated for the benefit of the much-desired outcomes such as gross enrollment rates, number of primary schools, pass-out ratio in secondary schools examination, the overall literacy rate etc. The reason of such ineffectiveness and inefficiency of Balochistan in providing better education and healthcare could be many. But the key among them is the ‘elite capture’ in line with the bureaucratic and political class corruption and sheer embezzlement of public finances that is widely documented in the province.