Fiscal federalism in Pakistan: A critical analysis of 7th NFC award

Abstract

Fiscal federalism is an intriguing phenomenon which deals with the distribution of various resources among the federating units of states. Federal systems are mounted upon written constitutions to devolve the powers between the central and provincial tiers. In this study, the 7th national finance commission award of Pakistan has been evaluated including challenges which jeopardized fiscal imbalance of Pakistani federation. In order to draw inferences, the researchers have adopted qualitative approach and used secondary sources of data. The inter-governmental structure has been used as a conceptual framework to assess the contours of 7th NFC award. As implemented in 2010, this award incorporated multiple factors for allocation of revenues among the federating units. Furthermore, the share of the provinces got enhanced from the divisible pool. The findings showed that in subsequent financial years, the federal government faced difficulties to meet its economic needs, while, the provinces had surplus finances. Although, 7th NFC award had positive vibes among the political forces, yet the sharing formula yielded such results that required further discussion to resurrect the recurring financial imbalance among the central and provincial governments.