LAHORE: The economy cannot acquire the required speed, nor can poverty be reduced in any meaningful way, unless the federal and provincial governments move in tandem. The country’s constitutional framework demands cooperation and complementarity between the centre and provinces.
Yet what prevails today is finger-pointing, overlapping jurisdictions and an almost complete breakdown of coordination on vital policy fronts. Under the constitution, the federal government is entrusted with foreign policy, border security, foreign trade, fiscal discipline and energy provision. The provinces are responsible for agriculture, price control, provincial trade, education, health and law and order. The logic behind this division is clear: the centre ensures macroeconomic and external stability, while the provinces drive social and economic progress at the grassroots level.
Unfortunately, neither side has lived up to its constitutional obligations. The provinces, despite commanding nearly 70 per cent of total development funds, have failed to deliver quality services in education and healthcare -- two sectors fundamental to human development and national productivity. Instead of reforming public systems, provincial administrations have allowed private providers to dominate, catering mainly to the affluent. The result is a two-tiered society where the rich have access to quality schools and hospitals, while the poor are left at the mercy of under-resourced and often non-functional public facilities. The deterioration of provincial services has deepened social inequality and stalled progress in human capital formation.
The inefficiency is also visible in the management of agricultural markets. Provincial market committees -- created to regulate food and farm produce -- have become centres of corruption. Political appointees, instead of facilitating farmers, manipulate the system to favour middlemen. Growers receive low returns for their hard work, while consumers pay inflated prices. This mismanagement feeds rural poverty, distorts inflation, and discourages productivity in a sector that still employs a large share of Pakistan’s workforce.
Yet, the federal government cannot be absolved of blame. While Islamabad often complains about provincial inefficiencies, it has repeatedly failed to provide policy consistency and fiscal discipline. Frequent changes in taxation policy, unpredictable exchange rate management, and politically motivated subsidies have undermined investor confidence. The Centre also struggles to ensure equitable energy distribution and affordable power tariffs -- areas constitutionally under its purview. Moreover, weak enforcement of fiscal laws and leniency toward politically connected tax evaders have discouraged provinces from taking revenue collection seriously.
Taxation remains perhaps the most glaring area of disconnect. While the centre demands higher revenue to meet budgetary needs, the provinces have shown little will to broaden their own tax bases. Traders, doctors, engineers, and other professionals operating private businesses often pay only a nominal provincial professional tax while avoiding the national income tax net. But the federal government has also failed to integrate tax databases, modernize assessment systems, and build trust with provincial authorities. The absence of a coordinated strategy means that the burden of taxation continues to fall disproportionately on salaried individuals and documented businesses -- a recipe for resentment and non-compliance.
True reform demands that both levels of government share responsibility and work in harmony. The Council of Common Interests (CCI), a constitutional platform for resolving federal-provincial matters, must be strengthened and made more functional. It should meet regularly to set measurable national goals in taxation, education, healthcare, and infrastructure, and publicly report progress. Similarly, the federation must respect provincial autonomy but also insist on accountability in how provincial resources are spent.
Pakistan’s poverty, unemployment and fiscal distress cannot be corrected by federal policy alone or by isolated provincial initiatives. The dream of inclusive growth will remain elusive until Islamabad, Lahore, Karachi, Peshawar and Quetta operate as partners rather than rivals. Only a cooperative federation -- one that matches authority with accountability -- can lift Pakistan out of its current economic stagnation and put it on a path of sustained development.
