Every few years, when Pakistan’s public finances come under strain, an old argument returns with renewed confidence: the federation has become too generous to the provinces. The 18th Amendment and the Seventh National Finance Commission (NFC) Award, critics claim, have starved Islamabad of resources, weakened the federal government and pushed the country towards fiscal instability.
Once again, calls are emerging to revisit provincial shares in the divisible pool and recentralise authority in the name of efficiency. It is an attractive argument because it offers a simple explanation for a complex problem. It is also largely wrong. The recently released World Bank report, ‘Strengthening Fiscal Federalism in Pakistan’, should finally put to rest the notion that federalism itself is responsible for Pakistan’s fiscal troubles. If anything, the report reaches the opposite conclusion. The constitutional framework established after the 18th Amendment remains fundamentally sound. What has failed is not devolution but its incomplete, inconsistent and politically selective implementation.
Pakistan’s challenge is not that power has gone too far towards the provinces. It is that power has stopped halfway. The World Bank’s analysis is refreshingly candid. It points out that transfers to the provinces increased after the Seventh NFC Award, but federal expenditure did not decline correspondingly. Islamabad continued spending heavily in sectors that the constitution had already devolved. Rather than restructuring itself into a leaner coordinating federation, the federal government largely retained its previous administrative footprint while simultaneously transferring greater fiscal resources to the provinces. The result was predictable. Federal deficits widened not because provincial autonomy was excessive but because federal reform never followed constitutional reform.
Successive governments have preferred to blame the NFC Award rather than confront a more uncomfortable reality: the federation itself has remained a remarkably expensive institution. Ministries, departments, overlapping authorities, duplicated functions and expanding bureaucracies have survived despite constitutional changes that were supposed to redefine their responsibilities. This is hardly a convincing case against federalism. It is a case against institutional inertia. Nor can the provinces escape criticism. They have indeed received significantly larger transfers over the past decade and a half. Yet much of this additional spending has disappeared into expanding administrative machinery, salaries and pensions.
More than four-fifths of provincial expenditure now goes towards recurrent rather than development spending. Education and health budgets have grown, but a substantial proportion of them finances payrolls rather than classrooms, laboratories, libraries, hospitals or preventive healthcare. Pakistan therefore finds itself in a peculiar situation. It spends too little on human development while simultaneously spending inefficiently on the institutions responsible for delivering it. This distinction matters. The country essentially suffers from low-quality expenditure. Pakistan still allocates less than one per cent of GDP to education when school and higher education are combined.
Few countries aspiring to sustained economic growth devote such limited national resources to educating their people. Unsurprisingly, the consequences are visible everywhere: overcrowded classrooms, inadequate teacher training, outdated curricula, weak research capacity, poor university rankings, underfunded laboratories and millions of children who remain outside the education system altogether. The recent QS World University Rankings merely reflect this broader reality. Pakistan does not lack talented students or capable academics. It lacks sustained national investment. World-class universities cannot be built on rhetorical commitments while budgets remain among the lowest in the developing world. Healthcare tells a similar story.
Public hospitals remain overwhelmed, primary healthcare facilities are under-equipped and preventive medicine is chronically neglected. Once again, the issue is not merely the size of budgets but how resources are allocated. Administrative expansion has frequently outpaced improvements in actual service delivery. The World Bank therefore proposes an important recalibration. Future NFC Awards should reward provinces that improve their own tax effort, strengthen service delivery and allocate resources according to need rather than historical precedent. Poverty, deprivation, educational deficits, health indicators and local performance deserve greater weight than political bargaining alone. These recommendations deserve serious consideration. Yet the most neglected dimension of Pakistan’s federal debate lies even deeper.
The constitution envisaged three tiers of government, not two. While attention remains fixed on the federation and provinces, local governments continue to occupy the weakest position in Pakistan’s political architecture. Article 140A requires elected local governments with political, administrative and financial authority. In practice, provincial governments across the political spectrum have treated local government as an inconvenient constitutional obligation rather than the foundation of democratic governance. The consequences are visible across the country. District administrations continue to exercise powers that should belong to elected representatives. Union councils remain financially dependent. Municipal services deteriorate. Development priorities reflect provincial political calculations rather than neighbourhood needs.
Public accountability weakens as decision-making moves farther away from ordinary citizens. No federation can truly flourish while its local governments remain structurally impoverished. The unfinished project of devolution must therefore move downward rather than backward. Strengthening local governments would also improve human development outcomes. Local authorities understand far better than distant ministries where schools require expansion, which health centres lack medicines, which drinking water systems have collapsed, which roads need repair and which communities remain underserved. Development succeeds when decisions are made closest to those affected by them. Equally important is the broader question of national priorities.
Pakistan undoubtedly faces genuine security challenges. Terrorism remains a real threat. Border management requires vigilance. National defence will always remain an essential responsibility of the state. But security cannot become the organising principle around which every national debate revolves. For decades, Pakistan has oscillated between crises that reinforce a perpetual sense of emergency. Relations with India remain characterised by confrontation rather than strategic patience. Relations with Afghanistan continue to fluctuate between suspicion and recrimination. Political discourse often amplifies existential threats while giving comparatively little sustained attention to literacy, nutrition, maternal health, scientific research or local economic development.
A nation cannot indefinitely securitise every policy challenge. Persistent belligerence, rhetorical escalation and constant mobilisation may generate television headlines, but they rarely produce prosperous societies. History demonstrates that durable national strength emerges less from perpetual confrontation than from educated citizens, productive workers, healthy children, capable institutions and innovative economies. Countries that invest consistently in people eventually strengthen both their economies and their security. Pakistan should aspire to exactly that balance. The debate surrounding the NFC Award, therefore, risks asking the wrong question. The issue is not whether provinces should surrender a greater share of national resources to Islamabad.
The real question is whether every level of government is using public money to improve the lives of ordinary Pakistanis. Here, the record remains disappointing across the federation. The federal government continues operating an expensive administrative structure while celebrating incremental achievements through increasingly sophisticated public relations campaigns. Provincial governments frequently expand bureaucracies faster than public services. Local governments remain financially constrained despite constitutional guarantees. Meanwhile, millions of citizens continue to struggle with underperforming schools, inadequate hospitals, unemployment, unsafe drinking water, unreliable municipal services and limited economic opportunity. Citizens judge governments not by constitutional diagrams but by daily experience.
The temptation to reduce provincial shares in order to relieve federal fiscal pressure should therefore be resisted. Such proposals risk treating symptoms while ignoring causes. Pakistan’s fiscal difficulties predate the Seventh NFC Award. Weak revenue mobilisation, limited taxation of agriculture and property, persistent tax exemptions, inefficient public enterprises, exchange rate shocks, rising debt servicing and expanding current expenditure have all contributed far more to present difficulties than federalism itself. Redistributing scarce resources from provinces back to an unreformed federal bureaucracy would simply relocate inefficiency rather than eliminate it. Instead, Pakistan requires a second generation of devolution.
The federation should withdraw fully from constitutionally devolved sectors while concentrating on national coordination, defence, foreign affairs, macroeconomic stability and regulation. Provinces should broaden their own tax bases, strengthen fiscal discipline and prioritise education, health and human development over administrative expansion. Local governments should finally receive predictable financial transfers, constitutionally protected authority and meaningful administrative autonomy. Alongside these institutional reforms must come a profound shift in national thinking.
The writer is dean of the faculty of liberal arts at a private university in Karachi. He tweets/posts @NaazirMahmood and can be reached at: [email protected]
