The Deadlock in National Finance Commission Award

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Pakistan’s federal democracy is evolving; the 18th constitutional amendment, the passing of the 7 th NFC Award and local government elections are some recent positive developments. However, while local government framework and the ensuing elections are fraught with problems, the NFC Award too is not backed by strong evidence. The NFC is seen to be marked with lacunas that causes delays and deadlocks in the passing of new awards; at the other end both vertical and horizontal revenue distribution is seen falling short of fairness while also lacking carrots and sticks to further revenue generation and to strengthen democracy at sub-national level.

Recognising these concerns, PRIME Institute undertook a project to provide independent research, advice and advocacy on NFC Award and its structure. The planned activities included dialogues at the federal and provincial level, a training workshop and conference in the capital, publication of papers and a final report.

In light of this, the purpose of this short report is essentially to review the reasons behind the delay and deadlock towards the passing of the new NFC Award, and its possible solutions currently being proposed by various stakeholders. The report also briefly touches upon some ancillary topics such as the formula for horizontal distribution, tax assignments, tax reform, provincial tax collection, and fiscal federalism though only as a supplement to the main focus of discussion i.e. how to fix the delay or deadlock.

The scope of this report is not to provide a detailed or a unique solution for the deadlock but to develop an understanding of what a country-wide stakeholder consensus on the NFC might look like and where the fault lines exist; summarizing the critical points that require further deliberation and research. As such, therefore, the scope defines the limits of this paper. The methodology adopted for this paper includes the analyses of various reports, papers, presentations, op-eds, and interviews published on the subject, followed by elite interviews with key stakeholders in the center and in the four provinces, including policy researchers, leading economists, relevant federal and provincial government officials and key politicians.

This list of stakeholders interviewed for this report is available in Appendix PQR; albeit their statements, unless made publicly, are not attributed in this report to respect the formal but candid nature of the conversation that was made possible on the condition of anonymity.

The Deadlock in National Finance Commission Award

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Policy Research Institute of Market Economy

آزاد معیشت – خوشحال پاکستان