Arshad Mahmood Awan
The eighteenth constitutional amendment, together with the seventh National Finance Commission Award, was meant to be a turning point. It promised to transform Pakistan’s fiscal architecture, to move power and money away from a distant centre and closer to the citizen, to let the provinces breathe and, in time, to let local governments breathe too. That was the promise. Sixteen years have passed since then, and the promise remains, in large part, unfulfilled.
A new World Bank report, titled Strengthening Fiscal Federalism in Pakistan, has now examined what became of this ambitious design. Its verdict is measured but unmistakable: the constitutional skeleton is sound, yet the flesh and sinew of implementation have withered. Consider the federal government first. Transfers to the provinces rose sharply after the seventh award, yet federal expenditure did not fall in step, nor did the tax-to-GDP ratio rise to compensate. The result is a federal government that continues to run deficits year after year, spending in sectors it formally devolved, duplicating what the provinces are constitutionally meant to do alone, and in the process eroding the very fiscal discipline that devolution was supposed to instil.
Now turn to the provinces. Here too, the record disappoints. Provincial governments have not expanded their own tax bases in any meaningful sense; they remain content to depend on transfers rather than to build the administrative and political will required to tax their own economies. And what have they done with the additional resources that came their way? Overwhelmingly, they have funnelled these funds into salaries and into a bureaucracy that keeps growing in size without growing in service. More than four-fifths of provincial spending today is recurrent, leaving only a narrow margin for development, for schools, for hospitals, for roads that citizens actually need. Local governments, meanwhile, have grown steadily weaker, starved of both money and authority, while fiscal allocations continue to mirror old historical patterns rather than today’s poverty levels or today’s service delivery gaps.
These findings are sobering. But let us be precise about what they mean, and equally precise about what they do not mean. They do not mean that devolution has failed. They mean that devolution has been mismanaged. The report demonstrates that provincial governments often spend inefficiently; it does not, and cannot, demonstrate that the centre would have spent any better had these functions never left Islamabad’s hands. History gives us no reason to believe such a counterfactual. What the evidence actually shows is that devolution remains incomplete: federal overlap persists in sectors long since devolved, institutional restructuring never followed the constitutional transfer of powers, intergovernmental coordination remains weak, and accountability, that essential ingredient of good governance, stays blurred between tiers that each blame the other.
One limitation of the report deserves mention. It gives insufficient attention to how provincial performance has shifted across different governments and different periods. A closer look at how changes in provincial leadership, or shifts in provincial policy, affected the delivery of services to ordinary citizens would have sharpened its analysis considerably. Such a comparison would have shown, more clearly than aggregate numbers can, where genuine effort produced genuine results and where it did not.
What we are witnessing, in truth, is the rise of provincial governments as the principal centres of civilian political authority in Pakistan. This is no small achievement in a country whose history bears the deep scars of centralisation. Yet power without accountability breeds its own distortions. Provincial incentives, shaped as they are by the arithmetic of political survival rather than the discipline of service delivery, have produced swollen administrations and swollen recurrent budgets, all while local governments were kept deliberately weak, financially and politically. Let us call this what it is: a failure of governance, not a failure of the devolution project itself. The answer, therefore, cannot be to retreat from provincial autonomy, to claw back what the eighteenth amendment rightly gave away. The answer must be to finish what was started, to complete the unfinished business of devolution rather than
