By Brig Syed Karrar Shah retired
Introduction
Over the years, Pakistan has faced serious challenges in providing its citizens with basic necessities such as education, health facilities, clean drinking water, and adequate road infrastructure. Despite the huge sums allocated in annual budgets, the outcomes remain poor. Corruption, mismanagement, and the unfair distribution of resources from the federal government to provinces — and further from provinces to local governments — have left ordinary citizens deprived. At the heart of this imbalance lies the National Finance Commission (NFC) Award, a constitutional mechanism designed to ensure a fair distribution of financial resources. While the NFC Award has, to some extent, addressed federal–provincial concerns, the real issue remains that local governments — the tier closest to the people — receive negligible funds.
This article discusses the major governance and resource allocation problems of Pakistan, explains the NFC Award and its formula, highlights the lack of financial empowerment of local bodies, and presents recommendations such as creating more provinces or strengthening local governments to ensure equitable distribution of resources.
Problems of Pakistan
1. Deteriorating Basic Infrastructure
Pakistan’s basic infrastructure is weakening with every passing year. Education standards have fallen despite massive investments, with ghost schools, poor teacher attendance, and outdated syllabi. Health facilities remain inadequate: rural areas lack hospitals, urban centres are overcrowded, and access to clean drinking water is a distant dream for millions. Roads, sewerage, and public transport systems fail to meet the growing population’s needs.
2. Corruption and Mismanagement
One of the biggest hurdles in Pakistan’s development is corruption. Whether it is siphoning of development funds, politically motivated projects, or kickbacks in contracts, corruption has become systemic. Mismanagement of resources means that funds rarely reach the intended projects or beneficiaries.
3. Unfair Distribution of Resources
The federal government collects most of the taxes, while provinces depend heavily on the NFC Award for their share. However, even after receiving their due share, provinces often fail to transfer resources to districts and local governments. This centralized control prevents development at the grassroots level and alienates communities.
4. Weak Local Governments
The Constitution of Pakistan (Article 140A) emphasizes the establishment of local governments, but in practice, local bodies are deprived of power and resources. Provincial governments, fearing political competition, hesitate to empower municipalities, district councils, and union councils. The result is poor delivery of services and lack of accountability at the grassroots.
NFC Award Details
Historical Background
The National Finance Commission (NFC) Award is a constitutional arrangement under Article 160 of the 1973 Constitution. It was introduced to determine the distribution of financial resources between the federation and provinces, ensuring fiscal balance and harmony. Every five years, the President constitutes the NFC, comprising the federal finance minister, provincial finance ministers, and other experts.
Key Functions of the NFC
1. Distribution of taxes collected by the federation between the centre and provinces.
2. Grants-in-aid to provinces in need.
3. Loans or subventions to provinces.
4. Any other matter relating to finance referred to the Commission.
Pre-2009 Awards
Before 2009, the NFC distribution was mainly based on population. Punjab, being the most populous province, received the largest share. This caused resentment in smaller provinces, which argued that backwardness, poverty, revenue generation, and other factors must also be considered.
NFC Formula of 2009 (7th NFC Award)
The 7th NFC Award (2009) was considered a landmark achievement because it introduced multiple criteria instead of population alone. The formula was as follows:
1. Population – 82%
2. Poverty/backwardness – 10.3%
3. Revenue collection/generation – 5%
4. Inverse population density – 2.7%
This formula slightly reduced Punjab’s share and increased allocations for Balochistan, Sindh, and Khyber Pakhtunkhwa. It also ensured that Balochistan would receive at least 9.09% of the total divisible pool, even if its calculated share was lower.
Federal vs Provincial Share
Under the 7th NFC Award, the federal government agreed to reduce its share from around 56% to 44% of the divisible pool, while the provinces collectively received 56%. This was a major step towards provincial autonomy.
Share Given to Local Bodies by Provinces
Although the NFC Award strengthened provinces, the real challenge lies at the provincial–local government level. Provinces are supposed to transfer funds to districts, tehsils, and union councils through their own Provincial Finance Commissions (PFCs). Unfortunately, most provinces either do not constitute PFCs or delay their implementation.
Punjab: Though it allocates some funds for local governments, the majority of development funds remain with provincial ministries. Local governments complain of insufficient resources for sanitation, water, and education.
Sindh: Karachi, despite being the country’s economic hub, receives meagre funds from the Sindh government. The city’s infrastructure collapse — from water shortages to garbage piles — is largely due to the provincial government’s reluctance to share resources with local authorities.
Khyber Pakhtunkhwa: KP has shown better progress by devolving certain powers, but still, local governments often depend on the goodwill of provincial authorities.
Balochistan: Being resource-poor and underdeveloped, Balochistan struggles even more. The provincial government itself is dependent on federal transfers and allocates very little to local councils.
This imbalance highlights a critical flaw: while provinces demand autonomy from the federal government, they fail to replicate the same model with their own local bodies.
Recommendations
To address these longstanding issues, Pakistan must move towards a system where resources reach the grassroots level in a fair and transparent manner. Some recommendations are:
1. Strengthen Local Governments
Provincial governments must fully implement Article 140A of the Constitution by establishing empowered local governments.
Provincial Finance Commissions should be made mandatory with strict timelines, ensuring a transparent formula for distribution of funds to districts, tehsils, and union councils.
Local councils should have powers over education, health, water, sanitation, and local policing for effective service delivery.
2. Increase Direct Federal Transfers to Local Bodies
Instead of routing all funds through provinces, the federal government could allocate a small portion of the divisible pool directly to metropolitan cities and large districts. For instance, Karachi, Lahore, Peshawar, and Quetta deserve direct funding given their population and economic importance.
3. Accountability and Transparency
Strict auditing and public reporting mechanisms must be introduced at provincial and local levels. Independent bodies should monitor the utilization of funds to curb corruption.
4. Creation of More Provinces
Given Pakistan’s large population and diverse regions, creating more provinces is a viable option. Administrative provinces such as South Punjab, Hazara, and Karachi can help ensure better governance and equitable resource allocation. More provinces will also reduce the feeling of alienation in smaller regions.
5. Focus on Need-Based Allocation
The NFC and PFC formulas should give more weight to poverty, backwardness, and population density rather than just population. This will ensure that underdeveloped areas receive a larger share for their uplift.
6. National Debate on Fiscal Federalism
Pakistan must initiate a serious debate on fiscal federalism — how to balance federal, provincial, and local powers. Scholars, politicians, civil society, and media must be engaged to build consensus on reforms.
Conclusion
Pakistan’s governance problems are deeply rooted in corruption, mismanagement, and inequitable distribution of resources. The NFC Award of 2009 was a milestone that strengthened provinces, but the real victims remain the local governments, which are deprived of funds despite being closest to the people. Without empowered local councils, Pakistan can not improve education, health, water supply, sanitation, or road infrastructure.
To move forward, Pakistan must ensure strict implementation of Provincial Finance Commissions, consider direct federal transfers to local bodies, strengthen accountability, and even create new provinces where needed. Only by empowering the grassroots can Pakistan truly serve its citizens and build a prosperous future.
