Fiscal Decentralization in Pakistan: A Case Study of Punjab Provincial Finance Commission

Abstract

The success of federalism in multiethnic societies greatly depends on fiscal decentralization. It empowers the provincial governments along with the local bodies at the grass root level. In this perspective fiscal decentralization needs structural arrangements in order to ensure revenue generation and appropriate expenditures. It helps to strengthen the national grid to avoid inter-provincial or intra-provincial discrepancies. This study illustrates the relationship between fiscal devolution and symmetrical horizontal economic development. It envisages the devolution plan (2001) introduced by former General Pervez Mushraff in Pakistan under which the Provincial Finance Commissions were established. This research would focus on Punjab as a case study to analyze the working of Provincial Finance Commission. This research tends to address the questions like what have been the patterns of fiscal decentralization in Pakistan? Did National Finance Commission and Provincial Finance Commission promote the principles of equitable devolution of resources in the divisible pool on the basis of need assessment? Could PFC be able to mitigate the intra-provincial disparities in Punjab? Did PFC take efficiency advantage in Punjab through the empowerment of local governments? This study would encompass the analysis of the resource allocation formula opted by the successive governments in the past till present and the counter arguments by the academia and the local body members. Qualitative and quantitative both methods would be used while incorporating primary as well secondary sources. This research concludes with the proposition that empowered local bodies and effective finance commission are the sine qua non of fiscal decentralization in democratic state like Pakistan.