World Bank Calls for Reforms to Pakistan’s NFC Award Formula
ISLAMABAD: The World Bank has recommended reforms to Pakistan’s National Finance Commission (NFC) Award, urging a review of the existing resource-sharing mechanism between the federal and provincial governments.
According to the World Bank’s latest report on fiscal federalism in Pakistan, the current NFC Award should be reassessed, with greater emphasis placed on provincial performance when allocating financial resources.
The report recommends that provinces generating higher tax revenues should receive a larger share of resources, arguing that such a system would encourage stronger fiscal discipline, improved governance, and enhanced tax collection.
The World Bank noted that the Seventh NFC Award and the 18th Constitutional Amendment were significant reforms in Pakistan’s fiscal framework. However, it said these changes reduced the federal government’s share of revenues without a corresponding reduction in its expenditure responsibilities.
The report further observed that several ministries continued to operate at the federal level despite the devolution of their functions to the provinces, contributing to persistent fiscal deficits.
According to the report, provincial governments have not fully translated the benefits of the NFC Award and the 18th Amendment into improved public services. Despite receiving additional financial resources, provinces have increased administrative and recurring expenditures rather than prioritizing development spending.
The World Bank also highlighted that nearly 80 percent of provincial revenues are being spent on administrative expenses, while only 1 percent is allocated to environmental initiatives. It added that key sectors such as education, public health, and public services have not received adequate attention under the current spending patterns.
