Dynamic Consequences of the 1997 NFC Award: Provincial Social Sector Expenditures

Muhammad Sabir

Abstract


An adequate provision of social services is a concurrent
function of federal and provincial governments. However, in Pakistan,
the financing and delivery of social services largely prevails in the
hands of provinces and major sources of revenues in the hand of federal
government, which creates vertical imbalances. Federal transfers are the
mechanism for their correction and these are constituted through the
National Finance Commission (NFC) Awards. The last NFC Award was
constituted in 1997 and it changed both the size of divisible pool and
the share of federal and provincial governments in the divisible pool.
The changed provincial shares have based on higher tax revenue
collection, which was not materialised during the following four-year
period after the award. Therefore, provincial governments experienced
the shortfall in the federal transfers during last four years after the
award and have experienced a lower growth in transfers than projected in
1997 NFC Award. This is in contrast with the provincial experience
during 1991 NFC Award, in which provinces had received higher revenue
transfers from federal government than projected.

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DOI: https://doi.org/10.30541/v40i4IIpp.967-984

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