The World Bank’s latest report on Pakistan’s fiscal federalism has reopened an old but unavoidable debate: has the National Finance Commission (NFC) Award delivered on its promise of better governance, or has it merely redistributed resources without improving public services? The report argues that while the 18th Constitutional Amendment and the Seventh NFC Award represented historic progress in devolving authority to the provinces, the existing fiscal arrangement has created structural imbalances that now threaten macroeconomic stability and service delivery. This is not an argument against provincial autonomy. Rather, it is an argument for making devolution work as originally intended. The Seventh NFC Award fundamentally altered Pakistan’s fiscal architecture by increasing the provincial share in the divisible tax pool. Provinces gained substantial financial resources along with constitutional responsibility for sectors such as health, education and agriculture. The expectation was straightforward: decisions taken closer to citizens would improve governance, increase accountability and produce better social outcomes. Yet more than fifteen years later, the results remain mixed. The World Bank points out that provincial revenues increased significantly after the 2010 reforms, but federal expenses failed to adjust accordingly. The result has been persistent fiscal stress at the federal level alongside limited improvements in tax mobilization and public service delivery. Pakistan’s tax-to-GDP ratio remains among the lowest in comparable economies, while provincial governments continue to rely overwhelmingly on federal transfers instead of expanding their own tax bases through agriculture, property and other provincial taxes. Equally concerning is the spending pattern. According to the report, much of the additional provincial revenue has been absorbed by recurrent expenditures, particularly salaries and administrative costs, rather than investments in education, healthcare or local infrastructure. Local governments, which should form the third pillar of fiscal federalism, have steadily weakened, accounting for less than five per cent of total government expenditure today. These findings should not be interpreted as an indictment of devolution itself. International experience demonstrates that fiscal federalism can enhance efficiency and accountability........

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