ISLAMABAD: Prime Minister Shehbaz Sharif on Friday directed the formation of a high-level committee to review the World Bank’s recommendations on strengthening fiscal federalism in Pakistan, his office said in a statement, after a delegation led by its Country Director Bolormaa Amgaabazar met him to discuss revenue generation and federal-provincial fiscal relations.
Fiscal federalism refers to the distribution of taxation and spending powers across levels of government, usually federal, provincial and local. The National Finance Commission (NFC) Award in Pakistan determines how tax revenues collected by the federal government are distributed among Pakistan’s four provinces.
The World Bank released its report titled “Strengthening Fiscal Federalism in Pakistan” in June in which it pointed out that Pakistan’s tax system was fragmented, and local governments lack clearly defined or adequately resourced functional mandates.
Amgaabazar met Sharif along with a delegation of the World Bank in Islamabad and presented the key findings of the report, the Prime Minister’s Office (PMO) said in a statement. The prime minister directed the formation of a high-level committee to conduct a detailed review of the report.
“The committee will examine the recommendations in consultation with relevant stakeholders, including the provinces, while taking into account Pakistan’s constitutional and federal framework, so that practical proposals serving the public interest can be considered,” the PMO said.
Sharif said Pakistan’s constitutional federal structure, provincial autonomy and cooperation between the federation and provinces are of “fundamental importance” to the country’s development and stability.
He also acknowledged the World Bank’s role in the country’s socioeconomic development, thanking it for its continued support.
The delegation also presented policy recommendations aimed at improving fiscal discipline, resource use, service delivery and coordination between federal and provincial institutions during the meeting.
Sharif described the World Bank’s analysis and its comparative assessment drawing on international experience as commendable, saying such studies are key to providing useful guidance for policymaking.
The World Bank report had also recommended revising the NFC Award formula and adopting a fiscal equalization model under which provincial allocations would be based on expenditure needs and revenue-raising capacity rather than population alone.
