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World Bank

Federal vs Provincial: How Pakistan's Money System Works

The World Bank’s latest report on Strengthening Fiscal Federalism in Pakistan looks at one of the most important questions in Pakistan’s public finance system: how should money, responsibilities, and service delivery be divided between the federal government, provinces, and local governments? In this explainer, we break down the report’s key findings — including the role of the NFC, what changed after the 18th Amendment and 7th NFC Award, why federal-provincial fiscal imbalances persist, how tax fragmentation affects revenue collection, and why money reaching provinces does not always translate into better services for citizens. The report also outlines reform options for strengthening Pakistan’s fiscal federalism system — from aligning resources with responsibilities, to improving the provincial distribution formula, strengthening local governments, and making coordination institutions more effective. Watch the full explainer to understand why fiscal federalism matters for Pakistan’s economy, public services, and long-term development. Read the full report here: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099060626042014186 #Pakistan #WorldBank #FiscalFederalism #NFC #PakistanEconomy #PublicFinance #18thAmendment #PakistanAndCounting #fypシ Follow Pakistan & Counting on: X: https://x.com/PakAndCounting FB: https://www.facebook.com/PakistanAndCounting IG: https://www.instagram.com/pakistanandcounting/ Tiktok: https://www.tiktok.com/@pakistanandcounting?_t=8rbVjlJIYOw&_r=1 LI: https://www.linkedin.com/company/pakistan-and-counting/

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Federal vs Provincial: How Pakistan's Money System Works See the full World Bank series

Time Stamps:

  • Introduction: Pakistan’s revenue and where the money goes
  • Why understanding government spending matters
  • Pakistan’s government structure: federation and provinces
  • Division of responsibilities under the Constitution
  • How revenue is divided between federation and provinces
  • What is the National Finance Commission, or NFC?
  • Who sits in the NFC and what does it decide?
  • What changed in the 7th NFC Award?
  • Provinces’ share increased from 47.5% to 57.5
  • How the current distribution formula works
  • Issue 1: Mismatch between budget and responsibilities
  • Issue 2: Formula does not fully reflect development needs
  • Issue 3: Distribution is not linked to provincial performance
  • World Bank recommendations for fixing the NFC system
  • Recommendation 1: Balance federation and provincial responsibilities
  • Recommendation 2: Redesign the revenue distribution formula
  • Recommendation 3: Improve tax collection mechanisms
  • Recommendation 4: Improve distribution within provinces
  • Recommendation 5: Strengthen federal coordination institutions
  • Why Pakistan needs a new NFC Award
  • Closing: Should the system reward better planning and service delivery?