Islamabad – (Web Desk) – The World Bank NFC Award has become a hot topic in Islamabad this week. The bank has asked Pakistan to rework how money is shared between the federal government and the provinces.
Officials want the new formula to look at real needs. This means spending needs and how much revenue each province can raise, not just population size.
World Bank economist Tobias Haque shared these views. He spoke at the launch of a new report called “Strengthening Fiscal Federalism in Pakistan.” Country Director Bolormaa Amgaabazar also joined the event.
The report points to a messy tax system as a big problem. Right now, sales tax on goods and services is split across different provinces. The bank wants one unified system instead. This would need new laws to make it happen.
There is also a money gap between provinces. Punjab and Sindh had promised grants to the federal government. But Punjab pulled back Rs546 billion. Sindh held back Rs260 billion. Meanwhile, KP and Balochistan did not commit any funds at all this year.
On social welfare, the bank wants BISP to stay under federal control. But it says all provinces should help pay for it too, since social support is a shared job.
The report also says Pakistan’s federal deficit has grown since power was shifted to provinces. Provinces now collect more money. But federal spending never shrank to match. This mismatch has added pressure to the national debt.
Tax collection remains weak on both sides. The federal government still struggles to raise its tax share. But provinces are not doing much better. Big areas like farm income and property tax remain mostly untapped.
The World Bank suggests a clearer, fairer formula. It wants funds split based on actual needs and fair effort, not old habits or population numbers alone. Countries like Australia, Canada, and South Africa already use similar systems.
Experts say local governments have lost ground too. Their share of total government spending dropped from 10% in 2005 to under 5% today. The bank hopes reforms can also empower local bodies with more resources.
For now, Pakistan’s policymakers have several options on the table. Whether they act quickly on the World Bank NFC Award suggestions remains to be seen.
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