Fiscal Decentralisation and Economic Growth In Pakistan

2015

This study examines the effects of Fiscal Decentralization on Economic Growth in the context of Pakistan. The current structure of fiscal arrangements i n Pakistan consists of three tiers, federal, provincial and local. Resources are distributed among these tiers through National Finance Commission (NFC) and Provincial Finance Commission (PFC) awards. Besides, local governments also receive random transfers including special/development grants, discretionary funds of parliamentarians and executives, etc. Empirical theorists postulate that Fiscal Decentralization may have positive effects on economic growth due to its efficiency advantages. However, it may have negative effects on economic growth and brings macroeconomic instability when it is not accompanied by enhancing the skill of local government apparatus and by better political accountability. Following Barro (1990) and Davoodi & Zou (1998) theoretical models of fiscal decentralization, the study in hand has developed a model ...

Pakistan is an underdeveloped economy having not remarkable growth rate. There may be many sources of economic growth but present study focuses on the fiscal decentralization as the major source of economic growth. Fiscal decentralization improves the efficiency of the Public sector and its leads to economic growth. The analysis is based on the time series annual data covering the period 1972 – 2009. Autoregressive model is used for ordinary least square estimation. The findings show that the both fiscal decentralization variables like spending authority and revenue autonomy have positive and significant impact on economic growth. The study concludes that the federal government should delegate the fiscal power to provincial and local governments for raising the growth and welfare of the people of Pakistan.

This study attempts to analyse the impact of fiscal decentralisation on economic growth. It also examines the complementarity between fiscal decentralisation and democratic institutions in promoting growth. The modelling framework is the endogenous growth model augmented with the measures of fiscal decentralisation and democratic institutions. To capture the multidimensionality, three different measures of fiscal decentralisation are used. The overall analysis shows that revenue decentralisation promotes economic growth while expenditure decentralisation retards economic growth. Composite decentralisation positively influences economic growth implying that simultaneous decentralisation reinforces each other to promote economic growth. Analysis also shows that democratic institutions play a significant role in realising the benefits of fiscal decentralisation. Various policy implications emerge from this study.

72

Global Regional Review, 2019

This study has mainly examined the association "between Fiscal decentralization and Macroeconomic performance in" Pakistan. "The time series data 1980 to 2018 has been used for the above-stated purpose". This empirical study has used the Eviews9 software and estimation technique regression for the empirical analysis. "The study has found the significant association between Macroeconomic performance and fiscal decentralization in the" country. The "chief variables of fiscal decentralization are revenue transfer to the provinces and revenue generated by federating units and results of both variables" suggest the higher extent of fiscal devolution. The horizontal resource distribution mechanism among the provinces and vertical resources sharing method between provinces and federal has remained a very hot and blistering subject of debate since the inception of the country.

Gomal University Journal of Research, 2014

This paper examines the evolution of revenue and expenditures decentralisation in Pakistan. The paper discuses major issues regarding the financial distributions and expenditures obligations of both federal and provincial governments. The federal government collects the majority of tax and non-tax revenues and transfers a part of it to the provincial governments through the National Finance Commission (NFC) Award. A thorough look at the history of resource distribution suggests that the process of fiscal decentralisation has been less systematic and failed to pace with the fiscal and administrative demands of the provincial governments. Total Seven Awards after the independence of Pakistan, and with the exception of 1974 Award, the trend shows a consistent increase towards the fiscal decentralisation. Although since 1990 Award, the process of decentralisation has got momentum but a quantum jump towards true decentralisation is represented in 7 th Award that was concluded in 2009. The last Award the expanded the divisible pool by bringing more taxes into its orbit increased the provincial share and included other criteria besides population for horizontal distribution. As a result the financial position of the provinces improved that resulted into more autonomy.

Journal of Economics and Economic Education Research, 2011

Fiscal federalism is a controversial issue in Pakistan. Because the major heads of the revenue collection are in the federal government control, from divisible pool, these resources are then distributed between federal government and provinces. Over time, federal government has taken most of the functions that were earlier assigned to provincial governments. This hunger of power has created the controversy between federal government and provincial governments and also among the provinces over distribution of resources. Present study analyzes this issue by using the provincial data of the revenue and expenditure. Study finds that Punjab the most populous province enjoys fiscal decentralization, followed by Sindh. However, the other two smaller provinces Khyber Pakhtoonkhwa and Balochistan are dependent on the central government because of their relatively small population and hence they get low revenue share from the divisible pool. It is suggested that smaller provinces should enhance their efforts to further stimulate the provincial revenue collection; moreover, the federal government should give more control over the natural resources to the provinces.

Fiscal federalism is a controversial issue in Pakistan. Because the major heads of the revenue collection are in the federal government control, from divisible pool, these resources are then distributed between federal government and provinces. Over time, federal government has taken most of the functions that were earlier assigned to provincial governments. This hunger of power has created the controversy between federal government and provincial governments and also among the provinces over distribution of resources. Present study analyzes this issue by using the provincial data of the revenue and expenditure. Study finds that Punjab the most populous province enjoys fiscal decentralization, followed by Sindh. However, the other two smaller provinces Khyber Pakhtoonkhwa and Balochistan are dependent on the central government because of their relatively small population and hence they get low revenue share from the divisible pool. It is suggested that smaller provinces should enhance their efforts to further stimulate the provincial revenue collection; moreover, the federal government should give more control over the natural resources to the provinces.

International Business Research, 2012

Study emphasis that a successful fiscal decentralization process is a way to increase the participation of citizens in local level development and economic activities. Study explores that the fiscal decentralization has positive effect on employment generation while the negative relation with inflation and indirectly supports the positive relation with economic growth. Improvement in educational activities and economic integration promote employment activities in the state and fiscally decentralized economy has greater ability to promote these activities then the unitary governments. So, fiscal decentralization is a successful tool to promote employment activities, meanwhile it discourages the rise in nominal wages which contributes to higher inflation rate.

The exploration on the relationship between fiscal decentralization and macroeconomic security has been no results about the advantages of monetary decentralization. The present paper is investigated the impact of Financial decentralization on macroeconomic strength by using the misery indicator at the country level of Pakistan. This study used secondary data covering the period of 1974 to 2013. Ordinary least square technique is used to estimate the impact of fiscal decentralization on macroeconomic stability. This study used the variables like GDP , Unemployment rate , Investment , Adjusted provincial revenue , Adjusted provincial expenditure .Macroeconomic stability is the dependent variable. This study shows that the importance and positive impact of financial decentralization on macroeconomic stability .