The passage of the 18th Amendment and the seventh NFC Award was a landmark moment in Pakistan’s constitutional and fiscal history. Together, they reshaped the country’s federal structure by devolving greater powers and financial resources to the provinces, with the ultimate aim of strengthening local governments and bringing authority closer to citizens. Sixteen years later, however, the promise of this transformation remains incomplete.

A new World Bank report, Strengthening Fiscal Federalism in Pakistan, concludes that while the constitutional framework is robust, its implementation has been uneven and ineffective. The federal government continues to run deficits because transfers to provinces have increased without a corresponding reduction in federal expenditure or a rise in the tax‑to‑GDP ratio. Islamabad still spends in devolved sectors, creating duplication and undermining fiscal discipline.

The provinces, meanwhile, have failed to expand their own tax bases. Despite receiving larger fiscal transfers, much of the additional revenue has been consumed by salaries and bureaucratic expansion rather than improvements in public services. More than four‑fifths of provincial expenditure remains tied to recurrent costs, leaving limited space for development. Local governments, which were supposed to be empowered under the new framework, have steadily weakened. The report notes that fiscal allocations continue to follow historical patterns rather than reflecting current poverty levels or service delivery needs.

These findings highlight weaknesses in Pakistan’s fiscal architecture, but they should not be interpreted as evidence that devolution itself has failed. The report shows that provincial governments often spend inefficiently, but it does not prove that the centre would have delivered better outcomes had these functions remained centralised. Instead, the analysis suggests that devolution remains incomplete, hampered by federal overlap in devolved sectors, inadequate institutional restructuring, weak intergovernmental coordination, and blurred accountability.

The report gives limited attention to how provincial performance has evolved over time. A more detailed review could have examined whether changes in leadership or policy direction affected service delivery. What is clear, however, is that provincial governments have emerged as the principal centres of civilian political authority, with incentives often driven by political survival rather than service delivery. They have expanded administrative structures and recurrent expenditure while keeping local governments financially and politically weak. These are failures of governance, not of devolution.

The response, therefore, should not be to dilute provincial autonomy but to complete the unfinished process of devolution. The World Bank rightly advises boosting provincial revenue mobilisation, rationalising federal expenditure, reforming the NFC formula, ensuring regular awards, empowering local governments through predictable fiscal transfers, and improving coordination across all tiers of government. Ultimately, stronger local governments and clearer accountability are essential if fiscal federalism is to deliver better public services.