Pakistan Institute of Development Economics



Fiscal Decentralisation in Pakistan

Fiscal decentralisation is considered as an important policy instrument to achieve economic efficiency and ensure effective governance through financial autonomy of provincial governments. It integrates the smaller units of federation and ensures their participation in the economic development of country while at the same time capacitate the central government to fulfil the national level tasks more efficiently and effectively. It is considered as an important growth accelerating measure. It empowers the lower level governments through financial autonomy and administrative empowerment. Devolution helps the lower tiers of government to act as a powerful administrative agent of the central government. However, decentralisation helps units to be more innovative, responsible and efficient as they have more autonomous status. Decentralisation policy is believed to positively affect economic growth because it envisage better derivation and implementation of social policies. The decentralised setup of the government does not have any information barriers and lower level of government is better positioned to know the basic necessities and developmental needs of the people that are living in different regions of a country. Decentralisation brings up the true potential of a locality with the efficient resource exploration and its efficient utilisation. It furthers competition among the competing constituencies for better service provision which results in higher efficiency. This all has the potential to positively influence economic growth.

Jangraiz Khan, Iftikhar Ahmad, Naeem Ur Rehman Khattak