Page 63 - CMA Journal (Sep-Oct 2025)

Articles Section

Borrowing Powers under Article 160:

A Forgotten Mandate of Pakistan’s NFC Awards

Pakistan’s inter-governmental fiscal system has evolved ation and the provinc-
over more than seven decades, shaped by historical es. Initially, the coun-
legacies, constitutional reforms, and the political try operated under an
economy of federalism. The National Finance ad hoc arrangement
Commission (NFC) is at the heart of this system, tasked based on the Niemey-
under Article 160 of the 1973 Constitution with ensuring er Award (1937).
equitable distribution of resources between the federal Under this arrange-
and provincial governments. While the NFC has made ment, sales tax was
significant strides in addressing revenue-sharing issues, a
treated as a provincial
critical dimension borrowing powers has been subject, while 50% of
consistently neglected, despite its explicit inclusion in
federal income tax
the constitutional framework (Ahmed & Ahmad, 2016). collections were
The consequences of this omission are profound.
redistributed among
Pakistan today faces one of the highest public debt the provinces. Dr. Noor Alam
burdens in its history, accompanied by persistent fiscal Pakistan inherited a Senior Fellow and
deficits, limited tax revenues, and deep intergovernmen- highly centralized Associate Professor,
tal imbalances that strain the country’s fiscal federalism financial structure Institute of Business
(IMF, 2023). This fiscal stress has created challenges in from British India, Management, Karachi
sustaining economic growth, financing development where most taxation
projects, and maintaining macroeconomic stability. and revenue powers were concentrated at the federal
Understanding how this situation evolved requires
level, leaving the provinces dependent on federal transfers
tracing the historical trajectory of the National Finance to meet their basic expenditure needs.
Commission (NFC) and examining the reasons why
borrowing a constitutionally mandated agenda item As a result, provincial governments were heavily

under Article 160 has been consistently overlooked in dependent on federal transfers to meet their basic
successive NFC Awards. functional responsibilities, including education,
To fully grasp why borrowing remains excluded from the healthcare, policing, and infrastructure development
NFC’s deliberations, it is essential to first review Pakistan’s (Khan, 2017). During this early period, ad hoc
early fiscal history and the evolution of its revenue-shar- arrangements such as the Raisman Award of 1947
ing mechanisms. These initial arrangements not only (implemented in 1952) and subsequent adjustments in
shaped the intergovernmental fiscal landscape but also the 1960s were introduced to distribute limited tax
entrenched patterns of dependency and centralization revenues. However, these arrangements focused
that continue to influence fiscal relations today. exclusively on revenue sharing and did not establish a
sustainable framework for fiscal autonomy or
Early Revenue-Sharing Arrangements coordination between federal and provincial

(Pre-1973) governments, laying the groundwork for the fiscal
imbalances that persist today.
In the immediate aftermath of independence in 1947,
Pakistan had no formal institutional mechanism for the
equitable allocation of fiscal resources between the feder-

ICMA’s Chartered Management Accountant, Sep-Oct 2025 61