Page 64 - CMA Journal (Sep-Oct 2025)

Articles Section

Raisman Award and Ad Hoc Grants President convene the NFC every five years (or earlier) to
review and recommend new arrangements for
One of the first attempts to address fiscal disparities was intergovernmental finance (Government of Pakistan,
the Raisman Award of 1947, implemented in 1952. This
1973, Art. 160). Article 160(2) outlines four specific areas
award provided a framework for distributing certain
for NFC recommendations:
federal tax revenues among the provinces. Its key
features included: 1. Distribution of specified federal taxes between the
• Allocation of shares based almost entirely on federation and provinces.
population, favoring Punjab due to its demographic
dominance. 2. Grants-in-aid to provincial governments.
• Provision of grants-in-aid to smaller provinces such 3. The exercise of borrowing powers by the federal and
as Balochistan to compensate for their weaker fiscal provincial governments.
capacity.
4. Any other financial matter referred by the President.
• Central government control over major taxes such as
customs duties and corporate income tax (World The explicit inclusion of borrowing in Article 160(2)(c)
Bank, 2019). reflects a forward-looking vision of fiscal coordination. It
acknowledges that debt management is as crucial to
Despite its significance, the Raisman Award was limited
in scope, focusing narrowly on tax distribution. fiscal sustainability as tax allocation (Rana, 2019).
Borrowing was not considered relevant because:
Borrowing Provisions in the
• The federal government retained exclusive control Constitution
over both domestic and external debt management.
• Provinces lacked institutional capacity to manage In addition to Article 160, other constitutional provisions
debt independently. detail how borrowing is to be conducted:

• The political context of the time emphasized • Article 166: Governs federal borrowing, allowing
state-building and national security, leaving little the federal government to raise loans secured by the
room for provincial fiscal autonomy (Waseem, 2010). Federal Consolidated Fund.
Centralization and Fiscal Dependence • Article 167: Governs provincial borrowing.
Historically, provinces were restricted to domestic
Throughout the 1950s and 1960s, Pakistan’s fiscal borrowing only.
framework remained highly centralized. Provinces relied
almost entirely on federal transfers to fund their budgets. The 18th Constitutional Amendment (2010) introduced
This dependence created vertical fiscal imbalances, Article 167(4), allowing provinces to borrow
where expenditure responsibilities were devolved to internationally within limits set by the National Economic
provinces without corresponding revenue powers
Council (NEC) or federal law (Government of Pakistan,
(Ahmed et al., 2020). Borrowing remained a federal 2010, Art. 167(4)). This architecture theoretically
monopoly, with provinces playing a minimal role in debt
empowers provinces while ensuring coordinated debt
management. Consequently, subnational borrowing was management through the NFC. In practice, however,
never debated as a policy issue. This early pattern of
borrowing remains governed by separate legal
centralization set the stage for future tensions over fiscal
autonomy and resource distribution. frameworks, with no role played by the NFC.
Constitutional Embedding of the NFC Evolution of NFC Awards: Exclusive
and Borrowing Focus on Revenue

The adoption of the 1973 Constitution marked a Since 1973, seven NFC Awards have been announced,
transformative moment for Pakistan’s fiscal federalism. It each reflecting the political and economic dynamics of
was designed to address historical grievances by its time. While these awards have progressively improved
providing provinces with greater financial autonomy and revenue-sharing formulas, they have entirely ignored
creating mechanisms for equitable sharing of resources.
borrowing powers, leaving a critical constitutional
Establishment of the NFC mandate unfulfilled (Ahmed & Ahmad, 2016).

Article 160 of the Constitution formally established the
National Finance Commission (NFC). It mandates that the

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