The World Bank has urged Pakistan to reduce unnecessary federal expenses and reform the way financial resources are distributed between the federation and provinces.
World Bank Country Director in Pakistan Bolormaa Amgaabazar said there is a need to change Pakistan’s system of financial resource distribution.
She said a new National Finance Commission award is important for the country’s economy, adding that consensus must be reached on fair resource distribution between the federation and provinces.
Reallocation pending for 15 years
The World Bank representative said the reallocation of resources between the federation and provinces has been pending for 15 years.
She said local governments also need to be given more powers and resources to improve service delivery and governance at the grassroots level.
Federal expenses under scrutiny
The World Bank suggested that the federal government reduce unnecessary expenses. According to Amgaabazar, the federation has transferred a large part of revenue to the provinces but has not reduced its own expenditures.
She said that after the transfer of powers to provinces, the federation is facing a deficit of Rs2,000 billion, while the debt burden is also rising along with the deficit.
Provincial share, national priorities
The World Bank recommended reducing the share of provinces in distributable revenue for important national priorities.
It also emphasized the need to improve the tax collection system in provinces, including effective collection of agricultural income tax and property tax.
Amgaabazar said Pakistan is facing a low tax-to-GDP ratio. She said the urban property tax collection rate in Pakistan is only 0.13%, compared with 0.3% to 0.6% in other countries.
Health, education, administrative costs
The World Bank said provincial spending on health and education needs to be increased. It also expressed concern over rising administrative costs, warning that inefficient spending limits the government’s ability to strengthen public services.
The World Bank country director said 3.5 million people enter Pakistan’s labour force every year in search of employment. She said a better financial system would help strengthen the economy and improve public services.
