Fiscal Decentralization Under the 7th NFC Award and Its Implications on Improvement in Education in Pakistan

Abstract

Fiscal decentralization is the process of devolving revenue and expenditure functions to the subnational governments and is expected to improve Public Services Delivery. The 7^th NFC Award is the biggest step toward fiscal federalism in Pakistan as the share of provincial governments was increased accommodating their major demands. This study has been conducted to identify how much the new fiscal arrangements under the 7^th NFC Award have been effective to improve education in Pakistan. Data were collected on various indicators for the period 2001 to 2019 which were further divided into two groups i.e., the pre-7^th NFC Award period from 2001 to 2010 and the post- 7^th NFC Award period from 2011 to 2019. To assess the impact of the 7^th NFC Award on the education sector, various variables were selected and different techniques for trend analysis were applied to gauge the impact of the Award. Additionally, the Difference-in-Difference approach was also applied to compare three provinces i.e., Sindh, Khyber Pakhtunkhwa, and Baluchistan as treatment groups with Punjab as a control group. The results suggest that none of the indicators in the education sector has improved at national or provincial level in response to the 7^th NFC Award. It can be concluded that the additional funds transferred under the 7^th NFC Award did not bring any improvement in education services. It is also found that capacity of the government machinery and their ability to develop plans and strategies is important to realize the benefits of fiscal decentralization.  It is recommended that these step under the 7^th NFC Award must be supported by the administrative measures on part of the provincial government.

         Keywords: fiscal decentralization, 7^th NFC Award, education, gross enrollment, mean years of schooling, expected years of schooling, expenditures on education as a percent of GDP, and literacy rate