The Pakistan Development Review
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Financial Implications of the 7th NFC Award and the Impact on Social Services
Get PDFThe financial status of provincial governments in Pakistan
hinges largely on federal transfers to the provinces constituted through
National Finance Commission (NFC) Awards. These awards design the
formula of distribution of resources between federal and provincial
governments, and among the provinces for five years. Historically,
federal and all provincial governments have tried their level best to
get a higher share of the revenues in order to stabilise their own
financial status. As a result, there are very few examples of consensus
based conclusive awards in the past. These consensus based awards have
had different gainers. For instance, in the NFC Award 1991, provincial
governments were the main beneficiaries as they received substantially
higher shares of buoyant taxes such as sales and income taxes. In
contrast, the largest beneficiary of the NFC Award 1997 was the federal
government as it allocated higher shares of all taxes to itself in order
to stabilise its financial status. Given the sensitivity attached to NFC
awards, where an increase or decrease in the share of any tier of the
government affects the share of other tiers with the same magnitude in
the opposite direction, it seems very difficult to develop a consensus
among federal and provincial governments. As a result, since the
separation of East Pakistan, there have been only three conclusive NFC
Awards (1974, 1991, 1997) and one presidential distribution order (2006)
prior to the 7th NFC Award
Improving Governance in Pakistan: Changing Perspectives on Decentralisation (The Allama Iqbal Lecture)
No full textAllama Iqbal stressed the need for khudi in terms of national
identity and focus on selfreliance, without which there would have been
no chance to break colonial bounds. The message still resonates today,
in a period of economic crisis and lack of national agreement on tax
reforms. International experience with decentralisation also emphasises
the importance of significant own-source revenues in generating
accountability and effective service delivery at all levels of
government. Although the 18th Amendment of Pakistan Constitution makes
significant strides towards clarifying spending responsibilities, the
issue of subsidiarity is not effectively addressed, nor is the issue of
implementable own-source of revenues. This runs the risk of generating
unfunded mandates, further pressures and weakening of public service
delivery, leading possibly to strengthening of ethnic and parochial
divisions and centrifugal forces. Iqbal’s message is as important now as
it was in the last century. JEL classification: H 77 Keywords:
Intergovernmental Fiscal Relation
Challenges for Youth Employment in Pakistan: Are They Youth-Specific?
Get PDFThis paper analyses the patterns of and the challenges for
youth employment in Pakistan, and examines whether these challenges are
youth-specific. Using the 2005-2006 Labour Force Survey (LFS), the
analysis includes determinants of unemployment, determinants of working
in the formal sector, rate of return on education, and determinants of
working hours. The paper finds that many of the challenges to youth
employment in Pakistan are not youth-specific. Policies should thus
emphasise broader labour market reforms, even in the context of tackling
youth employment issues. Still, some challenges are youth-specific, such
as a higher youth unemployment rate and insufficient returns to
better-educated youth. To address these challenges, more youth-specific
interventions are needed
Targeting the Vulnerable and the Choice of Vulnerability Measures: Review and Application to Pakistan
Get PDFIn this paper, the concept of vulnerability of the poor’s
welfare and its practical measures are scrutinised in order to derive
implications for targeting poverty reduction policies toward vulnerable
households. As illustration, various measures of vulnerability proposed
in the literature are applied to a panel data-set collected from rural
Pakistan. The empirical results show that different vulnerability
rankings can be obtained depending on the choice of the measure. By
utilising these measures, we can identify who and which region is more
vulnerable to a particular type of risk. This kind of information is
useful in targeting poverty reduction policies. Since the nature of
vulnerability is diverse, it is advisable to use the whole vector of
various vulnerability measures. JEL classification: I32, I38. Keywords:
Vulnerability, Poverty, Risk, Consumption Smoothing,
Pakistan
Exchange Rate Pass-through to Consumer Prices in Pakistan: Does Misalignment Matter?
Get PDFThis study investigates the impact of exchange rate changes on
consumer prices (commonly known as exchange rate pass-through (ERPT)) in
Pakistan for the period 1995M1 to 2009M3. The study estimates short-run
and long-run ERPT in Pakistan while taking into account the existing
real exchange rate misalignment (RERM). The results suggest that the
ERPT to consumer price inflation in Pakistan is very low (close to
zero). The impact of the previous periods’ misalignment on inflation is
found significant in managed exchange rate regime. However, the overall
sample misalignment does not affect inflation. The impact of foreign
inflation on domestic inflation is positive and statistically
significant. JEL classification: F31, F41, E31 Keywords: Pass-through,
Misalignment, Inflatio
Budget Balance through Revenue or Spending Adjustment: Evidence from Pakistan
Get PDFGovernment cannot roll over the debt forever (ponzi game is
not allowed). In the long run, inter-temporal budget constraint has to
be satisfied, which is possible either through government spending
adjustment or increasing government revenues. So current budget deficit
calls for adjustment, in the future, in spending or revenues. There are
four hypotheses, in the literature, in this regard: the tax-and-spending
hypothesis, the spending-and-tax hypothesis, bi-directional causality
between government revenues and government expenditures, and
independence of taxes and expenditures hypothesis. The last hypothesis,
however, have negative implications, in the long run, in terms of debt
sustainability and inflatio
Can Sectoral Re-allocation Explain the Jobless Growth? Empirical Evidence from Pakistan
Get PDFThe present paper discuss the nature of structural changes in
employment to understand jobless growth in Pakistan for the period
spanning over 1967-2008. In our work (elsewhere)1 analysing Pakistan at
sectoral level to find underlying factors generating jobless growth, we
found that Jobless growth in manufacturing sector was anticipated.
Industrial sector has a significant importance in any economy across the
glob. Recent changes in the use of capital—based foreign technology has
resulted in substitution of labour with non-labour inputs such as
capital. Employment shifts between industrial sectors are often
witnessed as indicators of Structural change in an economy. In this
paper we are more interested in the nature of structural change that
took place in Pakistan economy over 1967-2008. We set to analyse four
commonly used measures of sectoral reallocation proposed by Lilien
(1982), Groshen and Potter (2003), Rissman (1997), and Aaronson, Rissman
and Sullivan (2004). Findings of our work are suggesting that the
economy of Pakistan underwent structural change during periods of
recession and recovery. However, it does appear that structural changes
were more pronounced at the time of 1969 recession than that of 1991
recession. A plausible explanation for this result might be significant
shifts in employment from agriculture towards services sectors. We
conclude, based on the evidence from our study, that sectoral
reallocation is one of the major causes of jobless growth in
Pakistan
Regional Integration in South Asia: An Analysis of Trade Flows Using the Gravity Model
Get PDFThe study deals with trade benefits from the free trade
agreement of the SAARC countries. It assesses the trade potential and
trade creation with member and non-member countries. The gravity model
has been used to measure the bilateral trade flows and to assess the
trade effect for member and non-member countries. Two analyses estimate
the gravity model. The first analysis is based on crosssectional data to
capture the trade effect individually each year; and the second
analysisutilises the pooled data to measure the overall trade effects
and trade flows for the period 2003 to 2008. The results from the two
approaches show that estimated coefficients are consistent with the
model assumptions. Both analyses show that the regional trade agreement
of the SAARC countries could divert the trade for member countries as
well as for the non-member countries. However, trade volume will
increase only if the major partners (Pakistan, India, and Sri Lanka)
sign regional trade agreements. JEL classification: F15 Keywords: Trade;
Regional Integration; Gravity Mode
Inter-District Inequalities in Social Service Delivery: A Rationalised Approach towards Funds Disbursement
Get PDFFor a less developed country, Pakistan has experienced a
relatively high average per capita growth rate of 2.2 percent, for the
period 1950-99 [Easterly (2003)]. Unfortunately, high growth rates have
not trickled down sufficiently and the living condition of the general
populace leaves a lot to be desired. The UNDP’s Human Development Index
(HDI) report released in 2010, ranked Pakistan at 144th on the HDI, out
of 178 countries [Wasif (2010)]. The HDI conceptualises poverty to be a
multi-dimensional construct and considers adult literacy and life
expectancy to be key indicators of the quality of life. Given, that
Pakistan has experienced high growth rates but ranks so poorly on the
HDI, clearly indicates that despite economic growth, the country faces
serious challenges in social service delivery. The coverage of social
services is limited and varies across different regions of the country.
Easterly (2003) points out that in terms of adult literacy there is a
huge variation across provinces and female literacy is only 3 percent in
rural Balochistan and Khyber Pakhtunkhwa whereas it is 41 percent in
urban Sindh. Zaidi (2005) shows that the situation is not much different
in case of health outcomes. The study shows that across the country,
nearly half of pregnant women suffer from anaemia and 35 percent of
children under age five are malnourished. Moreover, the numbers for
infant mortality vary across provinces considerably with urban Punjab
having an infant mortality of 70.6 per 1,000 live births compared to the
120.6 of urban Balochistan.