Decentralization deferred: The unfulfilled promise of 18th Amendment and local governance

Business Recorder

24-07-2025

In 2010, Pakistan passed the landmark 18th Constitutional Amendment, a legislative milestone that was widely hailed as a turning point in the country's journey toward democratic deepening and decentralization.
The amendment was envisioned as a transformative measure one that would transfer legislative, administrative, and fiscal authority from the federal center to the provinces, and eventually, to local governments. It promised greater autonomy, more accountable governance, and enhanced service delivery at the grassroots.
Fifteen years on, however, the vision remains unrealized. Instead of embedding a functional three-tier governance system, the amendment has revealed persistent structural and political barriers that continue to undermine genuine devolution.
Passed alongside the 18th Amendment, the 7th National Finance Commission (NFC) Award represented a critical fiscal realignment. It increased the share of provinces in federal divisible resources from 49 percent to 57.5 percent and adopted a new formula for resource distribution: 82 percent based on population, 10.3 percent on poverty and backwardness, 5 percent on revenue generation, and 2.7 percent on inverse population density. While this was a progressive step at the time, recognizing disparities among provinces and aiming to rebalance federalism, it inadvertently entrenched a number of limitations.
One major issue is the weak incentive for provinces to improve tax collection. With only 5 percent weight assigned to revenue generation, provincial governments find little fiscal reward in undertaking the politically sensitive and administratively burdensome task of expanding their tax base.
Simultaneously, the federal government faces growing fiscal deficits due to heavy debt servicing, defense spending, and subsidies, leaving limited space for growth-oriented investments. This results in a structural deadlock: provinces are underfunded and unmotivated, while the center remains overstretched and unwilling to relinquish financial control.
The stasis is further compounded by the fact that the NFC Award has not been revised since 2010. While originally envisioned as a mechanism for dynamic fiscal redistribution reflecting evolving developmental needs, the 7th NFC has remained frozen in time. The absence of an updated award means that provincial disparities persist, provincial service delivery remains constrained, and critical expenditures aligned with devolved responsibilities are routinely underfinanced. What worsens this situation is the lack of a functioning fiscal mechanism at the local level. Although the spirit of the 18th Amendment and Article 140-A is to ensure a flow of power from the federal to the provincial to the local tier, the last step in this chain, the empowerment of elected local governments, has been neglected.
Article 140-A of the Constitution obligates provinces to establish systems of local government and devolve political, administrative, and fiscal responsibilities to elected representatives. The rationale is clear: local governments are best positioned to address immediate community concerns, including solid waste management, drinking water, education infrastructure, and local roads. They form the interface between the state and citizens. Yet, in practice, local government institutions have been rendered ceremonial. Despite the constitutional amendment in 2010, provinces took several years to hold local elections: Balochistan in 2015, Punjab in the same year, Khyber Pakhtunkhwa in 2015 (and again in 2021), and Sindh only in late 2021. Even where elections were held, they were often delayed, disrupted, or diluted through legislative amendments and administrative interference.
The scope and depth of devolution across provinces also remain inconsistent. In Punjab, despite enacting local government legislation, real authority continues to rest with the provincial bureaucracy, and the elected tier has been frequently dissolved or sidelined. In contrast, Khyber Pakhtunkhwa adopted a comparatively more ambitious model, introducing village and neighborhood councils to promote citizen participation. However, systemic underfunding and limited decision-making powers have curtailed their effectiveness. Across all provinces, delays in local elections, lack of clarity in roles, and provincial reluctance to share financial authority have constrained the functionality of local governance structures.
These institutional shortcomings are not accidental; they reflect underlying political dynamics. Strong and empowered local governments can become centers of alternative political power, threatening the patronage networks and control mechanisms of provincial elites. For instance, the provincial government in Punjab has repeatedly postponed local government elections, citing legislative amendments and procedural concerns. The Election Commission of Pakistan has often been left in limbo, unable to proceed due to pending provincial revisions in local government laws. This problem is rooted in the very design of Article 140-A, which grants provinces significant leeway in defining and modifying local government systems, enabling manipulation and delay without consequence.
While the 18th Amendment was rightly celebrated as a step toward democratization, its implementation reveals a glaring mismatch between constitutional intent and political practice. The need for a revised NFC Award is now critical. A new formula should reduce the excessive dependence on population as the primary criterion and instead incorporate dynamic indicators like tax effort measuring the actual effort of provinces to raise revenues relative to their capacity. Increasing the weight of tax effort from the current 5 percent to at least 10 percent would incentivize provinces to mobilize their own resources, reducing their reliance on federal transfers and encouraging greater fiscal responsibility.
Equally, it is imperative to restore and strengthen local governments by shielding them from provincial encroachment. The Council of Common Interests (CCI) can serve as a neutral platform for reviewing and standardizing the design of local government frameworks across provinces. Reforms should include fixed electoral cycles, protected tenures, independent fiscal allocations, and the authority to retain and utilize locally generated revenues. These funds can be channeled into improving service delivery in vital sectors such as health, sanitation, and education. More importantly, legal, and institutional guarantees must be established to protect the autonomy and decision-making authority of elected local bodies, ensuring that they are not undermined by political expediency.
None of these problems is novel. Economists, civil society organizations, parliamentary committees, and government task forces have repeatedly identified the structural gaps in Pakistan's decentralization framework. The problem lies not in diagnosis, but in the absence of political will to implement reform. Pakistan's governance remains trapped in a cycle where governments prioritize short-term political survival over long-term institutional strengthening. Until this mindset changes, the 18th Amendment will remain an incomplete promise, its transformational potential hindered by administrative inertia and political resistance.
Decentralization is not merely a constitutional provision; it is a governance imperative. For Pakistan to truly benefit from the framework laid out in the 18th Amendment, it must move beyond symbolic commitments and toward systemic reform. A re-imagined NFC Award, empowered local governments, and genuine intergovernmental coordination are necessary steps to fulfill the democratic potential embedded in the Constitution. Without these, the foundational vision of a responsive, accountable, and citizen-oriented state will remain elusive.
Syeda Dua Raza, Abdullah Khalid, Saad Ali Ahmed
(The writers are associated with the Sustainable Development Policy Institute, Islamabad (SDPI) as research Interns. The article does not necessarily represent the views of the organisation)
Copyright Business Recorder, 2025