PAKISTAN

Pakistan is an Islamic and federal parliamentary republic. From its independence in 1947 until 1973, Pakistan had a unicameral system. Under the 1973 Constitution which came into force on 14 August 1973, Pakistan adopted a bicameral system at the federal level. The national parliament consists of two houses: the National Assembly (lower house), whose 342 seats renewed every five years are partly directly elected and partly reserved for women and religious minorities; and the Senate (upper house), composed of 104 members indirectly elected for six years by each of the four provinces and Islamabad Capital Territory (ICT).

The president is the head of State and is indirectly elected by an electoral college composed of the Senate, the National Assembly and the four provincial assemblies. The president is elected for a period of five years. The prime minister is the head of the government and is elected, for five years, by a majority vote of members of National Assembly. The prime minister remains in office with the confidence of the majority of the members of the National Assembly.

Pakistan has four provinces (Punjab, Sindh, Khyber Pakhtunkhawa and Balochistan), which are also federating units. The 1973 Constitution of Pakistan clearly delineates the functions, powers and responsibilities of the federal and provincial governments. Akin to the national parliament, each province has its own provincial assembly, which is also directly elected for a period of five years. Each provincial government is headed by a chief minister who has the confidence of a majority of members of the provincial assembly. The president of Pakistan, on advice of the prime minister, also appoints a governor in each province.

The 1973 Constitution lays down inter-governmental arrangements to discuss policies and strategies between federal and provincial governments. The apex institution is the Council of Common Interest (CCI) established under Article 153. It is headed by the prime minister and comprises chief ministers of all provincial governments. The CCI is empowered to formulate and regulate policies in relation to matters in Part II of the federal legislative list of the Constitution and exercises supervision and control over related institutions. Similarly, a National Economic Council (NEC) headed by the prime minister exists under Article 156 of the Constitution and is also comprised of all chief ministers. The National Economic Council reviews the overall economic condition of the country and advises the federal and provincial governments on such matters to ensure balanced development and regional equity. It is guided by the principles of policy set-out in Chapter 2 of Part II.

The local government is a provincial subject as per the 1973 Constitution of Pakistan. The 18^th amendment of the Constitution passed on 8 April 2010 carried out major redistribution of functions between the federal and provincial governments and made it mandatory for the provinces to establish a local government system (Article 140 A). Together with Article 32, this amendment provided constitutional protection for local governments. It also gave responsibility for holding local elections to the Election Commission of Pakistan. However, local government elections have not been held regularly in Pakistan and local governments have remained under the administrative control of non-elected administrators for most of the time.

Systems of local government differ substantially from one province to another. Main differences include (i) the tenure of elected local representatives (between four and five years), (ii) the tiers, composition and categories of local governments, (iii) the kind and scope of functions devolved to the local governments, (iv) the fiscal arrangements, and (v) the election mode for local representatives (direct vs. indirect, party-based vs. non-partisan). One feature common to all four provinces is the subordination of local governments to the provincial level of government, which has the authority to suspend or remove heads of elected local governments, thereby limiting local autonomy.

TERRITORIAL ORGANISATION
Municipal Level [1]	INTERMEDIATE LEVEL	STATE / PROVINCIAL LEVEL	TOTAL NUMBER OF SNGs (2021)
Metropolitan or municipal corporations (28); district councils (91); district authorities (180, in Punjab only); municipal committee (92); town committee (144, only in Sindh); city local government (6), tehsil local government (134) and local area authority (9) (only in KP)		4 provinces: Punjab, Sindh, Khyber Pakhtunkhwa (KP), Balochistan Islamabad Capital Territory (ICT), Gilgit-Baltistan Special Zone
Average municipal size: 323 000 inhabitants
684		6	690

[1] Name and number of sub-municipal entities:
Village councils (6 752, in Punjab and KP);
union councils (1 810, in Sindh and Balochistan);
neighbourhood councils (3 123, in Punjab and KP)
Total: 11 685

OVERALL DESCRIPTION: Pakistan is a federal parliamentary republic with powers shared between the federal government and the provinces. Pakistan is territorially divided into four provinces and the Islamabad Capital Territory (ICT). In addition, there is the Gilgit-Baltistan region which has been granted status of a special zone under the 2018 Gilgit Baltistan Order. The federal government is responsible for administration of the Islamabad Capital Territory (ICT).

The provinces are administratively divided into divisions, districts and tehsils. The tehsils are the lowest administrative unit of a provincial government. The provincial governments discharge functions assigned to them by the Constitution. Their responsibilities are carried out through departments and other institutions at the provincial level and through administration present at divisions, districts and tehsils level.

Local government is a provincial function under the 1973 Constitution of Pakistan; therefore, the tiers and categories of local government units differ between the provinces. Historically, there has been a three-tier system of local governments with the district government units at the top, the tehsil level at the medium, both of which constitute the municipal level, and the union councils at the lowest level which, together with village and neighbourhood councils in some provinces, constitute the sub-municipal level.

Beside the local government systems of the four provinces, separate legal arrangements exist for certain areas, including for the ICT and for the cantonments (i.e., housing settlements of the Armed Forces located within the territory of a district). Until mid-2017, the seven “tribal districts” bordering Afghanistan were grouped as Federally Administered Tribal Areas (FATA) without any form of elected local governments. With the 25^th Constitutional Amendment of May 2018, FATA has now been merged into the province of KP, and steps are being taken to build up a local government system in-line with the existing KP system.

REGIONAL LEVEL: Provinces are the main subnational tier of government. There are four provinces: Balochistan, Khyber Pakhtunkhwa (KP), Punjab and Sindh. The majority of the population lives in the Indus Plain, located in Punjab and Sindh provinces. Punjab, having a population of 110 million people is not only the most populated province of Pakistan but it is simultaneously the most economically vibrant province. Punjab is followed by Sindh and Khyber Pakhtunkhawa in terms of population and contribution to national economy. These two provinces are also home to the largest cities of Pakistan: Karachi and Hyderabad in Sindh province and Lahore, Faisalabad, Rawalpindi, Multan and Gujranwala in Punjab. Balochistan province forms 43.6% of Pakistan’s total area and is the largest in terms of area. It is, however, the least populated province of Pakistan.

MUNICIPAL LEVEL. The provincial governments of Pakistan are constitutionally committed to introducing a strong local government setup in their respective provinces. In December 2021, Sindh and Punjab introduced major changes in their local government systems through promulgation of provincial legislation. Local government elections are scheduled to take place in both these provinces in 2022. In Khyber Pakhtunkhawa, the Local Government Act of 2013 is in effect and the elections were held in one part of the province in December 2021. Balochistan has its own system of local government established under a provincial act in 2010.

The responsibilities and functions of subnational governments are outlined in the 1973 Constitution. Prior to the 18th Amendment to the Constitution in 2010, there was a concurrent list containing 47 subjects on which the federal and provincial governments could legislate. The 18^th amendment abolished the Concurrent list and 44 subjects were devolved to the provinces as residual subjects. These include criminal law, civil and criminal procedure, preventive detention, arms and firearms, environment, population planning, social welfare etc. This represents the extended sphere of provincial responsibility and authority.

The provinces are empowered to devise their own local governments and that explains the difference in the structure and constitution of local governments in each province. The mandate and functions of the different local government units are also regulated in accordance with the respective local government acts of the provinces and rules and regulations formed under such legislations, like rules of business. Most of these acts do not specify local government functions as “mandatory” or “discretionary”. Due to the lack of constitutional force, the scope and depth of local government functions differ substantially between the provinces.

The lowest level (union council/committee or village/neighbourhood council) of a local government is usually responsible for community development, community infrastructure projects, and civic registration. The medium level (such as tehsil municipal administration, town committee, municipal committee) normally deals with “municipal services”. For the highest level, functions differ substantially between urban (metropolitan/municipal corporations) and rural local governments (district councils). Urban local governments usually deal with municipal services in the urban areas. District councils often have a monitoring role for the lower levels, and also carry out some of the functions assigned to the lower levels (in Punjab, district councils are tasked with sanitation and waste management normally assigned to union councils). In KP, the 2013 local government act devolved a substantial number of social services (such as health, education, social welfare) to the district level.

Often, sectoral policies, regulation and planning are the jurisdiction of the provincial level while implementation is with local government units. In addition, all provinces have created public sector corporations (such as local development authorities, water and sanitation companies) dealing with local-level functions, which are run by the provincial administrations and thus encroach on local government autonomy. Vertical coordination between the tiers of local government remains a major challenge, and inter-local government cooperation has always been a challenge.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	Administrative service; Police; Revenue Administration/Excise/Taxation; Planning; Administration and operation of general services (not assigned to specific functions)	Civic registration (birth and death, marriages and divorces certificates, etc.)
2. Public order and safety	Police, Fire Service, Prison Administration, Administration of Public Order, Disaster Management, Relief and Rehabilitation	Public safety
3. Economic affairs / transports	Provincial-level infrastructure and services (roads and buildings); Public Works; Agriculture; Cooperatives; Energy; Forestry, Wildlife, and fisheries; Industries, Commerce and investment; Labour; Mines and minerals, Irrigation	Local-level infrastructure and services; Roads; Bus terminal/stand; Urban public transport; Licensing of local transport services; Urban traffic regulation of livestock and dairy development; Slaughterhouses; Fairs and local markets
4. Environment protection	Waste Management, Pollution Abetment, Environment Protection - Policies and regulations; Enforcement	Support in enforcement; Public parks and green areas; Street cleaning; Protection of local water supply sources; Sewerage; Waste management (collection and disposal)
5. Housing and community amenities	Low Income Housing, Urban housing, Regional spatial planning;Large scale water supply and sewerage schemes;	Building Control; Urban and land use planning; Zoning; Local/urban water supply schemes; Street lights
6. Health	Health Sector regulation; Sector planning; Secondary health services (such as tehsil and district hospitals); Tertiary health services and teaching hospitals and Public Health Services	Primary health services (such as basic health units); Mother & child health care centres
7. Culture & Recreation	Museums; Libraries; Arts and sports facilities; Religious affairs	Local museums; Libraries, Arts and sport facilities at the local level.
8. Education	Sector regulation; Higher education, teacher education; Curriculum development; approval and provision of teaching material and equipment; Sector planning; Tertiary education, Policies and sector planning for non-formal and adult education	Primary and Secondary Education; Pre-School Education; Non-Formal and Adult Education
9. Social Welfare	Policy and regulation; Population issues; Women development;	Social welfare services

Scope of fiscal data: Provinces only. Data for local governments are not publicly available.

Pakistan’s Fiscal Operations, Ministry of Finance

Availability of fiscal data: Low

Quality/reliability of fiscal data: Medium

GENERAL INTRODUCTION: The 1973 Constitution establishes a National Finance Commission (NFC) that is mandated to regulate the distribution of financial resources between the federal government and the provinces (Article 160). The NFC is constituted every five years. Currently, 7^th NFC Award approved on 1 July 2010 is in place in Pakistan and financial resources are distributed in accordance with this Award. The 8^th and 9^th NFC were also constituted but these were unable to announce an Award. As a result, the 7^th NFC remains in force.

Part IV of the Constitution details the fiscal and financial powers of provincial governments (Art. 118-127). The provision of funds by provincial governments to local governments is done in accordance with the respective local government acts. In Punjab, Sindh and KP, the Provincial Finance Commissions are constituted for this purpose whereas in Balochistan, the Local Government Act provides for the establishment of a local council grants committee for awarding grants to local governments.

Local governments generally have limited or no powers to impose new taxes at the local level or to engage in borrowing. They are only empowered to collect certain minor taxes entrusted to them by provincial governments. This makes these local governments financially dependent upon respective provincial governments. Provincial governments also carry out inspections and social audits of the local governments.

Subnational, state and local government expenditure by economic classification
2020	Dollars PPP / inhabitant			% GDP			% general government			% subnational, state and local government
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total expenditure	-	366	-	-	7.6%	-	-	32.8%	-	-	100.0%	-
Inc. current expenditure	-	294	-	-	6.1%	-	-	29.8%	-	-	80.3%	-
Compensation of employees	-	-	-	-	-	-	-	-	-	-	-	-
Intermediate consumption	-	-	-	-	-	-	-	-	-	-	-	-
Social expenditure	-	-	-	-	-	-	-	-	-	-	-	-
Subsidies and current transfers	-	-	-	-	-	-	-	-	-	-	-	-
Financial charges	-	-	-	-	-	-	-	-	-	-	-	-
Others	-	-	-	-	-	-	-	-	-	-	-	-
Incl. capital expenditure	-	72	-	-	1.5%	-	-	51.7%	-	-	19.7%	-
Capital transfers	-	-	-	-	-	-	-	-	-	-	-	-
Direct investment (or GFCF)	-	-	-	-	-	-	-	-	-	-	-	-

EXPENDITURE:The 18^th Constitutional Amendment and 7^th NFC Award are considered milestones in the evolution of fiscal federalism in Pakistan, as these devolved significant functions and expenditure responsibilities from national to provincial governments, especially in the area of social services. With the transfer of functions to provincial governments, expenditure at the federal level should have decreased; however, the current (operating) expense of provincial and federal governments increased disproportionately over time relative to their revenue. This higher current expense is largely responsible for increase of fiscal deficit at the national level in the last few years. The cumulative current expenditures of both federal and provincial governments which was 16.1% of GDP in FY 2011 increased to 20.4% of GDP in FY 2020. The cumulative current expenditure of provincial governments has become 80.3% of their total expenditure in FY 2020, whereas it was 77.1 % of their overall expenditures in FY 2011. Within current expenditure, the pension expense has grown rapidly in the last ten years. Pension expenditure at the federal level has risen by a cumulative annualised growth rate (CAGR) of 18% in Pakistan during FY 2011- 2021. Provincial pension expenditure has also witnessed a similar surge. Overall pension spending as a share of tax revenue has reached 18.7% as of FY 2020, almost double the level a decade earlier. This high level and continuous growth in pension expense of provincial governments has become a major fiscal risk.

DIRECT INVESTMENT: The federal and provincial governments incur development expenditures and make investments in key sectors of economy. While the federal government incurs capital expenditure through its public sector development programme (PSDP), the provincial governments make these capital investments through their respective annual development programmes (ADP). In FY 2020, the cumulative development expenditure at the national level stood at PKR 1 155.2 billion (USD 134 PPP per capita) which included a provincial development expenditure amounting to PKR 622 billion (USD 72 PPP per capita). Thus, capital expenditure at the provincial level made up a significant portion of total public capital expenditures in 2020 (53.84%). This reflects an increase of around 9% compared to FY 2019. Social and infrastructure sectors have been given the highest priority in terms of capital expenditures and these sectors are followed by productivity enhancement, science and information technology, and governance.

Subnational, state and local government expenditure by functional classification
2020	Dollars PPP / inhabitant			% GDP			% general government			% subnational, state and local government
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total expenditure	-	366	-	-	7.6%	-	-	32.8%	-	-	100.0%	-
1. General public services	-	-	-	-	-	-	-	-	-	-	-	-
2. Defence	-	-	-	-	-	-	-	-	-	-	-	-
3. Security and public order	-	-	-	-	-	-	-	-	-	-	-	-
4. Economic affairs/transports	-	-	-	-	-	-	-	-	-	-	-	-
5. Environmental protection	-	-	-	-	-	-	-	-	-	-	-	-
6. Housing and community amenities	-	-	-	-	-	-	-	-	-	-	-	-
7. Health	-	-	-	-	-	-	-	-	-	-	-	-
8. Recreation, culture and religion	-	-	-	-	-	-	-	-	-	-	-	-
9. Education	-	-	-	-	-	-	-	-	-	-	-	-
10. Social protection	-	-	-	-	-	-	-	-	-	-	-	-

Disaggregated data of expenditure by functional classification are not available.

Provincial governments spend significant amounts of their annual development plans on social sectors, which include education and health. In addition to the social sectors, provincial governments make substantial investments in infrastructure development (including roads, water supply and sanitation, and housing), urban development, special initiatives and services.

Subnational, state and local government revenue by category
2020	Dollars PPP / inhabitant			% GDP			% general government			% subnational, state and local government
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total revenue	-	483	-	-	10.0%	-	-	66.5%	-	-	100.0%	-
Tax revenue	-	338	-	-	7.0%	-	-	61.5%	-	-	70.0%	-
Grants and subsidies	-	27	-	-	0.6%	-	-	-	-	-	5.5%	-
Tariffs and fees	-	118	-	-	2.5%	-	-	-	-	-	24.5%	-
Income from assets	-	-	-	-	-	-	-	-	-	-	-	-
Other revenues	-	-	-	-	-	-	-	-	-	-	-	-

OVERALL DESCRIPTION: The revenue distribution between the federal and provincial governments is in accordance with the National Finance Commission Award. Currently, the 7^th NFC award (2010-2015) is in place which allocates 57.5% of the divisible pool resources to the provinces, while 42.5% is kept by the federal government. This is a substantial shift from the earlier Award which allocated 47.5% to provinces and 52.5% to the federal government.

Although the 7^th NFC award expired in 2015, the 8^th NFC did not conclude with an award. This is attributed to the constitutional clause stating that the share of provinces may not be reduced in subsequent awards, leading to a political blockage.

TAX REVENUE: Provinces are constitutionally empowered to collect taxes. These taxes include agriculture income tax, general sales tax on Services, urban immovable property tax, capital gains taxes on property, motor vehicle tax, excise duty on alcohol/liquor/narcotics and other duties and fees. Subnational governments are highly dependent upon their share in federal tax revenue. The federal transfers to provincial governments amount to USD 290 PPP per capita which constitute 86% of the total provincial tax revenue (USD 338 PPP per capita) and 60% of the total provincial revenue from all sources (USD 483 PPP per capita).

Currently, the most buoyant provincial tax is the general sales tax on services. The provinces have created provincial revenue authorities to collect and facilitate payment of the general sales tax on services.

GRANTS AND SUBSIDIES: In addition to the transfer of revenue shares to provincial governments, which is done in accordance with 7^th NFC Award, the federal government also gives grants and subsidies to the provincial governments. Grants include current grants and development grants. The current grants are given to meet certain operating expenses whereas development grants are made to finance development projects. Similarly, the federal government also pays subsidies to provincial governments for specific purposes e.g., public transport, fertiliser etc.

At the provincial level, the provincial finance commissions determine the amount and distribution of grants. In its interim Provincial Finance Commission Award of 2017/18, the province of Punjab also introduced criteria for transfers from provinces to districts and municipalities, while union councils continue to receive a uniform grant. In KP, the Local Government Act provides that the provincial finance commission transfers at least 30% of the provincial annual development program to local governments.

OTHER REVENUE: Provincial governments are also authorised to levy tariffs, fees and other such charges, which form part of the provincial “non-tax receipts”. These include road tolls, profits from hydro-electric power stations, royalty and license fees from mines and minerals etc. All such non-tax receipts form part of provincial accounts. Other revenue also include income from assets. Separate figures of the latter are not available.

Subnational, state and local government fiscal rules and debt
2020	Dollars PPP / inh.			% GDP			% general government debt			% SNG debt			% SNG financial debt
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total outstanding debt	-	204	-	-	4.3%	-	-	4.6%	-	-	100.0%	-	-	-	-
Financial debt	-	204	-	-	4.3%	-	-	4.9%	-	-	100.0%	-	-	100.0%	-
Currency and deposits	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Bonds / debt securities	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Loans	-	204	-	-	-	-	-	-	-	-	100.0%	-	-	-	-
Insurance pensions	-	0.01*	-	-	-	-	-	-	-	-	-	-	-	-	-
Other accounts payable	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-

*The figures do not include present value of accrued but unfunded pension liabilities.

FISCAL RULES: At the federal level, the Fiscal Responsibility and Debt Limitation Act 2005 prescribes the following major fiscal and debt rules: (i) fiscal deficit in a financial year shall not exceed 3.5 % of GDP; (ii) the maximum limit of public debt to GDP ratio shall not exceed 60%; (iii) central government guarantees issued in a financial year shall not exceed 2% of the GDP. No such rules exist for the provincial governments as of yet. However, some provincial governments are considering formulating public financial management/fiscal responsibility acts.

DEBT: The Constitution empowers provincial governments to raise loans (both domestically and internationally) within the limits set by the National Economic Council (NEC) (Article 167). However, these limits were only set by the NEC in 2015 when it approved a cumulative provincial borrowing limit of 0.5% of Pakistan’s GDP. This borrowing limit was assigned to provincial governments in accordance with their respective shares ascertained under NFC Award. This borrowing limit was revised to 0.85% of GDP in 2017 and has been distributed among provinces according to their horizontal share in 7^th National Finance Commission Award. Thus, Punjab has been empowered to raise debt up to a limit of PKR 142.67 billion (USD 17 PPP per capita). It has clarified that the federal government may also borrow on behalf of any province. The federal government arranges loans on concessional terms from international institutions especially for development projects of provinces and it then on-lent the loan to the respective provincial government. As of 30 June 2020, the total debt stock of provincial governments was PKR 1 764 billion (USD 204 PPP per capita): Punjab with PKR 998 billion (USD 116 PPP per capita), Sindh with PKR 454 billion (USD 53 PPP per capita), KP with PKR 261 billion (USD 30 PPP per capita) and Balochistan with PKR 51 billion (USD 6 PPP per capita). Provincial governments obtained multilateral loans from international financial institutions and a few bilateral loans to support the development needs of the province through the federal government. The focus of external financing remains in the areas of education, agriculture, transport, urban development and infrastructure development in the provinces.

TERRITORIAL MANAGEMENT OF THE CRISIS: The first case of COVID-19 in Pakistan was reported on 26 February 2020. The government of Pakistan immediately set up a National Coordination Committee (NCC) headed by the prime minister for policy decision-making. Concurrently, the National Command and Operation Center (NCOC), a joint civilian-military body, was established as an operational arm of the NCC to coordinate the national COVID-19 response efforts. The NCC also approved a National Action Plan (NAP) that laid out the broad contours of the government’s strategy to COVID-19.

The National Coordination Committee on COVID-19 (NCOC) met on a daily basis to monitor the situation and to iron out issues of coordination, administration, and supervision. It discussed operational matters related to procurement, supply chain, testing, personal protective equipment (PPE), disbursements under social protection programs, digital tracking and tracing mechanism, etc. NCOC assisted the NCC for strategic decision-making and monitored implementation of the decisions of the NCC.

Immediately after the spread of COVID-19 in Pakistan in March 2020, the government enforced complete lockdown in the country with the only exception of grocery shops and pharmacies that were required to function under social distancing requirements. Later, federal and provincial governments in Pakistan followed the strategy of limited or smart lockdowns to ensure that economic activities may continue.

All the provincial governments worked in unison with federal government and NCC and took measures to implement the decisions of NCOC. This provided for an effective response to the COVID-19 crisis by the government that has been duly acknowledged by WHO and international agencies. Areas like law and order, management of educational institutions and provision of health care services falls within the ambit of provincial governments.

At the subnational level, the provincial governments spearheaded campaigns for COVID-19 testing, provision of emergency and medical services to COVID-19 patients, hospital load management, imposition of lock downs and regulation of public places, markets, private businesses and schools and measures for ensuring social protection of the vulnerable groups. In addition, the provincial governments were also responsible for adherence to COVID-19 standard operating procedures that include maintenance of social distancing in public places and sanitisation. Finally, they were also responsible for administering vaccines to the general public.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: In addition to taking health related measures to manage the pandemic and control its spread, the federal and provincial governments also tried to address the economic impact of COVID-19 through a combination of tax relief and additional expenditure measures. The State Bank of Pakistan (SBP) reduced the policy rate from 13.25% to 7% and deferred repayment of consumer, agricultural and other loans by one year. In addition, on 30 March 2020, the federal government announced a financial stimulus package of PKR 1.2 trillion (USD 139 PPP per capita) to deal with the adverse impact of the coronavirus outbreak on the economy. It included measures such as the launch of an emergency cash program for most vulnerable families whose livelihoods were severely impacted by COVID-19, a relief package for industrial workers rendered unemployed; deferring payment of gas and electricity bills for three months, an incentive package for the construction sector, and waiving of import duties on food items to ensure food security in the country.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: Pakistan’s economy suffered setbacks and slowdown due to the outbreak of COVID-19. As a result, Pakistan’s GDP growth during FY 2020 was reduced to -0.47% against pre-COVID-19 projection of 2.4%. Similarly, Pakistan faced a shortfall of PKR 1.557 billion (USD 180 PPP per capita) in revenue collection by the Federal Board of Revenue, the largest tax collecting agency in Pakistan during FY2020 as Pakistan’s revenue collection was PKR 3.998 billion against the pre-COVID-19 budget estimate of PKR 5.555 billion. As a result, the consolidated fiscal deficit of Pakistan (including federal and provincial governments) during FY 2020 was -8.1% of GDP against pre-COVID-19 budget estimate of -7.1% of GDP. Despite a large decrease in tax collection relative to the budget estimates, the overall budget deficit did not worsen much as non-tax revenues exceeded budget estimates and expenditures remained close to the target.

At the subnational level, no studies have been carried out to ascertain the impact of COVID-19 on provincial finances. The provincial governments are largely dependent upon transfer of resources from federal government, which is done in accordance with the National Finance Commission Award. Thus, any decrease in revenues at the federal level accordingly results in decrease in resources at the provincial level.

ECONOMIC AND SOCIAL STIMULUS PLANS: After the initial economic stimulus plans mentioned above, the federal and provincial governments have continued to take measures to support the revival of economic activities. The State Bank of Pakistan maintains the policy rate at the reduced level as it is instrumental in reviving industrial and economic activities in the country. The tax relief measures provided by the federal and provincial governments immediately after the outbreak of COVID-19 also continue. To support the most vulnerable segments of society, the federal government continues the emergency cash programme it launched as a social protection measure for these groups.

In addition, the federal and provincial governments have also increased public investments and development spending with the aim of boosting economic activity across the country. The governments of Punjab and Khyber Pakhtunkhawa have formulated their medium-term strategies for economic growth. These strategies guided the provincial governments in channelling their funding to trigger economic activities. The government of the Punjab has also revised its medium-term Punjab Growth Strategy. The revised strategy takes into account the economic shocks due of this pandemic and also provides strategic guidance for public investments in sectors in the post-COVID-19 period.