1. Pakistan
  2. Local government PPP landscape

Local government PPP landscape

  • Overview

    National Disaster Risk Management Fund

    Number of SNGs

    • Municipalities
      N/A
    • Intermediate
      N/A
    • Regional/State
      N/A
    • Total Number of SNGs
      N/A

    SNG Expenditure (% of GDP)

    • Total SNG Expenditure
      N/A
    • SNG Current Expenditure
      N/A
    • SNG Staff Expenditure
      N/A
    • SNG Investment
      N/A

    SNG Expenditure (% of govt. expenditure)

    • SNG Expenditure
      N/A
    • SNG Current Expenditure
      N/A
    • SNG Staff Expenditure
      N/A
    • SNG Investment
      N/A

    SNG Revenue (% of GDP)

    • SNG Revenue
      N/A
    • SNG Tax Revenue
      N/A
    • SNG Grants
      N/A
    • Other SNG Revenue
      N/A

    SNG Revenue (% of govt. revenue)

    • SNG Revenue (% of govt. revenue)
      N/A
    • SNG Tax Revenue (% of govt. tax revenue)
      N/A
    • SNG Grants (% of govt. grants)
      N/A
    • Other SNG Revenue (% of other govt. evenue)
      N/A

    SNG Debt Profile

    • SNG Debt (% of GDP)
      N/A
    • SNG Debt (% of govt. debt)
      N/A

    Transfers to SNGs from National Government

    • SNG Transfers Score
      A
    • Score for Transfer Allocation System
      A
    • Score for Info Transfer Timeliness
      B
    • Score for Collection and Reporting of Fiscal Data
      A

    GDP = gross domestic product, N/A = not applicable, SNG = subnational government.

    Note: The Public Financial Management and Accountability Assessment report, developed by the World Bank and other development partners, comprised scoring of various indicators by rating them from A to D. These ratings, as per criteria stated in the Public Expenditure and Financial Accountability (PEFA) framework, are broadly interpreted as follows:

    A = good performance that meets international standards (i.e., the criteria for the indicator are met in a complete, orderly, accurate, timely, and coordinated way);

    B = a level of performance ranging from good to medium by international standards;

    C = a level of performance ranging from medium to poor; and

    D = a process or procedure that is either nonexistent or not functioning effectively.

    Sources: PEFA. Pakistan 2012. https://www.pefa.org/assessments/summary/1536; and United Cities and Local Governments (UCLG) and Organisation for Economic Co-operation and Development (OECD). 2016. Subnational Governments Around the World: Structure and Finance. Part III-Country Profiles. A joint study of UCLG and OECD. https://www.uclg.org/sites/default/files/global_observatory_of_local_finance-part_iii.pdf.

  • Local Governance System in Pakistan

    Pakistan is a federal republic with three tiers of government: national, provincial, and local. The local government is protected by the Constitution in Articles 32 and 140-A. Each province has its own local-government-enabling legislation and ministries responsible for implementation. District councils and metropolitan corporations are respectively the highest rural and urban tiers of local government in the provinces. Both urban and rural local government have two or three tiers in all provinces except Khyber Pakhtunkhwa, where councils are identified as neither urban nor rural. There are 129 district councils across the four provinces, 619 urban councils made up of one city district, 4 metropolitan corporations, 13 municipal corporations, 96 municipal committees, 148 town councils, 360 urban union committees, and 1,925 rural councils. Additionally, there are 3,339 neighborhood, tehsil (town), and village councils in Khyber Pakhtunkhwa. The ability to raise local revenue varies according to provincial legislation.

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    Local Governance System

    Despite the issuance of Ordinance 2001, development of local governments in Pakistan is limited, and the local government in most parts of the country is empowered by provincial legislation. The provincial governments and their local government laws, along with the amendments, are outlined below:1

    • The Punjab Local Government Act 2019 (Act XIII of 2019), passed on 4 May 2019 (amendment of the Punjab Local Government [Amendment] Act of 2013).
    • The Khyber Pakhtunkhwa Local Government (Second Amendment) Act 2020, passed on 7 July 2020.
    • Sindh Local Government (Amendment) Act 2019, amended up to 27 February 2019 (amendment of the Sindh Local Government Act [Amendment] 2017).
    • The Balochistan Local Government (Amendment) Bill No. 08 of 2019, passed on 30 March 2019 (amendment of Balochistan Local Government Act 2010).

    The duration, structure, election processes, powers, and functions of the local governments vary from province to province. The amendments of 2019 and 2020 have led to several changes in the structure and functioning of the local and provincial governments’ rights. For example, the Punjab Local Government Act 2019 has changed the classification of urban local governments. It classifies nine cities as metropolitan corporations. The remaining urban areas with a population of 75,000 or more and urban areas designated as tehsil (town) headquarters have been classified as municipalities. The act also recognizes urban areas with a population of 20,000 or more that are not in the previous two categories as town committees. The act has also created a separation of executive and legislative functions, which is another important feature of a strong mayor–council model. The amended act has also introduced a provision that requires the provincial government of Punjab to devolve at least 26% of its general revenue receipts to elected local governments, which is a significant variation from the earlier act of 2013 as it will increase the funds available to elected local governments by eight times compared to the amount disbursed in 2017–2018.2

    Besides the local government act, there are various provincial cities acts that were passed in the 1970s in all four provinces. The objective is to manage large cities and establish special purpose vehicles such as the Development Authorities and Water and Sanitation Agencies in major cities above 1 million population. These acts were subsequently revised in many provinces including Punjab in 2019 and Khyber Pakhtunkhwa in 2020 (Khyber Pakhtunkhwa Urban Areas Authorities Act 2020). Further, Punjab 2019 and Khyber Pakhtunkhwa 2020 also passed their water acts (which have major implication on the local government functions) and regulatory systems related to water and sanitation services and options for outsourcing.

  • Infrastructure Development Plan of Local Governments

    Although there are variations by province, districts normally have the responsibility for delivering elementary and secondary education, literacy, primary and secondary health and dispensaries, and agriculture and intradistrict roads. The responsibilities of tehsils include local roads and streets; street services (e.g., lighting, water supply systems, sewers and sanitation); slaughterhouses; and fairs, markets, and cultural events. Metropolitan corporations (previously city districts) provide integrated services, managing these on a citywide basis to achieve economies of scale. Councils at the union level are responsible for libraries, local streets and street services, wells and ponds, and cattle ponds and grazing areas.

  • Sectors for Potential PPPs with Local Government Projects

    There are variations in the sectors that each local government could implement. For example, the Law of Balochistan defines the local government functions to include “public health, water supply, drains, animals and cattle, primary education, public safety, town planning, [and] building control.”

    Khyber Pakhtunkhwa, on the other hand, devolves much more detailed functions and indicates that “local governments are responsible for municipal services defined in the law and devolved administrative and financial authority for the management of the offices of government, to the district government, including primary and secondary education; mother and child health-care centers; basic health units; rural health centers; social welfare; sports, culture and youth affairs; revenue and estate; agriculture; livestock; on-farm water management; soil conservation; fisheries cooperatives; hospitals other than district headquarters; teaching and tertiary hospitals; rural development and rural works; population welfare coordination; human resource management; [and] planning, development, finance and budgeting functions for the devolved offices.”

  • Revenues for Local Governments

    The ability to raise local revenue varies according to provincial legislation.1  Different provincial laws allow for different sets of taxes and duties to be levied and collected as revenues by the local governments. For example, the Punjab Law provides a list of items, including “any tax, fee, rate, rent, toll, charge or surcharge only after the provincial government vets the tax proposal and approves it."

    Likewise, the Balochistan Law provides that “each tier, subject to the approval by the Provincial Government, levy all or any of the taxes prescribed by the government such as on cinemas [and] entertainment; registration and certification of birth, marriages, and deaths; licenses, sanctions, and permits granted by each tier of local government; transfer of immovable property; annual rental value of buildings and land; birth of children; marriage; advertisement and billboards; [and] animals and sale of animals.”

  • Borrowings by Local Governments

    In raising their own sources of revenue, each local government has laws that restrict the power of elected local government officials from imposing taxes and prohibit them from incurring any debt.

  • Budgetary Allocation to Local Governments

    Each provincial law makes elected local governments excessively reliant on provincial discretion of funding. In Punjab, Khyber Pakhtunkhwa, and Sindh, provincial finance commissions are composed largely of provincial ministers and public servant with nominal representation from elected local governments and members of the provincial assemblies. Meanwhile in Balochistan, the authority of the Grants Committee rests with the provincial ministers and secretaries.

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    Budgetary Allocation to Local Governments

    In Punjab, the provincial government retains the authority to review the approved budget of a local government and, if found contrary to the budget rules, may require the local government to rectify it. The law prohibits a local government from incurring any debt without previous approval of the provincial government. A local government may invest surplus funds, if any, in securities and financial institutions approved by the provincial government. In Khyber Pakhtunkhwa, the Provincial Finance Commission makes recommendations to the provincial government on the amount of grant for local governments out of the proceeds of the Provincial Consolidated Fund in a financial year. The Sindh Law states that the Provincial Finance Commission shall take all decisions by majority of the members present and voting, while the provincial government retains the authority to approve or, for reasons to be recorded in writing, alter the recommendations of the commission. The Balochistan Local Government Act provides for the setting up of a Local Councils Grants Committee to award grants to local governments.

    Assessment of Pakistan’s Public Financial Management and Accountability System

    The latest assessment of the Public Financial Management System (PFMS), based on the Public Expenditure and Financial Accountability (PEFA) framework of 2012, states that Pakistan has an overall rating of A (on a four-point rating scale, with A as the best and D as the worst) in terms of the country’s transparency in intergovernmental fiscal relations. The sub-indicators used to establish this overall rating are as follows:

    • Transparent and rules-based systems in the horizontal allocation of unconditional and conditional transfers among lower-level governments—having a rating of A (on a similar four-point rating scale).
    • Timeliness of information on transfers—having a rating of B (on a similar four-point rating scale).
    • Extent of consolidation of fiscal data for general government according to sector categories—having a rating of A (on a similar four-point rating scale).

    A new PEFA assessment for 2020 is being prepared, which may review the above parameters, but is yet unavailable. A structured rule-based allocation system governs the allocations to and among subnational governments in Pakistan under the direction of the National Finance Commission (NFC). The NFC award is the distribution of financial resources among the provinces of Pakistan by the federal government on an annual basis. Certain types of taxes collected by the federal government are pooled and then redistributed according to the NFC formula. Allocations from shares in federal taxes are made through a divisible pool, with shares being determined by the NFC award. The provincial share of the divisible pool would increase from 47.5% to 56% in the first fiscal year of the NFC award (FY2010) and 57.5% in the remaining years of the award. Provincial governments follow the same budgeting calendar as the federal government (i.e., Budget Call Circular is issued in November/December each year and budgets are to be finalized in May/June).

    Source: PEFA. 2012. Pakistan Federal Government: Public Financial Management and Accountability Assessment. Report No. 69185-PK. Islamabad: World Bank Pakistan. https://openknowledge.worldbank.org/handle/10986/26816.

  • Credit Rating of Local Governments

    No specific information on the credit rating of local governments was available. However, given that none of the four local governments reviewed are allowed to borrow money, it may be presumed that none of the local governments have credit ratings.