INTERNATIONAL UNION FOR CONSERVATION OF NATURE Decentralisation initiatives in Pakistan began in March 2000 with the National Reconstruction Bureau»s announcement of the Local Government Plan. The key

component of the country»s decentralisation strategy was to restructure local government bodies. In 2001, a Local Government Ordinance was promulgated in each of the four provinces, defining the functions of newly created local government entities, specifying their sources of revenue and spelling out accountability relationships. The main objectives of the devolution plan are to make local governments accountable to citizens, to reverse the bureaucratic centralisation of decision making, and to improve the quality and efficiency of basic service delivery (NRB 2007). It is worth noting, however, that local governments are not recognised by the Constitution of Pakistan. They exist as extensions of the provincial administration with specified functions delegated to them by the province. This distorts the fiscal structure as a whole, with a particularly negative impact on revenue mobilisation and expenditure decisions at the local level. The Local Government Plan acknowledges these issues, noting that the current system of transfers and grants is flawed. There is no formula for the distribution of funds to the districts, and provincial budgets do not specify district expenditures. Districts do not know what to expect from the province, with a detrimental effect on local-level planning activities. In such a climate, there is little or no transparency, and this encourages ad hoc decision making that is influenced by political imperatives rather than genuine, needs-based priorities. Decentralising revenue generation and expenditure decision making is one way to start addressing this problem. Reform of the current fiscal framework ca