This article discusses how the 7th National Finance Commission award and the 18th Amendment to the Constitution have strengthened the autonomy of the federating units in Pakistan. The former has empowered the provinces by increasing their access to financial resources, but there is the danger that it may increase the consolidated fiscal deficit unless both the federal and provincial governments increase their fiscal efforts and rationalize their expenditures. The 18th Amendment has the potential to change the structure of governance, but has been implemented in such a way that effective decentralization has been at least partially rolled back. For devolution to work in Pakistan, financing and the delivery of devolved services will have to be more effectively organized and managed.