This thesis aims to examine the impacts of fiscal decentralization (FD) on the economic development of Baluchistan. The data between the years 2005/2012 of 29 (out of 32) districts has been selected to carry-out this study. This study deals with expenditure decentralization and the district level development expenditures are used as proxy to measure FD. To measure economic development, three different indicator of development (health, education and infrastructure) have been used to construct the economic development index. For health, children immunization, for education, net primary enrolment and for infrastructure, access to tape water are used as proxy indicators. One-way Fixed Model of panel data estimation technique has been adopted for empirical analysis. The empirical results show positive and statistically significant impact of FD on economic development. The results also provide evidence that the magnitude of this significant impact is further increased after the 7 th National Finance Commission (NFC). Furthermore, the correlation between FD and all three development indicators used in this study to construct development index has also been analysed. The results show that there is positive and significant relationship between FD and education outcomes. Positive but insignificant statistical relationship between FD and health outcomes (before 7 th NFC) and statistically significant relationship between FD and access to tape water. This study suggests a more decentralized fiscal system in the country especially for the backward and under developed regions like Baluchistan. Supervisor:- Dr. Nasir Iqbal