Public Finance

At a time when constitutional devolution has firmly placed health, education, and social protection within the provinces’ domain, the federal government continues to spend heavily on these sectors. The recently published performance brief on federal current expenditure for FY2023-24 reveals that Islamabad allocated and spent over Rs. 637 billion on these three devolved sectors—raising important questions about the structure, efficiency, and alignment of fiscal federalism in Pakistan.

Federal Spending in Devolved Domains

Despite the 18th Constitutional Amendment of 2010 that granted legislative and fiscal control of social sectors to provinces, the federal government retains a significant financial footprint.

Here is a snapshot of the actual federal expenditures in FY2023-24:

(Source: Finance Division, Government of Pakistan – FY2023-24)

This expenditure underscores the persistence of federal involvement in service delivery, a role constitutionally meant for provincial governments after devolution.

What Lies Behind the Numbers?

In health, actual spending reached Rs. 45 billion—almost double the budgeted amount. The surge was largely due to a one-time allocation of Rs. 21.3 billion for the Expanded Program on Immunization (EPI), co-financed by provinces. Major recipients of health funding included institutions in the Islamabad Capital Territory like the Pakistan Institute of Medical Sciences (Rs. 5.2 bn), FG Polyclinic (Rs. 3.9 bn), and Sheikh Zayed Hospital, Lahore (Rs. 4.9 bn). The Ministry of Health’s administrative costs, NIH, and NIRM also received support.

In education, total actual spending stood at Rs. 114 billion, with Rs. 68.5 billion disbursed to the Higher Education Commission (HEC), including allocations for universities across provinces and regions such as AJK and Gilgit-Baltistan. School-level education in the ICT and cantonment areas accounted for Rs. 34.6 billion. Interestingly, the World Bank-supported ASPIRE program recorded an eightfold increase in actual expenditure—from a budgeted Rs. 1.5 billion to Rs. 8.6 billion.

In social protection, the federal government allocated Rs. 466 billion for the Benazir Income Support Programme (BISP) and an additional Rs. 8.6 billion for administrative costs. Region-wise disbursements show Punjab received Rs. 169 billion under BISP’s Kafalat component, followed by Sindh (Rs. 95.7 bn) and Khyber Pakhtunkhwa (Rs. 67 bn). Additionally, Rs. 4.2 billion was spent through Pakistan Bait-ul-Mal, an autonomous agency.

The Bigger Picture: Role Clarity or Role Confusion?

This continued federal investment in devolved sectors may reflect institutional inertia or reflect gaps in provincial capacity to independently run large-scale programs. Yet it also reflects a policy paradox. While devolution was designed to empower provinces, the federation has retained operational control of flagship programs such as BISP and EPI, which arguably require national standardization.

Moreover, vertical programs in health and higher education remain federally managed, raising efficiency concerns and questions of fiscal overlap.

Toward Fiscal Coherence and Accountability

To address this duality, there is a growing need to realign spending responsibilities with constitutional mandates. Key recommendations include:

• Conducting an expenditure reassignment study to evaluate the necessity and efficiency of federal spending in devolved areas.
• Enhancing intergovernmental coordination through the Council of Common Interests (CCI).
• Enabling provinces with stronger institutional capacity and financial autonomy to independently manage programs.
• Limiting federal funding only to areas of national or strategic significance.

Without such structural clarity, the tension between the letter of constitutional reform and the reality of fiscal operations will persist, potentially undermining both efficiency and accountability in public service delivery.

Reference:
The analysis in this article is based on the official document titled “Federal Government’s Current Expenditure 2023-24 on Health, Education and Social Protection” released by the Government of Pakistan. The figures and classifications reflect current federal allocations despite the constitutional devolution of these subjects under the 18th Amendment. 

This article was published on Publicfinance.pk.