Challenges in Implementing Medium-Term Budgetary Frameworks at the Provincial Level

Overview

In Pakistan’s decentralized fiscal landscape, Medium-Term Budgetary Frameworks (MTBFs) are heralded as a solution to break the cycle of short-termism in provincial resource allocation. Introduced under the 2016 National Fiscal Pact, MTBFs require provinces to align annual budgets with 3–5-year expenditure plans, linking spending to strategic priorities like education and healthcare. However, a 2023 World Bank review found that only Punjab and Khyber Pakhtunkhwa (KP) achieved partial MTBF compliance, while Sindh and Balochistan lagged with 60% of departments still relying on ad-hoc budgeting. With provinces managing 57% of national development spending, these gaps risk derailing fiscal stability and service delivery.

Adoption Patterns: A Tale of Four Provinces

MTBF implementation varies starkly across provinces, reflecting disparities in capacity and political will:

• Punjab : Launched Pakistan’s first provincial MTBF in 2018, achieving 72% compliance by 2023. Integrated 14 sectors into multi-year spending plans, reducing annual budget variances from 22% to 9%.

• KP : Adopted MTBF in 2020, but only 40% compliance due to post-merger governance complexities in tribal districts.

• Sindh : Piloted MTBF in health and education (2021), yet 80% of departments lack multi-year costing frameworks.

• Balochistan : Struggles with basic MTBF prerequisites—only 15% of staff trained in medium-term forecasting.

MTBF Compliance and Fiscal Outcomes (2023)

Institutional Hurdles Undermining MTBF Efficacy

Provinces face shared structural barriers despite differing adoption rates:

• Capacity Deficits : Only 18% of provincial finance officers are trained in MTBF tools like baseline costing or scenario modeling (2023 AGP audit).

• Political Volatility : Frequent shifts in provincial priorities—e.g., Sindh’s abrupt reallocation of ₨55 billion from MTBF-aligned health projects to ad-hoc infrastructure in 2022—undermine continuity.

• Data Fragmentation : KP’s MTBF portal lacks integration with federal databases, causing 33% of development projects to duplicate federal initiatives.

• Resource Misalignment : Balochistan’s MTBF earmarked 70% of education funds for teacher salaries, leaving infrastructure gaps unaddressed.

The Promise and Pitfalls of Fiscal Discipline

Where implemented rigorously, MTBFs show tangible benefits. Punjab’s 3-year health budget (2021–2024) reduced maternal mortality by 19% through predictable funding for rural clinics. Conversely, Sindh’s fragmented MTBF exacerbated inefficiencies: a 2023 audit revealed ₨23 billion in unspent health funds due to rigid multi-year allocations that ignored mid-term demographic shifts.

Pathways to Sustainable MTBF Integration

Closing provincial MTBF gaps demands tailored interventions:

• Capacity Investment : Train 1,000+ provincial staff in MTBF tools via partnerships with institutions like the IMF’s Middle East Regional Technical Assistance Center.

• Tech-Enabled Alignment : Deploy integrated platforms (e.g., Punjab’s MTBF Dashboard) to synchronize provincial and federal priorities, avoiding duplication.

• Accountability Mechanisms : Link federal transfers to MTBF compliance, as proposed in the 2024 National Finance Commission Award.

• Citizen Engagement : Publish user-friendly MTBF trackers (e.g., KP’s Citizen Budget Portal ) to build public ownership and deter politicized reallocations.

Punjab’s 2024 decision to embed climate resilience into its MTBF—reserving 15% of development funds for adaptation projects—offers a model for adaptive planning. However, without addressing core issues like bureaucratic inertia and data gaps, MTBFs risk becoming another box-ticking exercise.

For Pakistan’s provinces, the MTBF journey is not just about better budgets—it’s a test of governance maturity. As climate shocks and population growth strain resources, the cost of fiscal short-termism will only escalate. The window to institutionalize MTBFs is narrowing, but the payoff—a future where budgets serve citizens, not crises—is worth the grind.

This article was published on PublicFinance.pk.