Performance Budgeting: How Output/Outcome Measures Are Being Used in the Current Budget Cycle
As Pakistan’s fiscal system evolves to align with modern public financial management (PFM) standards, the FY 2025–26 budget cycle marks another step in embedding performance budgeting — a reform that seeks to link spending with measurable results. The move from traditional input-based allocations to performance-driven budgeting reflects the government’s commitment to improving expenditure efficiency, transparency, and accountability.
Understanding Performance Budgeting within Pakistan’s Fiscal Framework
Performance budgeting aims to ensure that public spending delivers tangible outcomes, not merely financial disbursements. In Pakistan, this approach has been institutionalized through the Finance Division’s PFM Reform Strategy (2022–27), which prioritizes a shift from incremental budgeting to a results-based framework. Under this system, ministries and divisions are required to define clear output and outcome indicators — such as service delivery targets, policy milestones, or beneficiary coverage — to justify resource allocations.
Evolution from Input-Based to Output/Outcome-Based Budgeting
Historically, Pakistan’s budgeting system focused on inputs: salaries, utilities, and administrative costs. The reform journey began with pilot initiatives supported by the World Bank and IMF’s Fiscal Affairs Department, emphasizing program-based classification and performance reports. Over recent years, the Finance Division’s Budget Wing has expanded this practice to key service ministries, including Education, Health, and Energy, where output indicators — such as classrooms built, immunization rates, or power sector recoveries — are used to evaluate budget utilization.
Integration of Performance Indicators in the Current Budget Cycle
The FY 2025–26 budget process operationalizes performance budgeting more systematically. Budget call circulars now require line ministries to submit performance plans with quantifiable outputs and expected outcomes. These are reviewed jointly by the Finance Division, Planning Commission, and PFM Reform Unit. Ministries are encouraged to integrate performance-linked justifications in their budget proposals — a move toward linking fiscal allocations with results rather than historical spending patterns.
The use of Medium-Term Budgetary Frameworks (MTBFs) complements this transition by providing a three-year outlook for both spending and performance indicators, ensuring continuity and predictability.
Institutional Roles: Finance Division, PFM Reforms Unit, and Line Ministries
The Finance Division provides the policy backbone, issuing budget circulars and guidance notes. The PFM Reform Unit supports capacity-building and performance indicator design, while line ministries implement sector-specific frameworks. However, challenges persist: uneven capacity across ministries, weak data reporting mechanisms, and limited integration of monitoring tools hinder full operationalization.
Challenges in Measurement, Reporting, and Data Consistency
A critical bottleneck is the absence of consistent, reliable data for outcome measurement. While ministries can define outputs (e.g., number of schools constructed), assessing outcomes (e.g., learning outcomes improvement) remains complex. Inadequate coordination between the Finance Division, Planning Commission, and provincial departments further complicates data harmonization. Moreover, the lack of real-time performance dashboards and standardized reporting formats restricts transparency.
Fiscal Implications: Linking Resource Allocation to Service Delivery Results
Performance budgeting enhances fiscal accountability by connecting resource flows to actual service delivery. It supports the reallocation of funds from underperforming programs to high-impact areas. In a constrained fiscal environment — characterized by limited fiscal space and mounting recurrent expenditures — results-based budgeting ensures that each rupee delivers measurable value. For FY 2025–26, this alignment is expected to improve public expenditure efficiency and rationalize non-priority spending.
International and Regional Lessons on Performance-Based Budgeting
Globally, countries like Malaysia, Indonesia, and the Philippines have embedded performance-based budgeting to strengthen fiscal discipline. Their experience shows that sustainable reform requires strong legal frameworks, transparent monitoring, and citizen engagement. Pakistan’s gradual transition aligns with these lessons, though institutionalizing the practice at both federal and provincial levels remains a work in progress.
Actionable Recommendations
- Institutionalize Legal Backing: Embed performance budgeting requirements in the Public Finance Management Act to ensure continuity beyond administrative directives.
- Develop Performance Dashboards: Introduce online, publicly accessible dashboards for monitoring outputs and outcomes across sectors.
- Capacity Building: Expand training for budget officers and planners in results-based management.
- Integrate Monitoring Systems: Link Finance Division, Planning Commission, and line ministry data systems for unified reporting.
- Independent Evaluation: Establish periodic third-party evaluations to validate reported performance indicators.
Conclusion
Pakistan’s move toward performance budgeting in the current budget cycle represents a decisive step in strengthening fiscal accountability and aligning public spending with developmental outcomes. While challenges of measurement and institutional coordination remain, the direction of reform — toward results-oriented fiscal management — holds the promise of transforming how budgets are formulated, monitored, and evaluated. The next phase will depend on sustaining momentum, investing in data systems, and reinforcing the accountability framework that underpins fiscal credibility.
This article was published on publicfinance.pk.
FAQs (for FAQ Schema)
1. What is performance budgeting in Pakistan?
Performance budgeting links government spending with measurable outputs and outcomes, ensuring that fiscal allocations produce tangible public service results.
2. Which ministries are implementing performance budgeting?
Key ministries such as Education, Health, and Energy are integrating output and outcome indicators into their FY 2025–26 budget proposals.
3. What are the challenges in adopting performance budgeting?
Challenges include limited data reliability, weak coordination between institutions, and insufficient technical capacity for measuring outcomes.
