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 institutionalised through the Finance Division's PFM Reform Strategy (2022-27), which prioritises 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.

The Medium-Term Budgetary Framework (MTBF) complements this transition by providing a three-year outlook for both spending and performance indicators, ensuring continuity and predictability across electoral cycles.

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, emphasising 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, immunisation rates, or power sector recoveries — are used to evaluate budget utilisation.

"The shift from input-based to outcome-based budgeting is not merely a technical exercise. It is a fundamental reorientation of how the state accounts for its performance to citizens."

Integration of Performance Indicators in the Current Budget Cycle

The FY 2025-26 budget process operationalises 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.

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 harmonisation.

Actionable Recommendations

Institutionalise legal backing for performance budgeting in the Public Finance Management Act. Develop online, publicly accessible dashboards for monitoring outputs and outcomes across sectors. Expand training for budget officers in results-based management. Link Finance Division, Planning Commission, and line ministry data systems for unified reporting. Establish periodic third-party evaluations to validate reported performance indicators.

Frequently Asked Questions

What is performance budgeting in Pakistan?
Performance budgeting links government spending with measurable outputs and outcomes, ensuring fiscal allocations produce tangible public service results. It is embedded in the Finance Division's PFM Reform Strategy 2022-27.
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 under MTBF guidelines.
What are the challenges in adopting performance budgeting?
Challenges include limited data reliability, weak coordination between institutions, and insufficient technical capacity for measuring outcomes across federal and provincial tiers.

Filed Under

Performance BudgetingMTBFPFM ReformFinance DivisionResults-Based Management