Laraib Saeed
Pakistan’s health crisis runs deeper than funding shortages, the real problem is not just how much is spent, but how resources are distributed.
The population-dominant National Finance Commission (NFC) Award formula assumes that more people require more resources. But this assumption falls short in a system where need varies sharply. A financing model based primarily on population cannot account for differences in poverty, disease burden, geography or the cost of delivering services.
Population remains important, but insufficient for guiding health financing. Provinces with similar populations can encounter vastly different health challenges: one may struggle with higher maternal mortality, weak infrastructure and dispersed populations; another may have stronger service delivery systems and better access. Yet under a population-centric formula, both are treated largely the same.
This weakens the NFC’s role as an equalisation mechanism. Instead of reducing disparities, it risks entrenching them. Since provinces rely heavily on NFC transfers, misalignment with need leads to uneven access to services, under-resourced primary care and persistent regional inequalities. Areas with higher health burdens or greater delivery challenges are not systematically prioritised.
By tying fiscal transfers closely to population size, the formula also risks rewarding population growth rather than improvements in human development. This is particularly problematic in the health sector, where long-term gains depend on preventive care, efficiency and better outcomes.
International experience offers a clear lesson. Systems, such as Nigeria, that rely heavily on population-based transfers without incorporating measures of need have struggled to reduce disparities. In contrast, countries that link funding to service demand, cost of delivery and fiscal capacity have made greater progress in improving equity. The lesson is not to abandon population, but to balance it.
That balance is now central to calls for NFC reform. A more equitable formula would retain population as a major component but reduce its dominance and complement it with indicators that better reflect reality such as poverty and deprivation, service-linked population, cost-to-serve factors such as remoteness and fiscal capacity. Such an approach shifts the focus from “how many people” to “what those people need” and “what it takes to serve them.” It also restores the NFC’s intended role as a tool for equalisation rather than simple distribution.
Reform, however, is not purely technical. It is a political process that requires careful management. Provinces are understandably sensitive to changes in their shares. Any transition must therefore be gradual, transparent and supported by credible data, with safeguards to prevent sudden losses.
The alternative is to maintain a system increasingly out of step with Pakistan’s development challenges. As disease burdens and population growth increase pressure on the health system, the limitations of a population-centric formula will become more pronounced.
Pakistan’s current NFC Award answers one question well: how many people live in each province. But it fails to answer where need is greatest, what services are required and how much they cost. Until the formula reflects these realities, improving health outcomes will remain far more difficult than it needs to be.
—The writer works at Akhter Hameed Khan Foundation as Communications & Partnership Officer.
