The Hidden Engine of UHC: How PFM Determines What Health Policies Deliver

From allocations to execution, the financial mechanics behind health systems matter more than we think.

A few years ago, I visited a rural health facility that had shelves stocked with glaucoma drops — a treatment rarely needed in that area. Meanwhile, children with common eye infections went untreated because basic antibiotic eye drops were missing. In another district, a Basic Health Unit had multiple vials of Streptokinase, a high-cost emergency cardiac drug that no one had the training or equipment to administer. What they really needed — oral rehydration salts, antibiotics, and pain relief — were nowhere to be found.

When we looked deeper, the problem wasn’t funding. Budgets had been allocated, and money had been spent. The real issue was systemic: a one-size-fits-all procurement plan developed centrally and applied uniformly, with little regard for local disease patterns or facility-level needs. It was a planning and financial management failure — not a resource gap.

These aren’t isolated incidents. They illustrate a broader truth: Universal Health Coverage (UHC) cannot succeed if public financial systems fail to deliver the right inputs to the right places, at the right time. Policymakers often focus on what health policies to introduce — insurance schemes, essential service packages, new delivery models — without considering the financial plumbing that underpins them. But PFM is not just a background function. It determines whether policies work in practice or remain stuck on paper.

This article explores why UHC cannot be achieved without strong public financial management systems. It begins by clarifying how PFM shapes UHC delivery, then draws lessons from country cases where disconnects have blocked progress. It ends by proposing reforms that can realign financial systems with health outcomes — so that money moves with purpose, not just process.

Why the UHC–PFM Conversation Can’t Wait

UHC has moved from vision statements into national policies across many low- and middle-income countries. It is enshrined in health sector strategies, embedded in Sustainable Development Goals, and backed by substantial donor funding. Yet, a persistent disconnect remains between policy ambition and implementation reality. Countries that pledge to achieve UHC often fall short when it comes to sustaining the reforms needed to deliver on that promise.

One major reason is hiding in plain sight: public financial management (PFM). While global health debates focus on insurance models or service delivery, the unsexy machinery of budgets, procurement, and fund flows often dictates success or failure. This oversight proves costly. When UHC initiatives are not fully integrated into national budget processes, the result is usually a mix of delayed fund flows, underused allocations, fragmented delivery, and ultimately, unmet coverage goals.

This article explores why PFM matters so critically to UHC. Drawing on country experiences, it unpacks how weak financial systems can derail even the most well-funded reforms, and what can be done to bring health financing and PFM into alignment.

What Do We Mean by PFM in Health?

Public financial management refers to the processes through which governments plan, allocate, execute, and monitor public resources. For instance, a clinic’s ability to stock medicines depends not just on the health budget’s size, but on whether funds are released on time and whether procurement rules allow flexible spending.

In the health sector, this influences everything from how funds are allocated across programmes, to whether medicines arrive at clinics on time, to whether hospitals can hire staff and pay for essential services.

At its best, a PFM system enables strategic allocation of resources based on health priorities, ensures timely and predictable fund flows to all levels of the system, and allows for performance tracking and accountability. Conversely, when PFM is weak, even well-intentioned policies can flounder. Budgets may be approved but not spent, funds may be locked in rigid line-item structures, and procurement or payment delays may choke off service delivery.

Figure 1: UHC-PFM Leaky Pipes

Source: Author

In the context of UHC, the stakes are especially high. Expanding access to health services requires reliable, flexible, and efficient financial systems that can respond to evolving needs and scale service delivery in real time.

How PFM Weaknesses Undermine UHC Delivery

The UHC journey is fundamentally about delivering a defined package of services to the entire population, regardless of income or location. This requires not just money, but money that moves through the system in ways that support timely procurement, provider autonomy, and accountability for results.

When PFM systems are poorly aligned with health goals, they can introduce structural roadblocks. Line-item budgets often lock providers into spending categories that do not reflect service needs. Funds may be released late in the fiscal year, compressing spending into the last quarter and undermining procurement planning. Donor-funded programmes may sit outside national systems, creating duplication and inefficiencies. And in many cases, coding and reporting structures are unable to track actual outputs — such as outpatient consultations or maternal deliveries — making performance assessment nearly impossible.

These challenges are not theoretical. They manifest every day in health systems across the Global South, where clinics operate without medicines despite unspent budgets, or where investments in insurance schemes proceed without the backend reforms needed to process claims or manage risk.

Connecting the Dots: How PFM Shapes UHC Systems

A functioning UHC system depends on more than just health policy or service delivery infrastructure. It requires that each element of the financing chain — budget formulation, classification, execution, and reporting — is designed to support accessible, quality care. For example, if budgets are not structured around outputs, it becomes difficult to monitor whether funding for primary health care is actually reaching intended populations. If local governments receive lump-sum transfers but lack the capacity or authority to spend those funds effectively, service delivery suffers. A visual model can help clarify how PFM functions link directly to UHC outcomes.

Figure 2: Every PFM Link Matters for UHC

Source: Author

Budget formulation determines whether sufficient resources are allocated to key services. Classification systems affect whether funds can be tracked by programme or service area. Execution processes determine how quickly and predictably funds reach providers. And reporting mechanisms affect transparency and the ability to assess whether resources are delivering results. Weaknesses in any of these functions can disrupt the chain and leave populations underserved.

Three Countries, Three Lessons

Experiences from South Asia illustrate how different dimensions of PFM affect the ability of countries to translate UHC aspirations into operational success. The following case studies from Bangladesh, Nepal, and Pakistan offer practical insights into how PFM constraints shape health system performance.

Bangladesh: Expanding Budgets, Misaligned Allocations

Bangladesh has steadily increased health sector spending in recent years. Between FY2017 and FY2022, the health budget grew by over 60 percent, and development spending nearly doubled. On paper, this suggests strong political and fiscal commitment to health. In practice, however, the structure of the budget has not kept pace with the needs of a UHC-oriented system.

A 2023 Public Expenditure Review by the World Bank reported that budget execution rates had improved, ranging from 80 to 91 percent in recent years. But allocative efficiency remained a concern. Spending was disproportionately concentrated in tertiary hospitals and infrastructure projects, with far less going to frontline service delivery or preventive care. Primary care remained underfunded, and public health functions received limited attention.

The implication is clear: spending more is not enough. If budgets are not structured to prioritize the services most critical to UHC — such as outpatient consultations, immunizations, and maternal care — then increased spending may not improve access or equity. Budget formulation and classification reforms are needed to realign resources with UHC goals.

Without reallocating funds to primary care, Bangladesh’s budget growth risks becoming a fiscal placebo — expensive but ineffective.

Nepal: Decentralised Finances, Centralised Capacity Gaps

Nepal's transition to federalism brought with it a major decentralization of health functions. Today, over 700 local governments are responsible for planning, financing, and delivering health services. This shift holds great potential for UHC, as it brings decision-making closer to communities.

Yet implementation has been uneven. While fiscal transfers to local governments have increased, many lack the capacity to prepare credible health plans, manage procurement, or report expenditures in line with national standards. A 2022 World Bank review found that local plans were often disconnected from national UHC priorities, and that limited technical and financial capacity hampered service delivery.

The central lesson from Nepal is that decentralization must be accompanied by sustained investment in local PFM systems. Without this, the promise of local ownership can turn into fragmentation, where funds are available but remain unspent or are allocated in ways that do not support universal access.

Decentralization without PFM capacity doesn’t broaden UHC — it fragments it. When local governments can’t execute, ‘health for all’ becomes ‘health for some’.

Pakistan: When Health Funds Remain Unused, Services Suffer

In one Pakistani province, the government took a bold step toward UHC by funding a universal inpatient health insurance scheme. The programme expanded access to hospital-based care and reduced out-of-pocket expenditures for millions. However, routine health investments — particularly at the primary care level — continued to suffer from persistent execution challenges.

According to the province’s 2023–24 budget documents, only 38 percent of the allocated health development budget was actually utilized in FY2021–22. This meant that more than 13 billion rupees, originally intended for facility upgrades, procurement, and service improvements, went unspent. Delays in procurement processes, lack of timely planning approvals, and weak local implementation capacity were identified as major contributing factors.

This case illustrates the limits of financing reforms that operate in isolation. While insurance coverage expanded, the rest of the health system struggled to absorb and deploy available resources effectively. For UHC to succeed, provinces must strengthen budget execution systems, especially at the district level, and ensure that funds flow predictably to the frontline.

Insurance schemes can’t compensate for a system that can’t spend its own budget.

UHC Progress and Performance: Where Do These Countries Stand?

Despite their differing approaches and challenges, the three countries face a common bottleneck: weak financial systems are limiting the impact of health sector investments. According to the WHO’s UHC Service Coverage Index, Nepal scores 57, Bangladesh 48, and Pakistan 45 (based on the 2021 dataset). These figures confirm that financial commitments alone are not translating into equitable or comprehensive service coverage. The gaps in performance stem, at least in part, from the structural constraints discussed above.

The Transition Tipping Point

As donor financing for health begins to decline across many low- and middle-income countries, the responsibility for sustaining UHC is shifting inward. Countries can no longer rely on external grants to underwrite their ambitions indefinitely. Instead, the success of UHC increasingly depends on the strength of domestic systems — particularly the capacity of public financial management to allocate, spend, and account for resources effectively.

The visual below illustrates this shift. As donor funds gradually taper off, the weight of responsibility tilts toward domestic PFM capacity. Countries that invest in procurement reforms, subnational financial systems, and budget planning resilience are better positioned to maintain momentum. Those that delay may find their health reforms stalled midstream.

Figure 3: The UHC Transition Tipping Point

Source: Author

From Diagnosis to Design: What Can Be Done?

Recognizing the disconnect between PFM and UHC is only the first step. The real challenge is aligning financial systems with service delivery goals in a way that is practical, sustainable, and measurable. The encouraging news is that several countries are already experimenting with reforms that offer valuable lessons.

One of the most foundational shifts involves moving away from input-based budgeting and toward output-based models. This means structuring budgets around measurable health outcomes, such as immunization coverage or antenatal care visits, instead of traditional line items like salaries or utilities. This approach improves prioritization and fosters greater transparency in how public funds are used.

Kenya provides a strong example. Its health sector has adopted programme-based budgeting, enabling expenditures to be directly linked to service delivery objectives. According to the 2019 Health Sector Working Group Report, this reform has helped align budgets with health priorities and improved public accountability by making spending more visible and understandable (Kenya Treasury, 2019).

Another important reform is the tagging and tracking of UHC programmes within the budget and financial management systems. When budget lines explicitly reference key policy commitments, it becomes easier to monitor progress and ensure resources follow stated priorities.

Strengthening public financial management at the subnational level is also essential, particularly in contexts where service delivery has been devolved. Without adequate capacity in financial planning, procurement, and reporting at the local level, decentralization can create new inefficiencies rather than resolve them.

Rwanda has taken a comprehensive approach by embedding performance-based budgeting across all government ministries, including health. This reform builds on Rwanda’s existing performance contract system, and has been institutionalized through national financial legislation. According to reports by the IMF and the World Bank, Rwanda’s system ensures that budget allocations are tied to program results, enhancing the link between planning and implementation in the health sector (IMF PFM Blog, 2021, World Bank, 2022).

Countries should also aim to bring donor-financed health initiatives into the national financial system. Parallel financing structures may be efficient in the short term but often undermine long-term coherence and sustainability. Integrating these flows into national budgets helps ensure better alignment with priorities, reduces duplication, and strengthens overall fiscal governance.

Finally, adopting performance-linked disbursements can reinforce a culture of results. Tying fund releases to verified progress — such as service coverage milestones or procurement completion — can improve accountability and shift the focus from spending inputs to delivering outcomes.

These reforms may not be quick fixes, but they represent a necessary shift. Public finance must be managed not just for compliance or control, but with the aim of delivering tangible health results. When financial systems are designed to serve health policy, UHC becomes a feasible goal, not just an aspirational one.

Conclusion: Aligning the Engine Room with the Destination

Public financial management may seem technical, but it is fundamental to the success of UHC. It determines whether health policies can be implemented, whether services are available when needed, and whether funding systems can withstand shocks. As fiscal space tightens and donor funding declines, aligning PFM with UHC is no longer optional — it is essential.

If UHC is the destination, then PFM is the engine room that powers the journey. Countries that ignore this connection risk building beautiful blueprints that never leave the drafting table. But those that invest in getting their financial systems right stand a real chance of delivering health for all.

For policymakers and advocates, the message is clear: stop treating PFM as a technical footnote. Health reforms without financial plumbing are like a hospital without electricity — visible, well-funded, and utterly nonfunctional.

👤 About the Author

Afeef Mahmood is a health economist and public financial management specialist with over two decades of experience advising governments and development partners across Asia, Africa, and Latin America. He works at the intersection of health systems reform, budgeting, and policy, and regularly supports evidence-based decision-making through applied economic analysis.

📚 Suggested Citation

Mahmood, Afeef (2025). The Hidden Engine of UHC: How Public Financial Management Determines What Health Policies Deliver. Substack.