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Rural Urban Divide in Public Expenditure on Social Services.

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Public expenditure on social services such as education and health contributes to human capital formation and the enhancement of human capabilities. It is therefore considered to be an important ingredient of inclusive growth. Historically socio-economic indicators of Pakistan reveal that the country has performed inconsistently both in social and economic development with persistent regional inequalities and lack of inclusiveness. Public expenditure priorities of respective governments are generally blamed for this state of affairs. Pakistan spends a very low share of its GDP on the social sectors. Since the responsibility of social service delivery lies mainly with provincial governments one explanation for the low level of spending was the weak fiscal position of provinces due to their low share in divisible pool taxes. This situation has been rectified by the 7th

National Finance Commission (NFC) Award of 2010 that not only substantially enhanced the share of provinces in the divisible pool of taxes but also devolved General Sales Tax (GST) on services which is a very broad based and buoyant source of tax generation for the provinces. This provided fiscal space to the provinces to focus more on social sectors particularly after the 18th Amendment to the Constitution that further enhanced the responsibility of provincial governments to deliver social services.

This chapter aims to analyse the distribution of public expenditure in rural and urban areas both at national and provincial levels to help understand whether public expenditure on social sectors is perpetuating or eliminating urban-rural disparity. It examines the changes in the level as well as the urban-rural distribution of public spending on education and health after the 7th NFC Award. It also attempts to analyse the efficiency and effectiveness of spending particularly in rural areas.

PUBLIC SPENDING ON EDUCATION

Education is among the essential social services provided mainly by provincial governments in Pakistan. However details of input and output on amount allocated to achieve various targets are not available in budget documents. The scrutiny of all available budget documents indicates that institution-wise data related to expenditure are available but their urban-rural disaggregation is missing. As such public finance data do not shed any light on perpetuating or reducing regional differences that exist in various socio-economic indicators including education. One of the possible explanations for this situation is the largely incremental process of budget formulation and implementation. Therefore linkages of public spending with the quality of services and outputs are weak. Subsequently the literature on urban-rural distribution of public expenditure on education or urban-rural differences in unit cost of education is scarce in the public domain despite the importance attached to

urban-rural differences in access to public services. An attempt is made here to fill this gap by systematically computing urban-rural differences in unit cost of education provision. For this a five- step methodology has been developed which is described below while sources of data are presented in Box 9.1.

1. Collection of data on enrolment number of teachers and schools from published sources.

2. Computation of inverse of pupil-teacher ratio and pupil-school ratio for both rural and urban areas.

3. Computation of relative rural and urban costs by giving 80 percent weight to the number of teachers and 20 percent weight to the number of schools. These weights are based on shares of salary and non-salary in total expenditure.

5. Computation of weighted cost shares by using relative cost and number of enrolment in public sectors.

6. Computation of rural and urban distribution of public expenditure on education based on these shares.

The Education System

According to the Constitution of Pakistan education used to be the part of the Concurrent Legislative List where both the federal and provincial governments had a role in its delivery. However with the promulgation of the 18th Constitutional Amendment in 2010 the responsibility for educational services has been devolved to the provincial level.

The education system in Pakistan consists of three major levels primary secondary and tertiary while pre-primary public schooling called Katchi Pehli is optional for children of age 3 to 5 years. Primary education spreads over a period of 5 years (grades 1-5) where the official age of entry is 5. The next is secondary level education spanning over a period of 5 years (grades 6-10) which starts from age 10 and ends ideally at 14 years.

At the tertiary level two options are available to students. They may either choose polytechnic institutes/colleges for technical education or general colleges/schools for higher secondary education which is also called intermediate level. After successful completion of two-year intermediate program the education system encompasses three lines of study: technological/engineering colleges and universities; medical colleges and universities; and general colleges and universities.

Trends in Public Expenditure and Unit Costs in Education Pakistan

Table 9.1 presents the nominal expenditure on education by levels of education for years 2004-05 2008-09 and 2011-12 at the aggregate national level. It reveals that public expenditure has grown tremendously since 2004-05 both at primary and secondary levels. As expected the pace of growth in education expenditure is relatively higher after the 7th NFC Award. The fiscal space provided by the Award was used by the provincial governments to focus more on social sectors particularly education. Although a substantial increase in nominal expenditures is observed at all levels growth in secondary education is higher than that in primary and tertiary education.

Table 9.1 also reveals urban-rural differential in public expenditure on education that vary with the level of education. It shows that both the federal and provincial governments spent a sizeable amount of the education budget on rural areas compared to urban areas except tertiary education. For instance the share of rural areas in primary education

expenditure was slightly over 79 percent in 2004-05 which further increased to over 80 percent in 2008-09 and reached almost 82 percent in 2011-12. The share of rural areas in the expenditure on secondary education went up marginally from 68.8 percent in 2004-05 to 69.2 percent in later years. In contrast the rural share in expenditure on tertiary education declined from 41 percent in 2008-09 to 39 percent in 2011-12. This shows that both the federal and provincial governments are focusing more on primary and secondary education in rural areas and on tertiary education in urban areas.

Another set of interesting statistics related to the unit cost of public schooling is observed. The unit cost of public schooling increased sharply after 2008-09 (post-NFC period) particularly in primary education. Interestingly during 2004-05 to 2008-09 (pre-NFC period) growth in the unit cost of primary education was high in urban areas as compared to rural areas while the trend reversed during the post-NFC period. A look at enrolment data reveals that enrolment in public primary schools declined in absolute terms during both periods in urban areas but the decline was relatively sharper in the second period. However in rural areas there is a sharp increase in enrolment during the pre-NFC period. This trend was reverted after 2008-09 and enrolment in rural areas declined by nearly 500000 during three years. This huge decline in enrolment combined with higher growth in public expenditure led to a sharp increase in the unit cost of primary education.

In contrast to the primary level enrolment at the secondary level increased in rural and urban areas during both periods. However the increase in enrolment is much sharper in rural areas compared to urban areas and during the pre-NFC period compared to the post-NFC period. Consequently growth in the unit cost of secondary education is less than the growth in public expenditure on secondary education and it is higher for urban areas compared with rural areas. In addition the unit cost of all three levels of education is higher in rural areas compared to urban areas. Finally the trend in per capita expenditure shows that public spending on primary and secondary education is higher for rural areas compared to urban areas indicating a positive bias towards rural areas.

Table 9.1 also gives a similar set of statistics in real terms (at constant prices of 2005-06) for a meaningful comparison. The Index of General Government Services was used to convert nominal expenditure into real expenditure. It indicates that public expenditures on primary education in real terms was almost constant in urban areas during the pre-NFC period while the unit cost of public schooling increased marginally due to the decline in enrolment. In contrast in the same period public expenditure on primary education in rural areas increased in real terms whereas the unit cost of primary education declined due to the increase in enrolment. However public expenditure unit cost of public schooling and per capita expenditure on both primary and secondary levels showed positive growth in real terms during the post- NFC period.

Table 9.1 Public Expenditure on Education by Locality: Pakistan

Primary Education###Secondary Education###Tertiary Education

###Urban###Rural###Total Urban###Rural###Total###Urban###Rural###Total

###Nominal Expenditure

Public Expenditures on Education (Rs in Millions)

2004-05###10135###39162###49297###8566###18848###27414

2008-09###15362###62520###77882###18248###41078###59326###27173###19228###46401

2011-12###24371###107779###132150###33373###75275###108648###42319###27134###69453

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###11###12.4###12.1###20.8###21.5###21.3

2008-09 to 2011-12###16.6###19.9###19.3###22.3###22.4###22.3###15.9###12.2###14.4

Cost of Public Schooling per student (Rs)

2004-05###4446###4655###4610###4433###7086###5970

2008-09###6884###6541###6606###8802###12813###11238###30665###78463###41020

2011-12###11582###11887###11830###15918###21277###19283###40968###54600###45396

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###11.5###8.9###9.4###18.7###16###17.1

2008-09 to 2011-12###18.9###22###21.4###21.8###18.4###19.7###10.1###-11.4###3.4

Per Capita Public Expenditure on Education (Rs)

2004-05###1409###2211###1978###1295###1393###1362

2008-09###2097###3428###3047###2515###2683###2629###2055###880###1323

2011-12###3219###5691###4981###4387###4861###4701###3065###1158###1865

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###10.5###11.6###11.4###18.1###17.8###17.9

Punjab

Table 9.2 presents a comparable set of statistics for Punjab. It reveals that while primary education is the top priority within the education budget growth in nominal public expenditure on secondary education was remarkably higher than that in primary education during both periods. However the pace of growth in expenditure on primary education increased substantially after the 7th NFC Award. Expenditure on tertiary education did not show any dynamism as they increased only by one percent in 2011-12 compared to 2008-09.

Table 9.2 also reveals that urban-rural differentials in public expenditure on education vary with the levels of education. The Government of Punjab spent a sizeable amount of the education budget in rural areas compared to urban areas. For instance the share of rural areas in total expenditure on primary education was almost 85 percent in 2004-05 which declined slightly in 2008-09 but bounced back in 2011-12.

Further the rural share in total expenditure on secondary education remained up to 68 percent in each year. Tertiary education is the only level in which the share of urban areas is higher (more than 64 percent in each year). This shows that the provincial government focussed more on primary and secondary education in rural areas and tertiary education in urban areas.

As shown in Table 9.2 the unit cost of public schooling increased sharply after 2008-09 particularly in primary education. Interestingly growth in the unit cost largely in the case of primary education was less than that in public expenditure indicating efficiency gains in both rural and urban areas during the pre-NFC period. Afterwards annual average cumulative growth in the unit cost is higher than that in expenditure indicating a decline in efficiency in primary education. This decline is more pronounced in rural areas compared to urban areas. It is important to mention that enrolment in public primary schools declined in absolute terms during both periods in urban areas where the decline was relatively sharper in the second period. However in rural areas there was a sharp increase in enrolment during the pre-NFC period. This trend was reverted in the post-NFC period and enrolment in rural areas declined by more than 500000. Thus a huge decline in enrolment combined with higher growth in

public expenditure led to a sharp increase in the unit cost of primary education. In contrast to primary education enrolment at the secondary level increased both in rural and urban areas during both periods. However the increase in enrolment was much sharper in rural areas compared to urban areas during the pre-NFC period. Consequently growth in the unit cost of secondary education is less than the growth in public expenditure on secondary education and higher for urban areas as compared to rural areas. In addition the unit cost of all three levels of education is higher in rural areas compared to urban areas. Finally the trend in per capita expenditure shows that public spending on primary and secondary education is higher for rural areas as compared to urban areas. At the tertiary level the unit cost declined in 2011-12 compared to 2008-09

Table 9.2###Public Expenditure on Education by Locality: Punjab

###Primary Education###Secondary Education###Tertiary Education

###Urban###Rural###Total Urban###Rural###Total###Urban###Rural###Total

###Nominal Expenditure

###Public Expenditures on Education (Rs in Millions)

###2004-05###4431###24706###29137###3229###7676###10905

###2008-09###6088###33049###39137###7634###17542###25176###17862###10523###28385

###2011-12###10285###56539###66824###16340###35616###51956###18836###10433###29269

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###8.3###7.5###7.7###24###23###23.3

###2008-09 to 2011-12###19.1###19.6###19.5###28.9###26.6###27.3###1.8###-0.3###1

###Cost of Public Schooling per student (Rs)

###2004-05###4317###5761###5482###2919###5169###4208

###2008-09###5970###7026###6837###6084###10045###8389###35604###113804###47774

###2011-12###10462###13746###13112###12944###19224###16679###33577###80675###42399

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###8.4###5.1###5.7###20.2###18.1###18.8

###2008-09 to 2011-12###20.6###25.1###24.2###28.6###24.2###25.7###-1.9###-10.8###-3.9

###Per Capita Public Expenditure on Education (Rs)

###2004-05###1212###2604###2217###916###1014###983

###2008-09###1679###3437###2956###2122###2171###2154###2502###822###1423

###2011-12###2651###5792###4895###4234###4372###4324###2542###765###1391

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###8.5###7.2###7.5###23.4###21###21.7

###2008-09 to 2011-12###16.4###19###18.3###25.9###26.3###26.1###0.5###-2.3###-0.8

###R e a l E x p e n d i t u re a t C o n s ta n t P r i c e s o f 2 0 0 5 - 0 6

###Public Expenditures on Education (Rs in Millions)

###2004-05###4743###26446###31189###3457###8216###11673

###2008-09###4301###23351###27653###5394###12395###17788###12621###7435###20056

###2011-12###5223###28714###33937###8298###18088###26387###9566###5298###14865

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###-2.4###-3.1###-3###11.8###10.8###11.1

###2008-09 to 2011-12###6.7###7.1###7.1###15.4###13.4###14###-8.8###-10.7###-9.5

###Cost of Public Schooling per student (Rs)

###2004-05###4622###6167###5869###3124###5533###4505

###2008-09###4218###4964###4831###4299###7097###5927###25156###80410###33755

###2011-12###5313###6981###6659###6574###9763###8471###17052###40972###21533

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###-2.3###-5.3###-4.7###8.3###6.4###7.1

###2008-09 to 2011-12###8###12###11.3###15.2###11.2###12.6###-12.2###-20.1###-13.9

###Per Capita Public Expenditure on Education (Rs)

###2004-05###1298###2787###2373###981###1085###1052

###2008-09###1186###2429###2089###1499###1534###1522###1768###581###1006

###2011-12###1347###2941###2486###2150###2220###2196###1291###389###706

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###-2.2###-3.4###-3.1###11.2###9###9.7

148###2008-09 to 2011-12###4.3###6.6###6###12.8###13.1###13###-9.9###-12.5###-11.1

which is a reflection of stagnation in expenditures level and sharp increase in enrolment particularly in rural areas.

Table 9.2 also presents the trend in education expenditure in real terms in the province of Punjab. It indicates that the public expenditure on primary education declined in real terms in both urban and rural areas during the pre-NFC period. However afterwards real expenditure increased in both areas. The trend is more or less similar in the unit cost of primary education and per capita primary expenditure. For secondary education there is double digit growth in expenditure during both periods in real terms. During the post-NFC period public expenditure the unit cost of public schooling and per capita expenditure on both primary and secondary levels showed positive growth in real terms while the same indicators declined in the case of tertiary education.

Sindh

In Sindh public expenditure on education grew tremendously during 2004-05 to 2008-09 both at primary and secondary levels (Table 9.3). Afterward that pace of expenditure growth declined both in primary and secondary education. In particular expenditure on secondary education remained stagnant during post-NFC period. On the other hand expenditure on tertiary education increased massively indicating that focus of government of Sindh is shifting towards tertiary education compared to both primary and secondary education.

Rural-urban comparison shows that disparities in public expenditure on education vary with the levels of education with provincial government's inclination towards spending a sizeable amount of budget on rural areas. For instance share of rural areas in primary education expenditure increased from 68 percent in 2008-09 to 71 percent in 2011- 12. Similarly share of expenditure on secondary education in rural areas went up from 43 percent to 47 percent while the share of tertiary education increased marginally by one percentage point.

Unit cost of public schooling increased after 2008-09 in primary and tertiary education. Interestingly growth in unit cost remained higher in urban areas compared to rural areas at each level of education in both the periods. In urban areas higher growth in unit cost than in expenditures at primary level in both periods and at secondary level during the first period indicates a decline in enrolment. However during the second period growth in expenditures and unit cost at secondary and tertiary levels in urban areas remained almost same implying no change in enrolment. On the other hand in rural areas lower growth in unit cost than in expenditures at each level in both periods depicts an increase in enrolment. Finally trend in per capita expenditure shows that public spending at primary and secondary levels was higher for rural areas compared to urban areas indicating a positive bias towards rural areas.

Table 9.3###Public Expenditure on Education by Locality: Sindh

###Primary Education###Secondary Education###Tertiary Education

###Urban###Rural###Total Urban###Rural###Total###Urban###Rural###Total

###Nominal Expenditure

###Public Expenditures on Education (Rs in Millions)

###2004-05###3215###5643###8858###4238###2658###6896

###2008-09###6438###13459###19897###8092###6200###14292###6314###2225###8539

###2011-12###8642###21080###29722###7581###6723###14304###13455###5074###18529

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###19###24.3###22.4###17.6###23.6###20

###2008-09 to 2011-12###10.3###16.1###14.3###-2.2###2.7###0###28.7###31.6###29.5

###Cost of Public Schooling per student (Rs)

###2004-05###3869###3272###3466###8753###9812###9133

###2008-09###8345###6782###7220###17666###14515###16146###22626###32842###24622

###2011-12###13086###10570###11196###16652###12829###14606###48018###32234###42340

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###21.2###20###20.1###19.2###10.3###15.3

###2008-09 to 2011-12###16.2###15.9###15.7###-2###-4###-3.3###28.5###-0.6###19.8

###Per Capita Public Expenditure on Education (Rs)

###2004-05###1261###1659###1489###1891###1115###1491

###2008-09###2447###3690###3169###3029###2030###2496###1389###597###1033

###2011-12###3345###5150###4454###2794###2183###2469###2854###1231###2097

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###18###22.1###20.8###12.5###16.2###13.7

###RURAL URBAN DIVIDE IN PUBLIC EXPENDITURE ON SOCIAL SERVICES

###2008-09 to 2011-12###11###11.8###12###-2.6###2.5###-0.4###27.1###27.3###26.6

###R e a l E x p e n d i t u re a t C o n s ta n t P r i c e s o f 2 0 0 5 - 0 6

###Public Expenditures on Education (Rs in Millions)

###2004-05###3442###6040###9482###4536###2846###7382

###2008-09###4549###9509###14058###5718###4380###10098###4461###1572###6033

###2011-12###4389###10706###15095###3850###3414###7264###6833###2577###9410

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###7.2###12###10.3###6###11.4###8.1

###2008-09 to 2011-12###-1.2###4###2.4###-12.3###-8###-10.4###15.3###17.9###16

###Cost of Public Schooling per student (Rs)

###2004-05###4141###3502###3710###9370###10504###9777

###2008-09###5896###4792###5101###12482###10256###11408###15987###23205###17397

###2011-12###6646###5368###5686###8457###6516###7418###24387###16370###21503

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###9.2###8.2###8.3###7.4###-0.6###3.9

###2008-09 to 2011-12###4.1###3.9###3.7###-12.2###-14###-13.4###15.1###-11###7.3

###Per Capita Public Expenditure on Education (Rs)

###2004-05###1350###1776###1593###2024###1194###1596

###2008-09###1729###2607###2239###2140###1434###1763###981###422###730

###2011-12###1699###2615###2262###1419###1109###1254###1449###625###1065

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###6.4###10.1###8.9###1.4###4.7###2.5

150###2008-09 to 2011-12###-0.6###0.1###0.3###-12.8###-8.2###-10.7###13.9###14###13.4

Real expenditures (at constant prices) on primary and tertiary education increased in post-NFC period while they decreased in the case of secondary education. The trend in unit cost in real terms is also similar to that in nominal terms.

Khyber Pakhtunkhwa

There has been tremendous increase in nominal public expenditure at each level of education in Khyber Pakhtunkhwa during since 2004-05. However growth in post-NFC period is more prominent. This is in line with the expectation that provincial governments would use the fiscal space attained in the 7th NFC Award to focus more on social sectors where education sector is one of the main beneficiaries. Growth in expenditures on secondary education is relatively higher than that in primary and tertiary education (Table 9.4).

As far as urban-rural differences are concerned the government spent a sizeable amount of the education budget on rural areas compared to urban areas. For instance the share of rural areas in primary and secondary education expenditure remained 88 percent and 84 percent respectively. In contrast the share of rural areas in expenditure on tertiary education declined from 66 percent in 2008-09 to 62 percent in 2011-12. This shows that government has been focusing more on primary and secondary education in rural areas and on tertiary education in urban areas. As shown in Table 9.4 the unit cost of public schooling increased sharply after 2008-09 particularly in primary education. Interestingly during the pre-NFC period growth in unit cost was high in urban areas compared to rural areas whereas during the post-NFC period growth in rural areas was high.

Higher growth in expenditures than that in unit cost at primary level in both periods indicates an increase in enrolment in both rural and urban areas. Similar trend is observed in the enrolment at secondary level. Finally trend in per capita expenditure shows that public spending at primary and secondary levels was higher for rural areas compared to urban areas indicating a positive biased towards rural areas.

Expenditures on education also increased in real terms at each level of education. The comparison of the two periods shows that growth in expenditures remained higher during the post-NFC period. However the unit cost grew sharply in real terms at the primary level in rural areas.

Balochistan

In Balochistan there has been phenomenal growth in public expenditure on education at all levels and in both localities during the post-NFC period (Table 9.5). However within the various levels of education higher annual growth of 43 percent and 38 percent is observed in the secondary and tertiary levels respectively. Growth rates of expenditure in urban and rural areas are almost the same within the respective levels.

Urban-rural disparity prevails in public expenditure on education at the primary and secondary levels where a sizeable amount has been allocated to rural areas. For instance the share of rural areas in primary education expenditure remained over 80 percent in each year. In contrast the urban share in expenditure on tertiary education remained over 75 percent in each year. This shows the government's preference for primary and secondary education in rural areas and tertiary education in urban areas.

Table 9.4###Public Expenditure on Education by Locality: Khyber Pakhtunkhwa

###Primary Education###Secondary Education###Tertiary Education

###Urban###Rural###Total Urban###Rural###Total###Urban###Rural###Total

###Nominal Expenditure

###Public Expenditures on Education (Rs in Millions)

###2004-05###786###5814###6600###971###4975###5946

###2008-09###1544###11243###12787###2162###10916###13078###2013###3839###5852

###2011-12###2782###21302###24084###4281###22346###26627###4307###7082###11389

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###18.4###17.9###18###22.2###21.7###21.8

###2008-09 to 2011-12###21.7###23.7###23.5###25.6###27###26.7###28.9###22.6###24.9

###Cost of Public Schooling per student (Rs)

###2004-05###3673###3849###3827###5128###8259###7510

###2008-09###6771###6039###6119###11017###15525###14541###34144###69993###51422

###2011-12###11719###11047###11121###21151###28253###26806###38207###46854###43160

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###16.5###11.9###12.4###21.1###17.1###18

###2008-09 to 2011-12###20.1###22.3###22###24.3###22.1###22.6###3.8###-12.5###-5.7

###Per Capita Public Expenditure on Education (Rs)

###2004-05###1644###1836###1811###2324###2066###2104

###2008-09###2823###3435###3347###4415###4000###4063###2350###1033###1280

###2011-12###5025###6524###6307###8357###7990###8047###4706###1756###2301

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###14.5###17###16.6###17.4###18###17.9

###RURAL URBAN DIVIDE IN PUBLIC EXPENDITURE ON SOCIAL SERVICES

###2008-09 to 2011-12###21.2###23.8###23.5###23.7###25.9###25.6###26###19.3###21.6

###R e a l E x p e n d i tu re a t C o n s ta n t P r i c e s o f 2 0 0 5 - 0 6

###Public Expenditures on Education (Rs in Millions)

###2004-05###842###6223###7065###1039###5326###6365

###2008-09###1091###7944###9035###1528###7713###9240###1422###2713###4135

###2011-12###1413###10819###12231###2174###11349###13523###2187###3597###5784

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###6.7###6.3###6.3###10.1###9.7###9.8

###2008-09 to 2011-12###9###10.8###10.6###12.5###13.7###13.5###15.4###9.9###11.8

###Cost of Public Schooling per student (Rs)

###2004-05###3932###4121###4097###5490###8840###8039

###2008-09###4784###4267###4323###7784###10969###10274###24125###49454###36333

###2011-12###5951###5611###5648###10742###14348###13614###19404###23795###21919

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###5###0.9###1.4###9.1###5.5###6.3

###2008-09 to 2011-12###7.5###9.6###9.3###11.3###9.4###9.8###-7###-21.6###-15.5

###Per Capita Public Expenditure on Education (Rs)

###2004-05###1760###1965###1938###2488###2211###2252

###2008-09###1995###2427###2365###3119###2826###2871###1661###730###904

###2011-12###2552###3313###3203###4244###4058###4087###2390###892###1168

###Average Cumulative Growth Rate (%)

###2004-05 to 2008-09###3.2###5.4###5.1###5.8###6.3###6.3

152###2008-09 to 2011-12###8.6###10.9###10.6###10.8###12.8###12.5###12.9###6.9###8.9

Table 9.5###Public Expenditure on Education by Locality: Balochistan

###Primary Education###Secondary Education###Tertiary Education

###Urban###Rural###Total###Urban###Rural Total###Urban###Rural###Total

###N o m i n a l E x p e n d i t u re

Public Expenditures on Education (Rs in Millions)

###2004-05###321###1470###1791###600###828###1428

###2008-09###563###2744###3307###1190###1808###2998###2051###661###2712

###2011-12###1094###5396###6490###3423###5321###8744###5386###1794###7180

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###15###16.9###16.6###18.7###21.6###20.4

2008-09 to 2011-12###24.8###25.3###25.2###42.2###43.3###42.9###38###39.5###38.3

Cost of Public Schooling per student (Rs)

###2004-05###2234###5074###4132###6931###15105###10101

###2008-09###3693###7411###6328###12004###26052###17790###269291###391782###291488

###2011-12###6874###12954###11274###33206###66015###47603###269009###264160###267781

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###13.4###9.9###11.2###14.7###14.6###15.2

2008-09 to 2011-12###23###20.5###21.2###40.4###36.3###38.8###0###-12.3###-2.8

Per Capita Public Expenditure on Education (Rs)

###2004-05###947###1202###1147###2236###994###1297

###2008-09###1564###2203###2060###3622###1687###2142###5381###641###1920

###2011-12###2882###3984###3741###9812###4893###6088###12299###1664###4733

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###13.4###16.4###15.8###12.8###14.1###13.4

###RURAL URBAN DIVIDE IN PUBLIC EXPENDITURE ON SOCIAL SERVICES

2008-09 to 2011-12###22.6###21.8###22###39.4###42.6###41.6###31.7###37.4###35.1

###R e a l Ex p e n d i t u r e a t C o n s ta n t P ri c e s o f 2 0 0 5 - 0 6

Public Expenditures on Education (Rs in Millions)

###2004-05###344###1573###1917###642###887###1529

###2008-09###397###1939###2337###841###1278###2118###1449###467###1916

###2011-12###555###2741###3296###1738###2702###4441###2735###911###3646

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###3.7###5.4###5.1###7###9.6###8.5

2008-09 to 2011-12###11.8###12.2###12.2###27.4###28.4###28###23.6###25###23.9

Cost of Public Schooling per student (Rs)

###2004-05###2392###5431###4423###7419###16169###10813

###2008-09###2610###5237###4471###8481###18408###12570###190270###276818###205954

###2011-12###3491###6579###5725###16864###33527###24176###136619###134157###135996

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###2.2###-0.9###0.3###3.4###3.3###3.8

2008-09 to 2011-12###10.2###7.9###8.6###25.7###22.1###24.4###-10.5###-21.5###-12.9

Per Capita Public Expenditure on Education (Rs)

###2004-05###1014###1287###1228###2393###1064###1388

###2008-09###1105###1557###1456###2559###1192###1514###3802###453###1357

###2011-12###1464###2023###1900###4983###2485###3092###6246###845###2404

Average Cumulative Growth Rate (%)

2004-05 to 2008-09###2.2###4.9###4.4###1.7###2.9###2.2

2008-09 to 2011-12###9.8###9.1###9.3###24.9###27.7###26.9###18###23.1###21

The unit cost of public schooling increased sharply at the primary and secondary levels while it declined at the tertiary level after 2008-09. Growth in unit cost remained higher in urban areas compared to rural areas in both the periods at the primary and secondary levels. At the tertiary level the unit cost in urban areas remained almost the same in 2011-12 compared to that in 2008-09 while it declined in rural areas.

Growth in expenditure remained higher than that in unit cost at each level of education in both rural and urban areas and in both periods implying an increase in enrolment. Finally the trend in per capita expenditure shows that public spending at the primary level was higher for rural areas compared to urban areas. In contrast per capita expenditure remained fairly high in urban areas at the secondary and tertiary level of education.

In real terms public expenditure increased at a higher rate during the post-NFC period as compared to the post-NFC period at each level of education and in both rural and urban areas.

PUBLIC SPENDING ON HEALTH

In order to provide affordable and quality healthcare services to the people both developed and developing countries spend a sizeable share of their budget on health. However the health sector in Pakistan has been neglected by consecutive governments and policy-makers and it has remained in critical crises due to low public investment. Pakistan's health budget being less than 0.5 percent of GDP is the lowest in the region. Moreover rural-urban disparities are also evident in provision of health facilities.

As per the Constitution of Pakistan health was part of the Concurrent Legislative list. Thus both the federal and provincial governments had a role in delivery of health services. However after the 18th Constitutional Amendment in April 2010 the responsibility for health services was devolved to the provinces. Hence the provincial governments are now entrusted with the responsibility of planning and delivering primary health services to the people

Public Health System in Pakistan

Even before the 18th Constitutional Amendment the provincial governments were primarily responsible for health service provision. The role of the federal government was regulatory as well as supplementary service provision. First the federal government was responsible for designing a National Health Policy that would provide necessary parameters to maintain a uniform standard of health status in line with international standards. Second there were a number of tertiary care facilities run by the federal health ministry under public sector curative care" such as the Jinnah Postgraduate Medical Centre (JPMC). Third there were several vertical programmes initiated for the prevention and control of communicable diseases. These include the Programme for Family Planning and Primary Health Care (commonly known as Lady Health Workers Programme) Expanded Programme for Immunization (EPI) and other programmes for the control of communicable diseases such as malaria TB HIV/AIDS hepatitis etc.

The federal ministry through the national and provincial programme managers in coordination with district focal persons had been managing these programmes throughout the country.

After the promulgation of the 18th Constitutional Amendment most of the tertiary care facilities were transferred to provincial governments. Moreover the role of the federal government in implementation of vertical programmes is now limited only to their financing till the currency of 7th NFC Award. There is a vast network of health care facilities under the control of provincial health departments including hospitals dispensaries Basic Health Units (BHUs) and Sub-Health Centers Mother and Child Health Centers Rural Health Centers (RHCs) and TB Centers.

From the perspective of public finance there are four broad categories of health services that are generally reported in PRSP annual progress reports. These are: (1) general hospitals and clinics; (2) mother and child health; (3) other health facilities; and (4) preventive measures and others. However this chapter focuses only on two categories for the analysis of rural-urban distribution of public spending in health namely general hospitals and clinics (including BHUs RHCs) and preventive measures and others. The reason for focusing on these two categories is that the Pakistan Social and Living Standards Measurement Survey (PSLM) which is one of the major data sources for this analysis does not cover the other categories reported in budget documents effectively. Moreover general hospital and clinics alone account for more than 80 percent of the total spending on public health care. Methodology of the expenditure analysis is presented in Box 9.2 while the sources of data are described in Box 9.1.

Unit Subsidies in Curative Health

Table 9.6 presents the result of province-wise estimates of unit cost in curative health. It reveals that the unit cost varies significantly among the provinces. The amount of per patient unit cost was highest in Punjab followed by Sindh Khyber Paktunkhwa and Balochistan in 2004-05. However in 2008-09 per patient cost in Sindh exceeded from rest of the provinces. In Sindh the average annual growth in per patient cost was more than 53 percent during the pre-NFC period which declined to 15.6 percent during the post-NFC period. In fact the growth in per patient expenditure is well above the salary increase in public sector during these periods. This huge increase in unit cost can be attributed to both high growth in public spending on health and decline in the number of patients visiting government health facilities. In the other provinces as well per patient cost grew in both nominal and real terms. However the growth rate remained higher during the first period except in Balochistan.

Table 9.6###Nominal and Real Cost per Patient Curative Health

###(Rs)

###Per Patient Cost###Per Patient Cost at 2005-06 prices

###2004-05###2008-09###2012-13###2004-05###2008-09###2012-13

###Pakistan###9182###29650###48515###9829###20950###22973

###Punjab###13715###31160###50180###14681###22016###23761

###Sindh###6929###38262###68249###7417###27034###32318

###Khyber Pakhtunkhwa###6421###16019###26645###6874###11318###12617

###Balochistan###4975###12870###33321###5325###9093###15778

###Average Cumulated Growth Rate (%)

###Pakistan###34.1###13.1###20.8###2.3

###Punjab###22.8###12.7###10.7###1.9

###Sindh###53.3###15.6###38.2###4.6

###Khyber Pakhtunkhwa###25.7###13.6###13.3###2.8

###Balochistan###26.8###26.8###14.3###14.8

Table 9.7###Public Spending on Curative Health by Locality and Province

###(Million Rs)

###Expenditure on Health###Average Cumulated Growth Rate

###2004-05###2008-09###2012-13###2004-05 to###2008-09 to

###2008-09###2012-13

Pakistan###21917###61755###131868###29.6###20.9

###Urban###6908###20133###43519###30.7###21.3

###Rural###15009###41622###88349###29.0###20.7

Punjab###10837###30542###65055###29.6###20.8

###Urban###3618###11302###25628###32.9###22.7

###Rural###7219###19240###39427###27.8###19.6

Sindh###3958###15883###34620###41.5###21.5

###Urban###1962###6838###13384###36.6###18.3

###Rural###1996###9045###21236###45.9###23.8

Khyber Pakhtunkhwa 2870###8175###16997###29.9###20.1

###Urban###526###1592###3824###31.9###24.5

###Rural###2344###6583###13173###29.5###18.9

Balochistan###1044###1580###7422###10.9###47.2

###Urban###247###427###1467###14.6###36.2

###Rural###797###1153###5955###9.7###50.7

Public Spending on Curative Health

Table 9.7 presents nominal expenditures on curative health in 2004-05 2008-09 and 2012-13 both at aggregate national level and province-wise with urban-rural break-up. It reveals that public expenditure experienced tremendous growth since 2004-05. The pace of growth is relatively higher during the first period. For instance aggregated health expenditure grew by 30 percent during pre-NFC period while the growth declined to 21 during post-NFC period. A comparison among the provinces indicates that the pre-NFC growth was the highest in Sindh (41.5 percent annually) and the lowest in Balochistan (around 11 percent annually). However during the post-NFC period growth in health expenditure was highest (47 percent) in Balochistan while in other provinces it remained around 20-21 percent.

The urban-rural disparities in public expenditure on health are also given in Table 9.7. It appears that both federal and provincial governments spent a sizeable amount of their health budget on the rural population compared to the urban population. At the aggregate level 68 percent of total expenditure was spent on rural health in 2004-05 which declined slightly to 67 percent in 2012-13. However there has been significant variation among the provinces. In 2004-05 the share of the health budget spent on the rural population was highest (82 percent) in Khyber Pakhtunkhwa and the lowest (50 percent) in Sindh. However this has gradually changed since 2004-05 where the rural share in Sindh and Balochistan increased to 61 percent and 80 percent respectively in 2012- 13. In contrast it declined from 67 to 61 percent in Punjab and from 82 to 78 percent in Khyber Pakhtunkhwa during the same period.

Table 9.8###Public Spending on Curative Health by Locality and Province

###at Constant prices of 2005-06

###(Million Rs)

###Expenditure on Health###Average Cumulated Growth Rate

###2004-05###2008-09###2012-13###2004-05 to###2008-09 to

###2008-05###2012-13

###Pakistan###23461###43634###62443###16.8###9.4

###Urban###7395###14225###20607###17.8###9.7

###Rural###16066###29409###41836###16.3###9.2

###Punjab###11600###21580###30805###16.8###9.3

###Urban###3873###7986###12136###19.8###11.0

###Rural###7728###13594###18670###15.2###8.3

###Sindh###4237###11222###16394###27.6###9.9

###Urban###2100###4832###6338###23.2###7.0

###Rural###2137###6391###10056###31.5###12.0

###Khyber Pakhtunkhwa 3072###5776###8049###17.1###8.6

###Urban###563###1125###1811###18.9###12.6

###Rural###2509###4651###6238###16.7###7.6

###Balochistan###1118###1116###3515###0.0###33.2

###Urban###265###301###695###3.3###23.2

###Rural###853###815###2820###-1.1###36.4

Table 9.8 gives a similar set of statistics in real terms (at constant prices of 2005-06). Index of General Government Services was used to convert nominal expenditures into real expenditures. It indicates that the public expenditures on health in real terms have positive growth during both periods indicating that the increase in health expenditures is more than inflation in public services including salary increases. The growth in real expenditure is almost 17 percent during the pre-NFC period and 9.4 percent during the post-NFC period. This growth is disproportionately higher for urban areas in Punjab and Khyber Pakhtunkhwa and for rural areas in Sindh and Balochistan.

Per Capita Expenditures on Curative Health

The per capita estimates of public health expenditure generally present a better picture for a regional comparison than the simple percentage distribution. Table 9.9 presents the per capita expenditure on curative health by province and locality. It shows that at the aggregate level Pakistan spent Rs140 per capita on health in 2004-05 which gradually increased to Rs715 in 2012-13 indicating double digit growth in both periods. The rural population received Rs147 per capita while the urban population received Rs128 per capita during 2004-05. These amounts further increased to Rs780 for the rural population and Rs612 for the urban population. It shows that growth in per capita is relatively higher for rural areas compared to urban areas. The pace of growth is highest in Sindh where per capita expenditures are almost double for the rural population compared to the urban population.

In 2012-13 per capita expenditure was higher in rural areas (as compared to urban areas) in the provinces Sindh and Balochistan whle it was lower in Punjab and Khyber Pakhtunkhwa.

Table 9.9###Per Capita Public Spending on Curative Health

###by Locality and Province

###(Million Rs)

###Expenditure on Health###Average Cumulated Growth Rate

###2004-05###2008-09###2012-13###2004-05 to###2008-09 to

###2008-09###2012-13

Pakistan###140###363###715###26.8###18.5

###Urban###128###325###612###26.2###17.1

###Rural###147###385###780###27.2###19.3

Punjab###125###324###640###27.0###18.5

###Urban###123###338###660###28.6###18.2

###Rural###126###317###628###26.0###18.7

Sindh###108###394###785###38.3###18.8

###Urban###102###312###543###32.2###14.9

###Rural###114###493###1092###44.2###22.0

Khyber Pakhtunkhwa###137###359###686###27.1###17.6

###Urban###154###381###769###25.4###19.2

###Rural###134###354###665###27.4###17.1

Balochistan###133###183###782###8.3###43.8

###Urban###126###185###556###10.2###31.7

###Rural###135###182###868###7.7###47.8

Public Spending on Preventive Health

Nominal and real expenditures on preventive health (with urban-rural break-up) at the aggregate national level are presented in Table 9.10. Public expenditure on preventive health experienced tremendous growth during the pre-NFC period. Moreover rural areas receive the major share (more than 80 percent) of these expenditures. The growth in public spending on preventive health remained more than 20 percent during the pre-NFC period and it was relatively higher for rural areas. However pace of expenditure growth almost collapsed during the post-NFC period both in nominal and real terms. In fact public spending on preventive health has declined in real terms since 2008-09.

One of the possible explanations of this collapse is the lack of ownership of preventive health programmes after the 18th Constitutional Amendment which devolved health services to the provinces but the federal government did not provide a corresponding increase in the

Table 9.10 Public Expenditure on Preventive Health

###Expenditure on Preventive Health###Average Cumulated Growth Rate

###2004-05###2008-09###2012-13###2004-05 to###2008-09 to

###2008-09###2012-13

###AT CURRENT PRICES

Pakistan###5536###12881###14450###23.5###2.9

###Urban###1027###2144###2421###20.2###3.1

###Rural###4509###10737###12029###24.2###2.9

###EXPENDITURE ON PREVENTIVE HEALTH AT CONSTANT PRICES###OF###2005-06

Pakistan###5926###9101###7339###11.3###-5.2

###Urban###1099###1515###1229###8.4###-5.1

###Rural###4827###7586###6109###12.0###-5.3###

financial resources of provinces. As per the decision of the Council of Common Interests (CCI) the federal government will finance vertical programmes of health till the finalisation of the next NFC Award. Therefore the federal government is financing these expenditures without much enthusiasm which perhaps led to the collapse of the pace of growth in these expenditures. Given the resurgence of polio and the recent incidence of chicken pox this decline is really alarming.

EFFICIENCY IN THE DELIVERY OF EDUCATION SERVICES IN RURAL AREAS1

It is evident from analysis presented in the earlier sections that public spending on education increased substantially since 2004-05 and the 7th NFC Award played an instrumental role in this increase. Now the question arises whether this increase has attracted more students in public education institutions or whether the efficiency of public institutions increased/decreased or remained constant. Prior to addressing this question it is important to briefly discuss the estimation of efficiency. In general measuring the efficiency of spending on education is a challenging task due to various technicalities [see Francesco Grigoli (2014)]. Complications arise due to two reasons (1) use of techniques and (2) definitions of input and output. There are a number of studies [Gupta Honjo and Verhoeven (1997) Herrera and Pang (2005)] which used public spending of education as an input and gross enrolment rates as output.

In order to avoid technical complexities analysis in this chapter relies on a simple method of estimation of efficiency in the education sector. Similar to other studies public spending on education in real terms is used as input and gross enrolment rates as output. Afterwards the average cumulative growth rate of both input and output is calculated. Finally the difference in growth is computed for both the periods 2004-05 to 2008-09 and 2008-09 to 2011-12. This difference (which is the growth in unit cost) is used to analyse the efficiency in the education sector. For instance an increase in the unit cost would indicate a decline in efficiency and vice versa.

The results of efficiency analysis are presented in Table 9.11. It shows that during the pre-NFC period public spending on primary education in rural areas grew by 1.3 percent in real terms and gross primary enrolment increased by 3.2 percent. Consequently the unit cost at the primary level declined by almost 2 percentage points during this period indicating an increase in the efficiency of public institutions in rural Pakistan. Afterwards public spending on primary education grew by 7.4 percent while enrolment declined by almost 2 percent. Thus it translated into a sharp increase of 9.3 percent in the unit cost at the primary level corresponding to a sharp decline in efficiency.

Another alarming finding is the continuous decline in efficiency at the secondary level during both periods where the pace of decline is higher in the post-NFC period. While the growth in real expenditure on the secondary level is almost the same during both periods growth in enrolment declined during the second period. In contrast there is a sharp

Table 9.11Efficiency in Public Spending on Education in Rural Pakistan

###2004-05 to 2008-09###2008-09 to 2012-13

PRIMARY EDUCATION

###Growth in Real Expenditure###1.3###7.4

###Growth in Enrollment###3.2###-1.9

###Growth in Unit Cost###-1.9###9.3

SECONDARY EDUCATION

###Growth in Real Expenditure###9.5###9.6

###Growth in Enrollment###5.0###3.5

###Growth in Unit Cost###4.5###6.1

TERTIARY E DUCATION

###Growth in Real Expenditure###0.5

###Growth in Enrollment###26.6

###Growth in Unit Cost###-26.1

decline in the unit cost at the tertiary level due to very high growth in enrolment and stagnation in real expenditures.

This indicates that a sizeable amount of public resources was diverted to primary and secondary education in rural areas particularly after the 7th NFC Award; however this did not correspond to an increase in enrolment rates. It is alarming to note that the enrolment in public institutions in rural areas declined in absolute numbers at the primary level during the post-NFC period which resulted in a sharp increase in unit cost.

Now the important question is why enrolment declined in rural areas. There are two potential explanations for this phenomenon: (1) the substitution effect due to which parents even in rural areas preferred to send their children to private schools instead of public schools and (2) a decline in the demand for education in rural areas.

In order to probe this question an analysis of public and private schools is performed. Table 9.12 shows the growth in enrolments at the primary secondary and tertiary levels in both public and private institutions in the rural areas of Pakistan. It indicates that during the pre-NFC period enrolments in public schools grew by 3.2 percent per year on average. During this period enrolment at private schools declined by 1.6 percent per year on average while the total enrolment grew by 2.3 percent annually

Table 9.12Growth in Enrolments at Public and Private Institutions in

###in Rural Areas of Pakistan

###2004-05 to 2008-09###2008-09 to 2012-13

GROWTH IN P RIMARY ENROLLMENT

###Public Institutions###3.2###-1.9

###Private Institutions###-1.6###11.8

###Both Public and Private###2.3###0.8

GROWTH IN S ECONDARY E NROLLMENT

###Public Institutions###5.0###3.5

###Private Institutions###15.5###13.2

###Both Public and Private###6.5###5.4

GROWTH IN TERTIARY ENROLLMENT

###Public Institutions###26.6

###Private Institutions###4.4

###Both Public and Private###24.2

in rural areas. Afterwards the situation appears to have changed substantially as enrolment in public primary schools started falling while enrolment at private schools experienced a double digit growth per annum during the post-NFC period. Despite double digit growth in private school enrolment total enrolment grew less than one percent annually.

The analysis of enrolment at the secondary level does not portray a rosy picture either though it is relatively better as compared to the primary level. The overall growth in enrolment at the secondary level was 6.5 percent and 5.4 percent during the pre- and post-NFC periods respectively. The enrolment rate at the tertiary level increased by 24.2 percent annually mainly due to a very narrow base.

Chart 9.1 shows the share of enrolment in government institutions as a percentage of total enrolment. Three messages emerge from this chart: Firstly the share of public institutions at the primary level first increased and then declined after 2008- 09; second the share of public intuitions in secondary enrolment has declined continuously since 2004-05; and thirdly the share of public institutions increased at the tertiary level.

KEY FINDINGS AND POLICY IMPLICATIONS

The analysis of public spending on education and health with urban-rural bifurcation revealed strong disparities in Pakistan. While national and provincial aggregates are limited and mask complex realities disaggregated analysis provides greater insights. The key findings of the study are summarised below.

Education

Despite the high growth in public spending on education particularly during the post-NFC period Pakistan is likely to miss the MDG target of universal primary education. The analysis of public spending on education by locality reveals that the focus of government has shifted towards rural areas.

The analysis of urban-rural distribution of public spending on education also reveals that:

A sizeable amount of public resources is diverted to social services particularly towards education since 2004-05. Within the education sector the focus was on secondary and primary education which experienced a very healthy growth in public expenditure during the post-NFC period. The focus of public spending is towards rural areas reflected through higher growth in public spending on rural areas compared to urban areas.

However this increase in public spending did not correspond with an increase in enrolment both in rural and urban areas. This resulted in a sharp increase in per unit cost of primary and secondary education provision during the post-NFC period.

During 2004-05 the public sector performed better than the private sector in attracting students at the primary level. Afterwards the public sector failed to compete with private schools as reflected in the decline in enrolment at the primary level in absolute terms in public schools and the simultaneous increase in enrolment at private schools during the post-NFC period.

During 2008-09 to 2011-12 the quantum of increase in the unit cost is more pronounced in primary education as compared to the other levels of education.

There is a sharp decline in efficiency at the primary level during the post-NFC period.

Only tertiary education has been successful in attracting more enrolment in public institutions reflected by a sharp increase in efficiency.

There are wide disparities in public spending on education across provinces.

In a nutshell the analysis indicates a shift in fiscal policy which is focusing more on the rural population compared to the urban population. There are some efficiency gains in primary education during the pre-NFC period. Subsequently the unit cost of primary education grew more than growth in absolute spending indicating efficiency losses.

Health

Analysis of public spending on health is a challenging task due to various complexities. The analysis in this chapter tried to focus on both curative and preventive health expenditures with an urban-rural break-up. Key findings are as follows:

Public expenditure on curative health grew by 30 percent during the pre-NFC period while the pace of growth declined to 21 percent during the post-NFC period.

The major beneficiary (of more than two-thirds) of public expenditures on curative health was the rural population of Pakistan.

Real expenditure on curative health exhibited double digit growth (17 percent) during the pre-NFC period while it grew at 9 percent during the post-NFC period.

Per capita estimates of public spending on curative health indicate that the government spent Rs612 per person per year on the urban population and Rs780 per person per year on the rural population in 2012-13. An alarming finding is the greater focus of the government towards curative health at the cost of preventive health despite the resurgence of polio the incidence of chicken pox and dengue.

While the nominal expenditure on preventive health grew by more than 20 percent during 2004-05 to 2008-09 it increased marginally after 2008-09.

In fact public spending on preventive health declined in real terms by more than 5 percent per year during the post-NFC period. Since the main beneficiary of public spending on preventive health is rural population this decline disproportionately affected the rural population of Pakistan.

One possible explanation for the decline in preventive health expenditure is the lack of ownership of preventive health programmes after the 18th Constitutional Amendment. While these programmes are under provincial domain the federal government will finance them till the next NFC Award.

Policy Implications

The insights provided by the locality-wise analysis of public spending on education and health services can be used to formulate region-specific policies. The following sub-sections provide policy implications based on the above findings.

Education

Despite growth in public spending on education Pakistan spent 2 percent of its GDP on education. Compared to other developed and developing countries this proportion is still very low. While there is a need to increase the quantum of public spending towards the social sector it is important that the increased amount should correspond with quality of services.

One of the alarming findings is the decline in primary enrolment at the primary level which causes the increase in the cost of service provision. Various explanations can be offered for this phenomenon which have different policy implications.

Low quality education at public schools along with the ghost teacher phenomenon may have contributed to the decline in the number students in public schools. There are arguments that public schooling in rural areas is ineffective in enhancing learning capabilities which makes public schooling less attractive. Therefore the government should focus on the quality of education particularly in rural areas. It includes ensuring regular attendance of both teachers and enroled children. In addition regular trainings of teachers together with monitoring and evaluation can lead to an enhancement in the quality of education.

The ongoing spell of low economic growth with natural and man-made catastrophes has led to a higher incidence of poverty which may have pushed more children to child labour instead of sending them to schools. In this regard government needs to introduce incentives in existing social safety nets that should link to the regular attendance of children from poor families. BISP and Waseela-e-taleem can be used as platforms to encourage children of poor families to enroll in public schools.

Another argument which may be used to explain the decline in enrolment is the weak link between education and employment which has made education less attractive for parents and caused a decline in enrolment. Employment opportunities for the educated youth are likely to play an instrumental role in tackling this situation. Therefore the labour policy needs to focus more on creating employment opportunities for the educated population.

Moreover different strategies in rural and urban areas are needed to make public spending on education more efficient effective and equitable. For instance to attract poor children in urban areas public- private partnership may be used to ensure the availability of teachers. Similarly a large network of private schools may be used to provide quality education to the urban poor through targeted subsidies.

Health

In light of the above findings the following policy implications are proposed to advance equality of health services:

At present public spending on health is biased towards curative health. Pakistan spent 29 percent of total health budget in 2008-09 on preventive health which declined to only 9 percent in 2012-13. This trend needs to be reversed and greater focus should be given to preventive health to avoid the growing incidence of polio chicken pox dengue and other infectious diseases. Since the main beneficiary of this spending is the rural population this will also help in reducing the incidence of illness in rural areas.

Despite growth in public spending on health Pakistan spends less than half percent of GDP on health. Compared to other developed and developing countries this proportion is very low. There is a need to increase the quantum of public spending towards health sector. It is equally important that the increased expenditure corresponds with the quality of services.

Different strategies are needed for the rural and urban population to make public spending on curative health more efficient effective and equitable. For instance micro insurance can be used to provide quality healthcare through a large network of private hospitals/clinics.

Public private partnership may be used to ensure availability of doctors at public hospitals clinics BHUs RHCs and other public health facilities.

NOTE:1. The analysis of efficiency has been conducted for education only. The nature of health services is rather complex as compared to education due to variation and difficulty in measuring output. For instance each type disease would have different cost implications. Moreover the data on various indicators (such as incidence of diseases) required for such analysis is not available since the coverage of PSLM is limited to basic health indicators.
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Publication:Annual Review Social Development in Pakistan
Article Type:Report
Geographic Code:9PAKI
Date:Dec 31, 2013
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