Local governments in Pakistan face challenges as limited financial resources constrain their ability to provide essential public services. The problem is particularly acute in South Punjab, where weak revenue systems, lack of political will, and low administrative capacity perpetuate inefficiencies.
Rahim Yar Khan, one of the region’s largest municipalities, struggles to mobilise Own Source Revenue (OSR), affecting the provision of critical services. With support from the Sub-National Governance (SNG) Programme, Rahim Yar Khan’s financial fortunes are undergoing a transformation, delivering results that set a powerful example for other municipalities.
The Challenge
Manual data handling, outdated fee structures, and inefficient collection methods have stifled the ability of the Municipal Committee (MC) Rahim Yar Khan to raise funds. A lack of human resource has exacerbated the problem, with revenue streams, such as rent from municipal shops and water sales, not revised for nearly 20 years.
Early assessment by SNG identified the dire state of financial management within the MC. Revenues had remained static for three years, with the failure to revise fees or introduce new revenue streams costing the municipality millions of rupees annually. The urgency for reform was clear – without intervention, the municipality’s capacity to deliver services would continue to decline.
Providing Support Throughout the Policy Cycle
SNG’s intervention in Rahim Yar Khan followed an ‘end-to-end’ policy cycle approach. This involves the provision of technical assistance across the policy cycle, from needs assessment to planning, allocating resources, implementation, monitoring and course correction. Work started with analysis of the issues faced by MC Rahim Yar Khan, resulting in a revenue mobilisation plan.
SNG engaged with local stakeholders to ensure broad-based ownership. Regular consultations were held with Reform Working Groups composed of municipal officials and representatives of the district administration. Meetings were also held with local political leaders to raise awareness within the community about the need to recover user fees to sustain municipal services. Over the course of this engagement, learning and innovation was at the forefront, leading to digitisation and automation of records.
SNG engaged Delivery Associates, to apply the ‘deliverology’ methodology pioneered by Sir Michael Barber. This approach defines measurable service delivery outcomes, sets clear performance goals, strengthens accountability systems, and ensures regular performance tracking. Regular stocktakes with the Deputy Commissioner and the MC leadership helped keep progress on track, and complemented SNG’s ‘end-to-end’ policy cycle approach.
Substantial Gains Across Revenue Streams
The intervention has had a significant impact. In the first year (FY2023-2024), MC Rahim Yar Khan achieved a 35% increase in Own Source Revenue, adding PKR 145 million for essential services.
Fees collected in the construction sector rose from PKR 71 million to PKR 114 million (60% increase), supported by a digital app that enables inspectors identify buildings with outstanding dues and track progress on payments. Overdue rent payments for municipal shops also rose, from PKR 2.6 million to PKR 21.8 million.
These developments were only made possible by the full cooperation of government officials. The Deputy Commissioner, Mr Khurram Pervaiz, who serves as the municipality’s administrator, provided leadership to the local government teams, embedding a culture of problem-solving and innovation. “SNG’s support has been instrumental in addressing critical bottlenecks to increase OSR. Thanks to innovations like digitization and automation, we have seen improvements in the efficiency of revenue collection and service delivery. These efforts have laid the groundwork for transformative urban development in the district”.
Sustaining the Momentum
Looking ahead, SNG aims to sustain and expand this approach. In FY 2024-25, the municipality approved upwards revision of all fees and taxes, and expects a 200% increase in revenues.
SNG is currently supporting the digitisation of all major revenue streams. A digital survey of water connections, and introduction of e-billing, are expected to expand coverage and increase revenue. A similar result is expected from the launch of a sewage tax and fees for construction plans.
A New Model for Local Revenue Mobilisation
The experience of Rahim Yar Khan is a testament to the power of data-driven technical assistance in local governance, even in the most challenging contexts. By addressing outdated systems, engaging stakeholders, and leveraging digital solutions, SNG has provided a blueprint for other local governments in Pakistan.
Following this success, the government of Punjab has scaled-up measures to expand own source revenues across all 229 local governments.
The remarkable turnaround in Rahim Yar Khan is a beacon of hope for local governments across Pakistan, showing that with the right reforms and innovative solutions, they can unlock much-needed resources, enhance public services, and improve the quality of life of millions across the province.
