Challenges to Achieving Universal Health Coverage Through Public Financial Management Reforms: Insights from the...

Public Financial Management (PFM) reforms are being increasingly recognized for their potential to enhance health financing systems and advance progress toward Universal Health Coverage (UHC). Although theoretical frameworks have outlined the pathways through which PFM reforms operate, empirical evidence on their effectiveness in specific low- and middle-income country (LMIC) contexts remains limited. This paper examines the reform of the Single Nodal Agency (SNA) system in India, aimed at improving budget execution in centrally funded schemes, including the flagship health sector scheme, the National Health Mission (NHM). The study analyzes the gains and challenges associated with the reform and highlights the institutional features that are critical to its effectiveness. The study draws on an assessment of SNA implementation in two Indian states, Bihar and Odisha, using qualitative evidence from key informant interviews conducted across multiple administrative levels between February 2023 and February 2024. This was supplemented with data provided by state finance departments and NHM implementing agencies. Results indicate that the reform has achieved its intended gains in cash management, expenditure transparency, and improved alignment of central fund releases with scheme expenditures at the sub-national level. However, weak budget credibility, coupled with constraints in digital connectivity and limited personnel capacity to manage financial transactions, is likely to exacerbate inequities in access to scheme funds. The increased emphasis on spending has heightened compliance pressures on fund utilization, while attention to actual health system outcomes remains limited. In sum, a conducive institutional environment is essential for reaping benefits through PFM reforms in LMICs.