ISLAMABAD
The Pakistan Muslim League-Nawaz (PML-N) government has announced the creation of a new committee to rationalise spending on development and pensions, as well as to reduce the size of government. This move, which accounts for only 16% of this year’s budget, is intended to streamline expenditure and curb spiralling costs.
However, it is noteworthy that Prime Minister Shehbaz Sharif left out of the committee’s jurisdiction the defence budget and interest payments, which combined make up over two thirds of the federal budget.
The team, which is made up of three independent experts and four bureaucrats, has been given a week to come up with ideas for slashing federal expenditures. Among them is economist Dr. Kaiser Bengali, who has long been a champion for closing cantonments and cutting back on non-combatant military spending.
The committee’s task is to examine the pension plans; the International Monetary Fund is currently considering this matter as well. The government’s pay and pension bill is one of the unresolved issues on the IMF’s agenda for the review talks scheduled for March 14–18.
The budget of Rs. 14.4 trillion for this fiscal year was approved by the National Assembly. The majority of this amount, an overstated Rs7.3 trillion, was set aside for interest payments, while an additional Rs1.8 trillion, exclusive of special projects, was set aside for defence spending.
The committee will be presided over by Dr. Jehanzeb Khan, Deputy Chairman of the Planning Commission, with participation from government officials such as the Secretaries of the Finance and Cabinet Divisions, as well as industry specialist Rashid Mahmood Langrial. Naveed Iftikhar, Dr. Kaiser Bengali, and economist Dr. Farrukh Saleem are appointed members from the business sector.
The committee’s purview encompasses evaluating prior recommendations, such as those from the Institutional Reforms Committee and the National Austerity Committee, with the objective of rationalising the size and operations of the federal government.
The committee was asked to assess the committee’s success in downsizing because several federal ministries continue to exist even after subjects have been transferred to provinces. As part of the committee’s role, a thorough plan and timetable for the remaining recommendations are anticipated.
Less than 5% of the whole budget, or Rs714 billion, has been set aside by the government to operate the civil administration.
The committee’s assignment is to offer suggestions regarding the pension plans and the Public Sector Development Programme. The National Assembly set aside Rs. 900 billion for development and Rs. 801 billion for pensions for this fiscal year.
The cost of military pensions is Rs563 billion, or 70% of the pension budget, out of Rs801 billion.
There isn’t much room for the committee to have a significant impact because the interest payments and the defence budget were excluded from its purview.
Since interest payments for this fiscal year are expected to increase, the finance ministry amended the budget deficit target upward last month, to Rs8.5 trillion. Currently, the expected amount of interest expenses is Rs8.333 trillion, whereas the annual allotment is Rs7.3 trillion.
For Pakistan to achieve significant spending reductions, the country need debt restructuring and significant interest rate reductions from the central bank.
The government paid interest payments totaling Rs4.66 trillion in the first seven months of current fiscal year, which exceeded the net income of the federal government during that same period.
Previous austerity measures, which were frequently eased after they were approved, have not assisted in achieving budgetary consolidation. Anwaarul Haq Kakar, the former Caretaker Prime Minister, has also authorised fresh budgetary austerity measures, such as a prohibition on hiring new employees and making significant purchases.
In the current budget for the fiscal year 2023–2024, as well as under the Public Sector Development Programme (PSDP), the government has already completely banned the creation of new positions.
As per the order, all vehicle purchases have already been prohibited, with the exception of solid waste vehicles, scooters, ambulances, buses for educational institutions, tractors, and firefighting vehicles.
