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EDITORIAL: The eleven-member Cabinet Committee for Economic Revival (CCER) has suggested slashing the budgeted expenditure by 1.4 trillion rupees that would reduce the size of the budget to 13 trillion rupees from the budgeted 14.460 trillion rupees – a decline of 9.6 percent.

Given the appalling state of the economy today, the task before the committee is extremely challenging as it is and a perceived difference of opinion on the way forward should be debated to reach an informed decision rather than to assume one’s superior knowledge – an approach followed by the then finance minister, Ishaq Dar, at great cost to the economy.

While we have consistently called for and would support slashing this amount from current expenditure down to 13.320 trillion rupees but not the usual resort to wiping out the Public Sector Development Programme, yet given the present state of the economy, cutting the size of the budget from whichever account would have to be undertaken.

Inflation fuelled by a high budget deficit was estimated at 31 percent in September 2023, up by 4 percentage points from August; and in addition a reduction in the budgeted outlay would lift the pressure on raising revenue which, given the sustained reliance on indirect taxes whose incidence on the poor is greater than the rich, would have simply brought the public ire to a boiling point sooner rather than later.

The committee’s mandate is to suggest measures for long-term growth which, irrespective of however one may define the long-term, is months if not years longer than the caretaker tenure stipulated in the constitution.

Be that as it may, the recent downgrade of the growth rate by the World Bank from the budgeted 3.1 percent to 1.7 percent does not auger well for any recommendations being implemented till now.

While CCER was tasked to provide detailed/quantified recommendations within two weeks, though no official statement with respect to the suggested recommendations having been released, yet reports indicate that there will be a cut: (i) reducing untargeted subsidies budgeted at 1.07 trillion rupees.

This would be in line with the multilateral mindset, however, any major deviation from the budgeted subsidies would further fuel public anger especially as subsidy to Wapda/Pepco and KE accounts for 83 percent of all subsidies; (ii) freeze salaries, allowances and pensions.

One would assume that this is a measure that has to be deferred till next fiscal year as public sector employees have already drawn a 30 to 35 percent increase in their salaries announced in the budget and any reversal would bring the organized public sector onto the streets.

In addition, there is no talk of pension reforms specifically to initiate employee contributions; (iii) slashing PSDP and there are visible signs that PSDP disbursements have been severely curtailed – a fact that may explain the projected decline in the growth rate by the World Bank; and (iv) cut all politically-motivated budgeted spending though the Shehbaz Sharif-led PDM government has already disbursed a major chunk of the 70 billion rupee allocation to parliamentarians.

Instead of the long-term, the CCER should focus on the very short-term, defined as at most till end-June 2024, and begin to initiate reforms that have been resisted time and again by elected governments for being politically challenging.

Specifically, there is a need to widen the tax net to include those sectors that remain outside the ambit, which is under the direct administrative control of the Federal Government, engage with the major recipients of current expenditure – civilian and defense administrations – and seek to curtail their procurement for the current year, initiate pension reforms and last but not least to assess any decline in PSDP on growth, an exercise vital to ensuring that factory closures and vanishing job opportunities are minimised.

Copyright Business Recorder, 2023


Comments are closed.

Aamir Oct 09, 2023 09:38am
Simply reduce size of govt footprint. Get off the back of filers and bring non filers into tax net. Stop stupid regressive tax thinking like wealth tax and property taxes. These will only lead to flight of wealth abroad Increase property valuation tables so no black money gets parked in real estate. Put a stop on the population bomb and introduce one child policy like China. Cut size of defense to what is actually required. So simple yet no one has the guts to do so
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KU Oct 09, 2023 01:00pm
The CCER needs to understand that their ''strategy'' for economic revival is going nowhere without the presence of a ''structure'', and they are consistently avoiding agriculture sector woes and assuming all is okay by focusing on sugarcane and cotton yields alone. Among the many, but narrowed down 8 agricultural zones, only 3 zones have canal irrigation water available to them, while the rest rely on diesel for irrigation or God for rains. The rise in the prices of fertilizer, pesticides, farm machinery, etc., has literally stumped the farmers, while the government forgets that even today, 60% of people and employment is directly and indirectly associated with the agriculture sector and their survival. The repeated rhetoric on solar energy and equipment can play an important role in our revival, but due to its high costs, it seems to have become only a bucket-list wish.
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Tariq Qurashi Oct 09, 2023 02:48pm
Reduce expenditure and increase income! Reducing expenditure is difficult because it will entail some tough decisions, but it is doable if the political will required is there. Increasing income can come mainly from increasing exports and increasing remittances. Someone in the Committee needs to carefully study the reforms implemented in India in 1991. Similar reforms are needed to increase our exports and FDI.
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