EDITORIAL: Prime Minister Shehbaz Sharif flanked by Finance Minister Ishaq Dar on his left and Qamar Zaman Kaira representing the second largest party in government on his right with representatives from the other nine coalition partners also seated at the dais announced a range of austerity measures that, he stated, were taken during a two-and-a-half hours-long cabinet meeting earlier that day.
Providing details, the Prime Minister stated that the following decisions have been taken: (i) government ministers, state ministers and advisers would no longer draw salaries or perks and privileges, pay their own utility bills, travel economy and not stay in five-star hotels; (ii) a 15 percent reduction in expenses of ministries and divisions; (iii) ban on purchase of all luxury items till end June 2023; (iv) government employees allowed only obligatory travel abroad; (v) vehicles would be taken back from those who are drawing transportation monetization as well as security vehicles; (v) no cabinet member would use luxury vehicles; (vi) no administrative unit would be set up for the next two years; (vii) a single treasury account would be established (a long-standing International Monetary Fund demand); (viii) offices would open at 7am to save electricity and gas; and (ix) civil servants would be allowed only one plot of land.
The Prime Minister estimated that these measures would lead to savings of 200 billion rupees though he did not clarify how long it will take to realize these savings. While all these measures designed to contain the significant elite capture from the taxpayers account must be appreciated yet one would have hoped that the Prime Minister had deemed it appropriate to provide an update on the implementation of the austerity measures approved by the cabinet last year, and consequent savings.
An office memorandum (OM) titled “Austerity Measures for Financial year 2022-23” was issued on 7 July 2022, which included: (i) ban on purchase of all types of vehicles from current and development budget except utility vehicles such as ambulances, buses for educational institutions.
In this context it is ironical that Federal Board of Revenue (FBR), which comes under the administrative control of the Ministry of Finance, in defiance of the spirit of this OM was planning to purchase 155 luxury vehicles under the head of up-gradation of obsolete hardware and software – a plan stopped by the Prime Minister only when reported by a private media outlet; (ii) ban on official visits by government functionaries where government funding is involved except obligatory visits, avoidable travel through use of zoom/video links, official lunches/dinners/hi-tea except for foreign delegations – savings which were restated by the Prime Minister on 22 February indicating that either he was not made aware that this was a repeat direction or that it was never implemented earlier; (iii) existing entitlement of government functionaries to be reduced by 30 percent and of Ministers by 40 percent while security vehicles of cabinet members be reduced by 50 percent; and (iv) ban on appointment of contingent paid/daily wagers except for development projects as well as purchase of machinery and equipment, including air conditioners, microwaves, fridges, photocopiers, etc.
What is baffling, however, is that the Cabinet has yet to order implementation of a source of significant savings that can be almost immediate and which conforms to what was agreed by all political parties in the eighteenth constitutional amendment and the National Finance Commission award 2010: to devolve around 18 subjects to the provinces (with around 17 remaining un-devolved to this day) costing the exchequer well over 200 billion rupees per annum.
True that PTI was not part of parliament at the time and therefore was not consulted; however, Shaukat Tarin, the last finance minister in the Khan’s tenure, was also the finance minister during the passage of the eighteenth amendment and is credited with being the architect of the 2010 NFC award as well.
It is significant that the narrative of all political parties today is to end the elite capture of resource distribution, in terms of budgeted allocations, as well as taxes imposed which sadly rely heavily on indirect taxes – estimated at over 80 percent of all annual FBR collections - whose incidence on the poor is greater than on the rich.
And while the Fund has compelled the government to withdraw the electricity subsidy to the export-oriented sector of around 110 billion rupees yet the ‘mini-budget’ consists mainly of indirect taxes that require urgent reforms to render the tax structure equitable, and non-anomalous and which do not appear to be on the horizon.
In addition, the Cabinet would be well advised to be more proactive in terms of assessing the status of the ninth review negotiations as many of the Finance Ministry’s claims appear to be half-truths reflected by the fact that the success of the ninth review remains pending to this day.
Copyright Business Recorder, 2023