By Sardar Khan Niazi
Prime Minister Shehbaz Sharif has announced a bundle of austerity measures to pull the country out of its economic mess. The belt-tightening comes as Pakistan facing a balance of payment crisis thrashes out a deal with the International Monetary Fund (IMF) to secure funds, which have been pending since late last year over policy issues
In line with the government’s decision to meet IMF demands to cut the fiscal deficit, he constituted a 15-member committee on austerity measures for better utilization of public money amid a substantial increase in the burden on people because of a hike in electricity and gas rates and additional taxation measures.
Pakistan’s foreign exchange reserves have fallen below a three-week import cover and the expenditure cuts announced are part of an effort to stave off an economic meltdown.
The country is in dire need of funds as it battles a wrenching economic crisis, has received financial assistance from the International Monetary Fund in the past, and is presently in discussions with the organization to resume its loan program.
An agreement on the ninth review of the program would release the needed funds. A resumption of the IMF program would also unlock other avenues of funding for Pakistan. The cabinet meeting agreed upon the decisions taken by the committee on austerity measures and approved the measures to cut official expenditures.
All cabinet members and advisers have voluntarily decided that they will not draw salaries or any other benefits from the state treasury and pay their utility bills. The cabinet members would stop the use of luxury cars and travel in economy class and would not stay in five-star hotels during foreign trips. It would also apply to all government officers.
The announcement of a gross 15% reduction in the current expenditure of each federal government department is another decision. The provinces will follow the suit and cut expenditures. The announcement included a ban on the purchase of all luxury items, including new cars until June 2024, and the better use of the colonial period palatial official accommodation by district officers.
Other measures include the opening of government offices at 7.30 am in summer and starting a one-dish policy at government functions. The policy will not apply to events held for foreign guests. All citizens, including government officials, must play their part in addressing the country’s economic challenges, and embrace a culture of frugality.
The measures came as the country bent its back to get $1.1 billion from the IMF under a $7 billion loan package to avoid a default on foreign payments. The talks with the IMF fund are at the last stage and the government hopes for the settlement of matters in a few days to get the agreement.
Before the talks the IMF had asked Pakistan to take a host of prior actions, which included the withdrawal of subsidies, hiking energy tariffs, raising extra revenues, and arranging external financing.
These austerity measures will save us 200 billion rupees annually. These are being termed as a sacrifice for the poor who cannot afford food on the table or medicines in the face of consistently high inflation, which touched 27.5% in January.
Similar attempts at austerity measures in the past included shutting down markets and restaurants by 8 pm, a work-from-home policy for a fifth of the government workforce, electric motorbikes, more energy-efficient lightbulbs and fans, solar energy for government buildings, etc. The government should never have strayed from the course it was set on.
There is nothing wrong with the different measures themselves. The problem lies in implementing them, which the government could not ensure last time as the traders’ unions, market associations, and lobbyists started kicking up a fuss.
