Cabinet panel suggests Rs1.4tr cut in expenditures

ISLAMABAD: In a bid to slash expenditures by Rs1.4 trillion, the Cabinet Committee on Economic Revival (CCER) has sought a detailed roadmap, including freezing of salaries, pensions and allowances as well as reducing officer-to-staff ratios.

The caretaker government has finalised a number of recommendations under ambitious plans to implement the austerity measures under which the CCER would ask the federal and provincial governments to reduce the officer-to-staff ratio to 1:3 in a gradual manner.

However, the CCER does not define how much timeframe it has given to both federal and provincial governments for implementing the ambitious plan. “The caretaker government has sought plans to freeze salaries, allowances, and pensions during the current financial year,” showed the CCER deliberations.

The government seeks to review untargeted subsidies and grants to reduce expenditure. There are accumulated bills of subsidies amounting to Rs1.064 trillion sought in the last budget for the current fiscal year. Out of this, the power sector subsidies are going to consume a major chunk to the tune of Rs0.97 trillion. The government has sought funding of Rs1.4 trillion in the shape of grants to different institutions and departments in the budget, so all this massive funding needs to be reviewed in detail. Wherever the federal government committed unnecessary or untargeted dole-outs, it must be abandoned immediately. The government has recommended a reduction in the Public Sector Development Program (PSDP) at the federal level and Annual Development Plans (ADPs) at the provincial level by stopping new schemes and transferring all provincial nature schemes to the federating units.

In the work done by the Ministry of Finance, it has been estimated that the re-focusing of PSDP schemes on account of the federal mandate could save Rs315 billion for the federal government for the current fiscal year. The caretaker government also plans to phase out federal expenditure on devolved subjects. The reduction in operational spending on account of devolved ministries could save Rs328 billion.

It is yet to be seen how much political will the caretaker government would show to abolish all the politically motivated or provincial nature development projects from the list of PSDP before the end of its tenure. The government has decided to focus on feasible public private partnership (PPP) projects. It is estimated at the federal level, 50 per cent of the PSDP portfolio would be shifted to the Public Private Partnership (PPP) Authority, known as the P3A pipeline.

It seeks credit guarantees from Infrazamin, an innovative for-profit credit enhancement facility, to enhance private sector investment in infrastructure, enhance allocation to the Viability Gap Fund (VGF) for undertaking infrastructure projects in PPP mode, climate resilient infrastructure through green bonds and debt swaps, and Sustainable Finance Bureau to assist corporates and public organisations to tap Environment Sustainability Gap (ESG) funds.

The government wants to stick to the condition of the IMF under which no supplementary grants will be allowed for the current fiscal year. Under the $3 billion standby arrangement (SBA) programme of the IMF, the Fund has slapped a ban on supplementary grants during the programme period. So it will continue to persist in the current fiscal year.