GOVERNMENT finances are stretched to breaking point with no serious effort to rein in expenditures of an entrenched ‘entitlement culture’ whose cost is much more than what the country can afford. The political leadership and state functionaries treat public money as their own, spending billions with little to show from the perspective of ordinary citizens. This gravy train has been run by governments administering large budget deficits. This article attempts to set out the key expenditure-related issues and proposals to address these.
The 18th Amendment, which led to several functions transferred to the provincial governments, did not inhibit the size of the federal government. It has 43 divisions supported by over 400 attached departments with a body count exceeding 650,000, all presiding over a host of autonomous organisations with 520,000 employees (excluding contract employees). Resultantly, there is an excessive, obsolete regulatory system presided over by 122 agencies, distorting markets by constraining economic activity and raising the cost and ease of doing business. The trend has been for structures to grow by creating new agencies and staff positions, their continued existence ensured by system beneficiaries, despite many tasks having become redundant.
A reduction in the number of divisions at the federal level is opposed by both politicians and bureaucrats; the former seeking ministerial positions and the latter positions as secretaries and the perks and privileges and influence and power that come with the post. The case of the provincial governments is even more disconcerting. They have become huge employment bureaus with a veritable army of unskilled personnel, while lacking those with adequate domain knowledge; for example, Punjab, which had 22 departments in 2000, now has 48!
A consequence of the above is that the combined pension liability of all governments is more than Rs13 trillion.
The overstaffed federal government must be shrunk by two-thirds.
Then there are the highly politicised expanded portfolio of development schemes, with no accountability for unsatisfactory impact. Schemes are approved and started with extremely small allocations, even though it’s obvious that there will be huge time and cost overruns. Project staff connected to important decision-makers get hired, while cars, mobile phones, laptops, etc are procured years before real work starts. And those recruited for the life of the project get a job for life since the scheme is never completed!
So, what could be a possible way forward? The overstaffed federal government must be shrunk by two-thirds to reflect the transfer of functions post-18th Amendment. Next, several of the organisations referred to above should be wound up (because of the redundancy of purposes or uses), since only a handful could be candidates for privatisation. And then for the two proposals above: a) retire those who have completed 30 years of service (protecting pension entitlements attained to date). If it becomes politically difficult to retire them they should be placed in a ‘surplus pool’, thereby saving on rent, utilities, maintenance of cars, etc; b) surrender all vacant posts and all such positions (banning new recruitments).
We should embrace a contributory pension system for new entrants to the civil service. For existing employees, it should be adopted through salary revisions, protecting pension entitlements attained to date. We need to deregulate commercial activities — the software aspect of laws, regulations and processes to stimulate investment. Much of the regulatory framework exists because of lack of clarity on the purpose of the controls. Moreover, better instruments exist for achieving these objectives. No new projects should be launched. Only donor-assisted and near-completion ongoing trunk infrastructure projects (inter-provincial but not intra-provincial) should be funded, while writing off those on which less than 20 per cent expenditure has been incurred.
Defence services should shed their non-core and commercial activities — NLC, projects of their foundations and trusts. There also needs to be a cropping of the size of conventional forces (annual bill of military pensions absorbs three-fourths of pension allocations of the federal government) and other non-combat expenditure by reprioritising expenditures from tail to teeth and establishing oversight on procurement. Examples requiring review are: a) upgrading of posts to accommodate the growing number of officers; b) expenditure on routine visits of senior officers; and c) adopting technology for conducting meetings and basic training. The following recommendations on austerity measures will help create a broader constituency for wider and deeper structural reforms.
• Monetisation of perks of housing and cars over the next four years. During this period, no new luxury vehicles to be provided as official cars, only to be replaced by1800cc cars, with severe penalties for using more than one car. Provision of official housing should be restricted to remote areas as defined by legislation; and only be in the form of apartments. The monetisation of perks and the salary revisions for adoption of a contributory pension scheme can be financed by savings from the reduction in the size of government and disposal of prime commercial land taken up for official housing.
• Haj/umrah and medical treatment abroad on government expense should be withdrawn.
• All schemes for bestowing land/residential and commercial plots should be discontinued.
• The practice of camp offices of the president, prime minister and chief ministers should be terminated.
• Discretionary funds and allocations for parliamentarians’ development schemes should be abolished.
• All travel of less than seven hours should be in economy class. And only the expenses of the principal secretary and the minister whose subject would be taken up with counterparts should be official.
• All papers related to decisions taken by the CDWP and ECC should be available in the public domain.
• The debt ceiling should be a percentage of tax revenues and the government should be required to seek parliamentary waiver when it has to transgress this limit.
• Until our debt situation improves, we should only elicit concessional loans from IFIs. Dependence on concessional terms from foreign countries is compromising national sovereignty. Parliament should be required to approve the key conditions.
But then, the obvious question is why individuals/groups controlling the state should suddenly change course and stop milking it for their own good?
The writer is a former governor of the State Bank.
Published in Dawn, May 25th, 2023
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