EVER since returning to power, the Shehbaz Sharif government has been pushing an austerity narrative like all previous dispensations. This narrative is mostly built around the announcement of superficial measures and is not backed by concrete policy.
Recently, it has notified certain cost-cutting measures. The so-called austerity package contains some cosmetic measures, such as a temporary ban on purchase of cars, machinery and equipment, as well as suspension of publicly-funded medical treatment abroad and “non-essential’ foreign visits by federal government functionaries.
If you believe these measures will actually be implemented or slash the burgeoning current expenditures of the government, you are mistaken. These will not even scratch the surface. Such measures are no more than a publicity stunt aimed at appeasing angry voters.
In addition to these measures, the government has decided to restructure and right-size the federal ministries and their attached departments to reduce costs. The cabinet has decided to abolish 150,000 jobs, outsource handyman jobs and get rid of surplus employees by offering them a severance package. These steps are said to be part of the ongoing exercise to cut the size of the federal government, complete the devolution agenda set by the 18th Amendment and save significant costs.
Again, this is not the first time a government has announced to abolish redundant posts and outsource odd jobs to the private sector. We should keep our fingers crossed and hope that these decisions will get implemented. However, the reduction in the number of federal employees will not make much difference without wide-ranging reforms to cut the perks of the higher bureaucracy through monetisation of various unlimited benefits enjoyed by them.
With debt servicing constituting more than half of the federal budget expenditure, it has become imperative for the government to reduce its wasteful spending to slash its widening fiscal deficit and reduce its reliance on borrowings for financing its spending. However, the budget for the current year does not contain anything to indicate that the authorities are serious about cutting wasteful expenditure.
Consequently, according to a report in this paper, the domestic debt of the central government increased by Rs537bn in July pushing total public debt to Rs69.6tr from Rs68.914tr, reflecting the surging expenditure of the state machinery. The rapid increase in public debt does not support the austerity narrative of the government either.
Real austerity involves hard choices. There is no evidence to show that our politicians are ready to make these choices, at least not as yet. With Pakistan going through one of its worst economic and financial crises, the real austerity reforms cannot be put on hold for a very long time. The government will have to deal with these problems and execute actual reforms sooner or later.
Published in Dawn, September 9th, 2024
