Caretaker government unveils ambitious Rs1.9 trillion cost-cutting plan
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In Islamabad, the caretaker government is planning significant austerity measures, aiming to reduce expenses by Rs1.9 trillion. These measures include prohibiting the creation of new positions, acquiring security vehicles, and cutting allocations for development.
Additionally, the government is exploring the implementation of a treasury single account (TSA) and encouraging federal ministries and attached departments to transfer funds to the federal government account, potentially saving up to Rs424 billion.
The government has identified that adopting austerity measures equivalent to 10% of the expenses incurred in running the federal government during FY22 could result in savings of Rs54 billion, as suggested by the World Bank.
To further economize, the government plans to reduce operational spending on devolved ministries, potentially saving Rs328 billion for the entire fiscal year 2023-24. In the aftermath of the 18th Amendment, certain responsibilities were transferred to the provinces, but central government spending continued, causing losses to the national treasury.
A high-profile Cabinet Committee on Economic Revival (CCER) has proposed these austerity measures to reduce expenses by up to Rs1.9 trillion in the short term. However, the implementation of these measures remains to be seen.
The recommended austerity measures include a ban on new positions, hiring of daily wage and other staff, prohibiting the purchase of new vehicles (except medical), restricting the purchase of machinery and equipment (except medical), banning foreign travel (including official visits and medical treatment), and cabinet members foregoing pay, with the withdrawal of government and security vehicles.
The plan also envisions potentially saving Rs458 billion for the fiscal year through the restructuring of 14 loss-making entities. Furthermore, the Ministry of Finance estimates that devolving the Higher Education Commission (HEC) to the provinces could save Rs70 billion annually.
While education became a provincial subject after the 18th Amendment, the HEC continued to operate at the federal level. The caretaker government aims to devolve the HEC to the provinces, but success on this front remains uncertain.
They are also considering implementing a cost-sharing mechanism for the Benazir Income Support Programme (BISP) with the provinces, potentially saving Rs217 billion annually. Additionally, the federal government is contemplating refocusing Public Sector Development Program (PSDP) spending exclusively on federally mandated projects, potentially saving Rs315 billion annually.
Caretaker Minister for Finance Dr. Shamshad Akhtar has directed the Minister for Planning to work out the details of provincial projects to remove them from the PSDP list, aiming to reduce expenditures by Rs315 billion in the current fiscal year.
The previous Pakistan Democratic Movement (PDM)-led regime had allocated Rs950 billion for the PSDP in the 2023-24 budget.
