Pakistan: Ongoing Austerity Theater

The recently announced austerity measures, by the Shehbaz Sharif government should ostensibly be aiming at reducing expenses appear to be more about show than actual substance. The decisions by the president and interior minister to forgo their salaries, though commendable on the surface, pale in comparison to the extravagance that continues to plague government spending. The gesture does little to address the underlying issues of fiscal irresponsibility that have led to Pakistan’s current economic predicament.

While restricting cabinet members to three international trips per year and delineating travel class guidelines for various officials might seem like prudent steps, they barely scratch the surface of the belt-tightening needed to navigate Pakistan through its financial quagmire.

Allowing MNAs and senior bureaucrats the luxury of business class travel — which in practical terms for a return ticket to many European destinations means spending approximately a million rupees — is a slap in the face of the concept of fiscal restraint.

The image of lawmakers and bureaucrats jet-setting on public coin sends a conflicting message to the populace they serve, especially when 40% of the country’s population lives below the poverty line.

The disparity in salary ratios between various employees in the UK and Pakistan serves as a shameful mirror for reflection. In the UK, the salary ratio between a janitor and the senior-most bureaucrat is 1:8, whereas in Pakistan, it is an astounding 1:80. The officials who think they are tightening their belts by not flying first class, the president and chief justice can are sorely mistaken.

The austerity narrative pushed by the government — indeed like all other governments before it — collapses under the weight of these contradictions. The privileging of a select few to cushy travel perks, while a significant chunk of the nation struggles to eat three square meals a day, is not austerity; it is austerity theatre.

The critique here is not merely about the scale of the measures but their sincerity. Real austerity involves hard choices and genuine sacrifice, not selective tokenism. The continued allowance of benefits and the half-measures proposed signal a troubling lack of commitment to governance and fiscal responsibility.

If the government means business, lawmakers would do well to pass a resolution in parliament refusing such privileges until the economy stabilizes.

The Prime Minister, services chiefs, and at best, the foreign minister may utilize such travel perks but it is unreasonable to extend these to the rest of the government machinery.

Symbolic gestures won’t do anymore. There is a need for a fundamental reassessment of priorities and spending, with a laser focus on eliminating waste and directing resources towards sustainable economic recovery. Only then can the nation hope to emerge from its economic plight and embark on a future marked by stability and prosperity.

Dawn Editoria

Pakistan: Markup payments exceed net revenue collection

Economic analysts have been warning about the adverse impacts of indiscriminate borrowing and persistent hike in the interest rate, in the name of containing inflation. However, economic managers never paid any attention to this.

Today, I am inclined to refer to a report by Topline Securities, one of the leading brokerage houses of Pakistan. According to the report total markup payments during 9MFY23 were up 69%YoY on the back of higher interest rates and increasing debt stock.

Budget Deficit of Pakistan for 9MFY23 has been reported at PKR3.08 trillion or 3.7% of GDP as against PKR2.56 trillion or 3.8% of GDP in 9MFY22. Budget Deficit for 3QFY23 was reported at PKR1.39 trillion as against a deficit of PKR1.19 trillion for 3QFY22. IMFs has projected budget deficit for the full year FY23 at 4.6%.

The government for 9MFY23 recorded a primary surplus of PKR0.5 trillion or 0.6% of GDP as against a primary deficit of PKR0.45 trillion in 9MFY22. For 3QFY23 primary deficit was posted at PKR0.39 trillion as against a primary deficit of PKR0.53 trillion for 3QFY22. IMFs had projected primary surplus for FY23 at 0.2% of GDP. 

Total Revenue collection for 9MFY23 has been reported at PKR6.94 trillion as against PKR5.88 trillion for 9MFY22, a growth by 18%YoY. Total expenditures increased by 19%YoY to PKR10 trillion for the period under review.

Federal Government Markup Payments for 9MFY23 have been reported at PKR3.58 trillion as against net revenue receipts of PKR3.44 trillion. Total Markup payments during 9MFY23 were up 69%YoY on the back of higher interest rates and increasing debt stock.

Indirect Taxes contributing 55% of FBR revenue were reported at PKR2.84 trillion while Direct Tax collection was PKR2.31 trillion.