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Govt plans austerity measures by slashing Rs1.9tr expenditures

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1 year ago

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  • Govt decides reducing operational spending on devolved ministries.
  • Recommends ban on new posts, hiring daily wages/other staff, etc. 
  • Considers implementing cost-sharing mechanism of BISP with provinces. 

ISLAMABAD: The caretaker government is planning to take austerity measures by cutting down expenditures by Rs1.9 trillion including banning new posts, purchasing security vehicles, and slashing down allocation for development, The News reported Friday. 

The government has also considered making a treasury single account (TSA) and asking the federal ministries and attached departments to shift the money into the federal government account to save up to Rs424 billion.

It has been calculated that 10% of the expenditures incurred on running the federal government in FY22 could save Rs54 billion as worked out by the World Bank. 

The government has also decided to reduce the operational spending on devolved ministries to save up to Rs328 billion for the whole financial year 2023-24. 

In the aftermath of the 18th Amendment, different subjects were transferred to the provinces but the centre continued spending, causing losses to the national exchequer.

A detailed working of the government considered by the high-profile Cabinet Committee on Economic Revival (CCER) so far proposed certain austerity measures to cut down the expenditures by up to Rs1.9 trillion on a short-term basis. 

However, it is yet to be seen if these measures will be implemented in letter and spirit. 

It recommended that the federal and provincial governments both take austerity measures to reduce the expenditures by Rs54 billion for six months such as slapping a ban on new posts, hiring of daily wages/other staff, ban on purchasing new vehicles including from project funding, ban on purchase of machinery and equipment except medical, ban on travel abroad including official visits, medical treatment, cabinet members to forego pay and government vehicles and security vehicles to be withdrawn.

The ambitious plan also envisages that the triage of 14 loss-making entities will potentially save Rs458 billion for the whole financial year. The reduced operational spending on devolved ministries is going to save up to Rs328 billion during the current financial year.

The Ministry of Finance has estimated that the devolution of the Higher Education Commission (HEC) to the provinces would save Rs70 billion per annum. Education had become a provincial subject in the aftermath of the 18th Amendment but the Center recontinued with the HEC at the federal level. 

The caretaker regime has placed it as an agenda to devolve the HEC to the provinces so it is yet to see how much they are going to succeed on this front. 

Moreover, it is also considering implementing the cost-sharing mechanism of the Benazir Income Support Programme (BISP) with the provinces to save Rs217 billion on an annual basis.

The federal government is also considering re-focusing the Public Sector Development Program (PSDP) spending only on federally mandated projects which could save Rs315 billion annually. 

Caretaker Minister for Finance Dr Shamshad Akhtar had already directed the minister for planning to work out details of projects of a provincial nature for their removal from the list of PSDP to cut down the expenditures by Rs315 billion for the current fiscal year. 

The last Pakistan Democratic Movement (PDM)-led regime had allocated Rs950 billion for the PSDP in budget 2023-24.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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2 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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3 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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