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PIDE report highlights huge disparity in govt employees’ salaries

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1 year ago

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  • PIDE investigates burden each govt officer brings on budget.
  • With higher grades, proportion of perks increases total cost. 
  • Balance needed between short-term benefits, sustainable fiscal policies.

ISLAMABAD: The combined ratio of salaries, perks and operating expenses is much higher for upper grades from 17 to 22 compared to lower grades.

“The combined ratio of salaries, perks, and operating expenses is much higher for BPS-22 employees getting 32.52 times from BPS-1 employee. This suggests that perks and benefits and operating expenditure are highly compressed, with a large gap between the highest and the lowest salaries,” a study done by the Pakistan Institute of Development Economics (PIDE) titled “Life Time Cost of Public Servants” revealed on Sunday.

The aggregate ratio encompassing salaries, perks and benefits, and operating expenses for BPS 22 employees is significantly greater than that of BPS 1 employees, at a ratio of 32.52 times. This indicates a substantial disparity in perks, benefits, and operating costs, with a considerable chasm between the highest and lowest salary levels.

According to the Pakistan Bureau of Statistics, the latest headcount of federal government employees in Pakistan is 1,374,911 as of December 2022. This number includes civilians, armed forces and autonomous/semi-autonomous/corporations.

In Pakistan, the government spends an ample amount of money on paying its employees and providing pensions: The cost of paying these employees is about Rs3 trillion, and pension costs about Rs1.5 trillion. Project workers, people working in government companies and other organisations cost approximately another Rs2.5 trillion. The salaries for the military and the total amount spent on wages becomes around Rs1 trillion.

With higher grades, the proportion of cash allowances in pay and quantified perks in the total cost increases. Government housing facility, given as an in-kind benefit, has never been accounted for in the total cost of the civil servants nor its opportunity cost to the government has ever been calculated. 

The use of official vehicles for personal use by Grade 20-22 officers increases the total cost by more than 1.2 times the basic pay while the health allowances and medical bills reimbursement add over Rs2.5 to Rs3 billion to the budget. 

Moreover, perks and different allowances add to the total cost of civil servants substantially, and if monetised, would break the myth of low salaries in the public sector.

PIDE’s current study has investigated the burden that each newly recruited individual (ranging from Grade 1-22) brings on the national budget.

However, politicians raise political slogans of offering public employment to a substantial number of individuals, without acknowledging that the government’s job is to create new opportunities and not offering jobs. However, politicians by providing employment opportunities to many individuals, especially within their own party or patronage network, can cultivate a base of supporters who are more likely to vote for them in elections.

The study identified that the net present value of a Grade-1 employee hired in July 2023 would be Rs8.1727 million including salary and pension, perks and benefits and operating costs respectively.

It has also been calculated that the sums of Rs49, Rs136, and Rs245 million will be required by the government to afford a Grade-17 officer for a period of thirty years.

These sums represent what the state and government of Pakistan will have to spend on a worker. 

This prompts the question of whether or not we have sufficient revenue streams to support the compensation for the next 30 years; if not, it’s a good time to pause and consider the implications of adding a new worker to the system, given that the state and the government will be responsible for covering the cost through taxation.

To break free of its debt spiral, according to PIDE, Pakistan needs long-term planning; salaries and pensions are the major expenses for the institute, so the study has proposed being extra careful and cost-effective before deciding to keep an employee. This way, the institute can figure out how it can afford to pay the person for the rest of his or her working life.

It is essential for governments to evaluate the long-term financial implications of immediate job creation and to find a balance between short-term benefits and sustainable fiscal policies. While the creation of immediate jobs can have a good effect, it is equally important to note that rapid job creation can have negative effects.

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Business

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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2 days ago

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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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