The International Monetary Fund(IMF) should know that the austerity drive announced by Prime Minister Shahbaz Sharif on Wednesday, meant to be a cut in current expenditures it stipulated as part of the prior actions before a staff-level agreement for the 9th review to complete, is not only grossly inadequate but also an eyewash, and very unlikely to be implemented. It falls far short of the long list of recommendations of the National Austerity Committee (NAC) made in the end of January.
Sharif has announced the withdrawal of salaries and perks of the prime minister, federal ministers, special assistants, and advisers, along with a 15% cut in the expenses of all government departments. Further, bans have been announced on domestic and foreign business-class travel, and luxury cars. These government functionaries are also required to pay for their utilities, and all these measures are to remain in place till mid-2024.
The austerity drive by Shahbaz Sharif meant to be a cut in current expenditures it stipulated as part of the prior actions is not only grossly inadequate but also an eyewash.
NAC's recommendations were designed to nail the system of privileges that produces the fat-cats culture at the expense of the public.
A 2021 UNDP report found economic privileges accorded to Pakistan’s elite groups add up to roughly USD 17.4bn.
The mini-budget announced to meet the IMF conditions once again shafted the poor with increased indirect taxation.
Shahbaz Sharif's Austerity Measures Are Ruthless & Unreasonable
The first issue is that reducing or withdrawing lavish perks and privileges in a desperately poor country is reasonable, but it is witless to deprive people entirely of their salaries or to expect people to work without salaries. This measure alone reeks of drama.
The second issue is that the measures announced are restricted to the federal ministers and advisors alone whereas the bulk of such offices is in the provinces. Why have the provinces not been taken on board and included in the scheme?
Third, there are countless other government-paid bodies such as the military, the judiciary, the Federal Bureau of Revenue, the State Bank, the Election Commission, the National Accountability Bureau, etc, and state-owned enterprises like the national carrier, the railways, the steel mill, etc that have not been included in the belt-tightening. Why? “Armed forces have given a positive response to cut non-combat expenditures,” said Sharif without elaborating on it. This is his mettle.
But the most fundamental flaw in all this is that the recommendations of the NAC, which were far more comprehensive and were designed to nail the system of privileges that produces the fat-cats culture at the expense of the public, should have been taken to the national assembly and legislated for to ensure austerity became legally binding. What the Prime Minister has done is merely make an announcement with not a piece of paper, change in the rules of business, or law backing it up.
This indicates that there’s neither any intent nor any way of implementing even whatever little he has announced. The AC’s recommendations were assessed to save between Rs 500 bn to 1000 bn, compared with Sharif’s which is supposed to save Rs 200 bn (USD 760 million).
Are Govt-Proposed Measures Meant To Mitigate Crisis or a Hogwash?
The AC for example, included recovery and auction of all extra plots of land allotted at throw-away prices save one, and a 15% cut in salaries of all civil and military bureaucrats, judges, and federal and provincial parliamentarians; it recommended the introduction of pre-paid gas and electricity meters and abolishing of discretionary funds for parliamentarians.
None of this has been taken onboard save the few measures announced for the federal cabinet. And that too for a very limited time, indicating there is absolutely no intent to do away permanently with the rigged system of enriching the elite at the expense of the masses.
The NAC recommended reducing the cabinet size to 30, but the tone-deaf, insensitive, and completely out-of-touch PM increased his cabinet size to 85 from 70 plus in the middle of possibly the worst financial crisis the country has ever faced.
The icing on the cake of this chicanery is that dozens of cabinet members don’t even have a portfolio.They actually do nothing. Even if the additional ministers and Special Advisors to the Prime Minister (SAPMs) do not draw salaries (as the government claims), their offices, cars, and other paraphernalia add a significant burden on the exchequer.
The insincere nature of the announcement comes into sharp focus when the SAPM accompanying the PM for the announcement arrives in a BMW, which he did. Whether this announcement is meant to fool the IMF or the public or both, it won’t do the job.
But one of the most fundamental questions this business raises is that if cutting perks and privileges of just the federal cabinet and reducing federal govt expenses by 15% percent can save USD 760 million, why in the first place were such lavish expenditures being undertaken by governments of an impoverished people and country?
Pakistan's Pro-Elite Stance Makes for a Poor Call
The mini-budget announced on Monday to meet the IMF conditions once again shafted the poor with increased indirect taxation – the sectors continuing to enrich the elite kept the subsidies and remained exempt from taxes.
The ruling elite is truly an unashamed, unaccountable lot that has been coerced by the IMF to merely announce a token dropping of frills. A 2021 UNDP report found economic privileges accorded to Pakistan’s elite groups add up to roughly USD 17.4bn.
This combination of elite capture and the spiraling debt trap it engenders, continues to increasingly impoverish the public.
For sure, this is not sustainable forever and something will give, if not today then tomorrow. Unless structural reforms are undertaken for a more productive economy and more equitable distribution of wealth, the current arrangement can very well lead to civil unrest and rioting, making the country ungovernable and unlivable for the elite class itself.
(Gul Bukhari is a Pakistani journalist and rights activist. She tweets @GulBukhari. This is an opinion article and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)