February 23, 2023
ISLAMABAD – Prime Minister Shehbaz Sharif on Wednesday announced a slew of austerity measures, which he claimed would save the country Rs200 billion annually.
The announcement comes as Pakistan is eyeing a staff-level agreement with the International Monetary Fund (IMF) this week which will pave the way for much-awaited credit flows from other bilateral and multilateral lenders.
Pakistan is in dire need of funds as it battles a worsening economic crisis with the country’s foreign exchange reserves dropping to around $3 billion, barely enough to cover three weeks of controlled imports.
On Monday, the National Assembly passed the IMF-dictated Finance (Supplementary) Bill 2023, seeking to impose an additional Rs170bn in taxes.
List of the austerity measures:
- All federal cabinet members, advisers and special assistants to forgo salaries and other privileges
- All cabinet members to pay their own utility bills
- All cabinet members to return all luxury vehicles which will be auctioned
- Only one security vehicle to be provided to cabinet members when needed
- Cabinet members and government officers to travel in economy for domestic, foreign trips; support staff not permitted to tag along
- Cabinet members to not stay in five-star hotels during foreign visits
- All division, departments, subordinates and other government entities under the federal government to slash current expenditure by 15pc
- Purchasing luxury items, all types of vehicles banned till June 2024
- Official vehicles being used by government officers availing monetisation scheme will be recalled
- Security vehicles will no longer be provided to government officers
- Teleconferencing will be promoted to reduce traveling expenses
- No administrative unit or division or subdivision to be created for the next two years
- “Single treasury account” to be established
- Offices to open at 7:30am during summer
- Government employees to not be allotted more than one plot
- Only one dish will be served at all government events
Addressing a press conference alongside members of the federal cabinet in Islamabad, the premier said that ministers, state ministers and special advisers to the premier had decided “willingly” decided to forego their salaries and perks. He said that all ministers would now pay their own telephone, electricity, water and gas bills.
“All luxury cars being used by cabinet members are being revoked and will be auctioned,” he said. “Where needed, ministers will be provided only one car for security.”
The premier further said that federal ministers would also travel in economy when undertaking domestic travel or going abroad. He said that support staff would no longer be allowed to go on state visits while cabinet members would not stay in five-star hotels during foreign trips.
He added that the current expenditure of ministries, departments and sub-departments would be reduced by 15 per cent. He said that the relevant principal accounting officers would make the necessary changes to their budgets in light of this decision.
“Until June 2024, which means till next year, there will be a complete ban on buying luxury items. Until June 2024, there will be a complete ban on purchasing all types of new cars.”
The prime minister further said that government officers would only be allowed to undertake “obligatory visits”, adding that they would travel in economy and support staff would not be allowed to tag along. “Officers going abroad will not stay in five-star hotels.”
He said that government cars being used by senior ministry officials, who were already availing the car monetisation service, would be recalled.
Security cars would no longer be provided to government officers, he said. “A committee, under the supervision of the interior minister, will decide on giving permission for providing security cars on a case-to-case basis depending on the gravity of the situation.”
He asserted that no cabinet member or government officer would use a luxury car. In addition, teleconferencing would be promoted in order to reduce traveling expenses, he said.
PM Shehbaz said that no new department would be created with regards to the federal government. “For the next two years, no new administrative unit, division or sub-division will be created.”
He said that a “single treasury account” would be established, adding that the finance ministry had started working in this regard.
“To conserve gas and electricity, the advice for opening offices at 7:30am during the summer has been accepted.”
The premier said that it had also been decided that government employees would not be allotted more than one plot, saying that this would be implemented from tomorrow.
He noted that there were British-era government houses, taking up several acres, where police officers and ministers were residing while hundreds of thousands were sleeping under the open sky. “A committee, headed by the law minister, has been formed to draft a plan for building town houses on this land.”
He said that in terms of food, only a single dish would be allowed at government events. “There will only be one dish in all the ministries in Islamabad, the Prime Minister’s House and the federal cabinet. If it is tea time, then only tea and biscuits will be provided.”
However, this restriction would not apply to foreign guests and dignitaries, he said. “But even then, we will exercise caution […] It will not be lavish. We will do it in a simple manner.”
PM Shehbaz said that these measures would be implemented immediately, adding that “additional steps” would be taken at the time of the budget for the new fiscal year.
“The federal cabinet and I request the chief justice of Pakistan, the chief justices and courts of all four provinces, and the chief ministers to implement similar measures in their institutions and governments.”
Talking about the government’s energy conservation plan, PM Shehbaz said that it had not yet been implemented. “From today, we will give the message in the Centre and the provinces that if there is further delay in its implementation, we will be forced to cut the power supply of big markets and malls.”
Talking about the Toshakhana — a department under the administrative control of the Cabinet Division which stores precious gifts given to rulers, parliamentarians, bureaucrats, and officials by heads of other governments and states and foreign dignitaries — the premier said that the federal cabinet had decided that no one would be allowed to retain state gifts worth more than $300.
PM Shehbaz also announced that it had been decided to make the Toshakhana record public. “It is a public record. Everyone has the right to know about it and ask [about it].”
Responding to a question from a reporter, PM Shehbaz said that the measures would save Rs200bn annually.
‘Matters with IMF at last stage’
At the outset of his press conference, the prime minister said that the government had passed the mini-budget under which new taxes were being levied on big corporations so that the common man was protected by inflation to “some extent”.
He said that matters with the Fund were at the “last stage” and hoped that everything went well. He further said that “matters would be settled in a few days” but it would cause further inflation. He said that Pakistan had fulfilled almost all of the IMF’s conditions.
During his speech, he noted that the poor had always had to render sacrifices. He said that the budget for the Benazir Income Support Programme (BISP) was being increased.
He foresaw difficulty in the times ahead after the IMF deal was done, assuring the nation that the government would guide the country during this time.
“We made a committee, which worked day and night, on measures through which we can […] show through our personal example so that it raises awareness.”
‘Austerity will require sacrifices from the privileged’
Addressing the federal cabinet earlier in the day, PM Shehbaz said that only “one or two items” were remaining in the competition of the IMF agreement and asserted that Pakistan would soon strike a deal with the global lender.
PM Shehbaz talked about the country’s economic woes and said that sacrifices from the privileged were required in this difficult time.
“It is the joint responsibility of the government machinery, which includes the political face and bureaucratic face, and all the members of the provincial governments to show a performance that is needed in this extremely difficult time,” he asserted.
The premier stated that various reasons, including “imported inflation, IMF conditions and the doings of the previous government”, had led to the economic difficulties that the nation was currently facing.
Shehbaz elaborated that the said performance required “retrenchment, simplicity [and] sacrifices”, citing that the disasters faced by the nation in the past had led the poor to make the most sacrifices.
“I know some affluent people who have stepped forward and made contributions in this time. But have all of them given a sacrifice?”
The premier further called for the nation to “learn from the past and decide to move forward”.
He said the nation was looking towards the government with “critical and questioning views”, admitting that it was “neither easy nor a joke” how the incumbent government was standing together in making decisions.
Shehbaz added that the government was striving at its full capacity but “practical steps” were needed. “As the saying goes ‘leadership by personal example’ […] it is now time to show it.
“We have to stand up and accept the challenge today and let the world know that Pakistan is a strong nation and the government is ready to do everything to face these challenges,” he asserted.
Acknowledging that the measures of entrenchment and simplicity would not reduce the burden of inflation, he reasoned that they would at least reduce the resentment “that is accumulated in the people because of what has been happening for the past 75 years”.
The prime minister said these measures would make the people realise that the “government, politicians and bureaucracy have decided from the core of their hearts to show the spirit of sacrifice”.
“Today is the time for you to stand up and accept the challenge and do it in the name of God, in the name of Pakistan. Let’s not delay it and shame our prosperity,” he added.
The prime minister’s media talk coincides with the start of the opposition PTI’s “Jail Bharo Tehreek” — an organised campaign to court arrests — which is billed by party chief Imran Khan as a counter to the “attack” on the party’s fundamental rights and the “economic meltdown”.
‘Cabinet size must go down’
Meanwhile, Climate Change Minister Sherry Rehman said that structural reforms and fundamental economic reforms were needed rather than “optic” measures.
“Many of us will voluntarily surrender salaries in the interest of further austerity but it’s the size of cabinet too that must go down,” she said.
The cabinet size swelled to 85 earlier this month with seven more special assistants. Of the 85 cabinet members, 34 are federal ministers, seven ministers of state, four advisers to the prime minister and 40 special assistants to the prime minister.