Monday, October 02, 2023

Cabinet committee develops plan to trim Rs1.4 trillion expenditures

Committee expected to ask federal, provincial govts to reduce officer-to-staff ratio to 1:3 in a gradual manner

— Reuters/File
— Reuters/File

  • CCER to ask govts to reduce officer-to-staff ratio to 1:3 in gradual manner.
  • It is unclear how much time frame has been calculated to implement reforms.
  • Govt has decided to focus on feasible public private partnership projects.

ISLAMABAD: The Cabinet Committee on Economic Revival (CCER) has sought a roadmap that includes a detailed plan for the freezing of salaries, pensions and allowances as well as reducing officer-to-staff ratios as it looks to cut down expenditures by Rs1.4 trillion, reported The News on Monday.

According to the publication, the Anwaar-ul-Haq Kakar-led caretaker government has finalised a number of recommendations under an ambitious austerity plan. The CCER is expected to ask the federal and provincial governments to reduce the officer-to-staff ratio to 1:3 in a gradual manner.

However, it is unclear how much time frame the CCER will be giving to the federal and provincial governments for the implementation of the plan.

“The caretaker government has sought plans to freeze salaries, allowances, and pensions during the current financial year,” showed the CCER deliberations.

The publication reported that the government seeks to review untargeted subsidies and grants to cut down expenditures.

There are accumulated bills of subsidies amounting to Rs1.064 trillion sought in the last budget for the current fiscal year. Out of this, the power sector subsidies are going to consume a major chunk to the tune of Rs0.97 trillion. The government has sought funding of Rs1.4 trillion in the shape of grants to different institutions and departments in the budget, so all this massive funding needs to be reviewed in detail.

The committee has also suggested that the federal government let go of unnecessary or untargeted dole-outs. 

Furthermore, it has been recommended that the Public Sector Development Program (PSDP) at the federal level and Annual Development Plans (ADPs) at the provincial level be curtailed by putting an end to new schemes and transferring all provincial nature schemes to the federating units.

In the work done by the Ministry of Finance, it has been estimated that the re-focusing of PSDP schemes on account of the federal mandate could save Rs315 billion for the federal government for the current fiscal year.

The caretaker government also plans to phase out federal expenditure on devolved subjects. The reduction in operational spending on account of devolved ministries could save Rs328 billion.

However, it is unclear if the caretaker government will be able to abolish all the politically motivated or provincial nature development projects from the PSDP before handing the reins of government.

The government has decided to focus on feasible public-private partnership (PPP) projects. It is estimated at the federal level, 50% of the PSDP portfolio would be shifted to the Public Private Partnership (PPP) Authority, known as the P3A pipeline.

It seeks credit guarantees from Infrazamin, an innovative for-profit credit enhancement facility, to enhance private sector investment in infrastructure, enhance allocation to the Viability Gap Fund (VGF) for undertaking infrastructure projects in PPP mode, climate-resilient infrastructure through green bonds and debt swaps, and Sustainable Finance Bureau to assist corporates and public organisations to tap Environment Sustainability Gap (ESG) funds.

The government wants to stick to the condition of the IMF under which no supplementary grants will be allowed for the current fiscal year. 

Under the $3 billion standby arrangement (SBA) programme of the IMF, the Fund has slapped a ban on supplementary grants during the programme period. So it will continue to persist in the current fiscal year.