Pakistan resorts to desperate cost-cutting measures as financial emergency declared

As the Shehbaz Sharif government braced for the 'financial emergency' with the depreciation of the Pakistani rupee to a new low and the existing economic crisis, Pakistan resorted to desperate cost-cutting measures such as rationing of fuel for the vehicles used by the government officials, restrictions on their travel, scrapping leave encashments, and other benefits such as the medical bill payments and allowances. 

“Pakistan’s economy continues to slump despite a resumption of the much-awaited International Monetary Fund’s (IMF) Programme. Country's Finance Minister Ishaq Dar must announce a clear policy on the rupee to ease the pain of traders and to save the industries," Pakistan Business Forum (PBF) CEO Ahmad Jawad had said, expressing concerns last week.

The country, said its Finance Minister Dar, is on verge of mounting foreign debt of $130 billion and $73 billion in three years and a minimum of  $20 to $30 billion deficit.

A financial calamity

As the economic turmoil worsened, Pakistan's government took drastic measures against its employees to slash the costs. Pakistani cabinet Secretariat said in a notification seen by the ANI news agency, "In view of the principal approval by the Prime Minister of Pakistan and present financial calamity of the state and the severe shortage of funds, it has become imperative to issue the following instructions, otherwise further financial catastrophe may lead to a situation of stoppage of salaries in public/autonomous organizations." In accordance with new rules, government employees with previous entitlement benefits will no longer be getting 120 liters of fuel per month. A ban would be imposed on bonuses to government employees, as per the new measures. Government employees will now be required to turn in detailed reports on the utilization of funds and an eight-hour workload policy would be implemented for all employees. 

Additionally, those travelling out of town, city, or village on the official work trip will now be handed two DAs. All leave encashment of regular employees of Grades 17-21 would be scrapped with immediate effect. More than 25 percent of the salaries will be deducted to compensate funds for allowances such as the financial hardships given to government employees. The latter falling into Grades 7 to 21 will be given annual increments strictly on basis of performance. A 50% salary deduction will be done for the government employees who are found in breach of the existing rules.

The cost-cutting measures were rolled out as a matter of urgency as the cash-starved Pakistan secured an urgent bailout financial package from the International Monetary Fund (IMF) in August and has been on the Extended Fund Facility (EFF). IMF approved the immediate disbursement of SDR 894 million (about $1.1 billion), bringing total purchases for budget support under the arrangement to about $3.9 billion. Due to the high inflation, unemployment, and low profitability, Pakistan's economy's average customer price index stood at just 25 percent.