In a move that’s more last-minute face-saving than strategic financial planning, caretaker Prime Minister Anwaarul Haq Kakar has cut fiscal spending at a time when debt servicing due to extortionate interest rates is higher than government income.
There is now a complete ban on creating new posts under the Public Sector Development Programme (PSDP) for the fiscal year 2023-24. The decision, approved almost four months before the fiscal year’s end in June 2024, goes against the usual practice of policymaking done at the start of a new fiscal year, reported Express Tribune.
Kakar has prohibited the purchase of machinery and equipment from the current FY budget, with exceptions made only for medical purposes.
The outgoing PM’s ban extends to vehicle purchases except ambulances, school buses, solid waste vehicles, tractors, fire-fighting vehicles, and motorbikes.
Kakar has also constituted an Austerity Committee to oversee the austerity drive, with provisions for flexibility as needed.
Meanwhile, the PM hasn’t addressed the issue of certain development projects being misused by officials for personal gains. Reportedly, some caretaker ministers have been abusing their privileges by misusing luxury vehicles beyond the scope of their office.
The Ministry of Finance has emphasized the government’s focus on expanding the tax net, rationalizing subsidies, and promoting economic growth. However, it has failed to address the rising debt servicing costs.
Concerns also linger about the country’s debt management strategy. Notably, external debt as a share of total public debt decreased slightly by the end of December 2023. Consequently, the Ministry of Finance has revised the budget deficit target to Rs. 8.5 trillion while interest expenses are now expected at Rs. 8.33 trillion.