The federal government’s new austerity measures are expected to save only Rs. 16.8 billion, as Finance Secretary Imdad Ullah Bosal briefed lawmakers on the implementation of Pakistan’s International Monetary Fund (IMF) program.
Bosal, who is also the government’s chief negotiator with the IMF, told the National Assembly Standing Committee on Finance that the savings would come mainly from cuts in fuel allocations for official vehicles and non-salary spending.
A 50 percent reduction in fuel allocations for official vehicles is expected to save Rs. 700 million over three months, while a 5 percent cut in non-salary expenses is projected to save Rs. 16.1 billion over one year.
Prime Minister Shehbaz Sharif announced the austerity measures after public criticism of the government’s decision to pass the financial burden of the Middle East war on to consumers. The government’s monthly petroleum levy collection is projected at Rs. 139 billion.
The finance ministry told the committee that several IMF conditions had not been fully met, including requirements related to sugar sector liberalization, health and education spending, the Sovereign Wealth Fund Act, statutory state-owned enterprises, and tax collection from retailers and agriculture.
Bosal said the government was advancing work toward full liberalization of the sugar sector and had shared draft recommendations for a national policy with the provinces. Three provinces had agreed to the proposal, while one province had reservations, with committee members identifying it as Sindh.
The government also missed its health and education spending target for the last fiscal year. Against the IMF target of Rs. 3.47 trillion, the five governments spent Rs. 3.1 trillion. Bosal said lower federal tax collection had also forced the government to ask provinces to reduce their spending.
Other pending IMF conditions include amendments to the Sovereign Wealth Fund Act, changes to laws governing nine statutory state-owned enterprises, amendments to the Securities and Exchange Commission of Pakistan Act, and measures to strengthen the anti-corruption framework.
The finance secretary said implementation of the overall IMF program remained strong and that this had helped the government reach staff-level agreements without major difficulties in previous reviews. However, the government continues to work with the IMF on several outstanding conditions, including the agricultural income tax framework and the fixed tax scheme for traders.
