Pakistan Aims to Streamline Public Spending Ahead of Federal Budget

Strategic Insights -

As the federal budget for 2024-25 approaches, Prime Minister Shehbaz Sharif has issued directives to ministries to identify and close redundant government organisations, resolve outstanding issues related to power sector subsidies, and streamline public spending. This effort is part of a broader cost-cutting agenda aimed at reducing unnecessary expenses and improving the country's fiscal space. The PM has constituted committees to address these matters, including the winding up of unnecessary institutions, review of subsidies, and finalisation of the Public Sector Development Programme (PSDP).

Key Takeaways:

  • The Prime Minister has directed ministries to review the 'pink book' - a budget document listing development schemes - and identify dysfunctional or obsolete organisations for dissolution by May 24.
  • Around 40,000 posts have been abolished or declared dying positions, with 11,558 (29%) being grade-1 posts such as peons, sweepers, and gardeners, expected to save Rs36.3 billion annually.
  • Abolishing grade-1 positions is expected to save Rs7 billion of the total savings.
  • The PM has asked the Finance Minister to submit a summary of key budget initiatives to shape the narrative of the budget speech.
  • The government will review proposed projects for 2025-26, with the aim of including only those development projects that can be fully funded given tight fiscal space.
  • Disagreements persist over the proposed Rs921 billion PSDP size, which the Planning Ministry and coalition partners deem insufficient.
  • Pressure is mounting to increase the allocation for the parliamentarians' Sustainable Development Goals Achievement Programme (SAP), with Rs50 billion originally allocated for this year and expected to exceed this figure.
  • The PM has urged the Finance and Power ministries to finalise the quantum of power sector subsidies, with no resolution reached despite a meeting between the two ministries.

Statistics:

  • Around 40000 posts have been abolished or declared dying positions in the government.
  • 11,558 (29%) of the abolished posts were grade-1 positions such as peons, sweepers, and gardeners.
  • Abolishing grade-1 positions is expected to save Rs7 billion of the total savings of Rs36.3 billion annually.
  • The proposed PSDP size is Rs921 billion, which is deemed insufficient by the Planning Ministry and coalition partners.
  • The government has set aside Rs1.04 trillion (0.8% of GDP) for power subsidies in the next fiscal year.

Sources:

  • Government sources
  • Statement by Prime Minister Shehbaz Sharif
  • Federal Budget Document (2024-25)
  • Planning Ministry Report (2025-26)
  • Parliamentarians' Sustainable Development Goals Achievement Programme (SAP) meeting minutes (45th steering committee meeting)
  • Petroleum Division Report (input tax adjustment issues affecting refineries)
  • International Monetary Fund (IMF) staff-level negotiations in March
  • Federal Board of Revenue (FBR) reports and statements