PML-N breaks promise of reducing the fiscal deficit through austerity drive


Promise

The PML-N had promised in its 2013 manifesto that once in power the party will reduce the fiscal deficit by putting a curb on the VIP culture and launching an austerity drive particularly expenses relating to PM house, the presidency, governor house and Chief Minister house will be significantly reduced.

Background

A fiscal deficit occurs when a country’s expenditure exceeds its income. This gap is filled by debt financing either from domestic market or from foreign lenders such as the International Monetary Fund, or at times through both.  When governments raise debt from the domestic market a crowding out effect takes place whereby banks instead of giving debt to the private sector invest its capital with the government because of safety and better rate of return.  The private sector shrinks due to insufficient external financing that pushes them out of the business environment.

Pakistan’s fiscal budget has accumulated to a whopping 5.8 per cent of the GDP and has reached to Rs 1.864 trillion, which is the highest in the four years of PML-N government as well as of the country’s 70 years history.  During the fiscal year 2016-17 the government had planned to limit the deficit to 3.8 per cent, but with the departure of the IMF, the government loosened its grip on the fiscal discipline.

Pakistan government needs Rs 10 trillion to finance its annual federal and provincial spending. Today the government is the largest buyers of imported products, and its spending has outgrown market expansion.  The local market especially the private sector has plunged in the absence of equity support (because of borrowing by the government). The World Bank report “Doing Business, 2017, Equal Opportunities for all,” has pointed out that in term of institutional support to doing business Pakistan ranks 144 among 190 countries.  Which means that the government policies and its central monitoring instruments, at the provincial and federal level, are not conducive for market development.  The country is neither developing and nor generating employment.

The government was supposed to curtail its expenses, but it failed to do that. As per the promise no effort was made to cut down expenses at the Prime Minister, Presidency, Chief Minister or Governor House. It has been business as usual.  In fact, there has been a steady increase in the budget of the PM office and house.

The budget for the PM office for the fiscal year 2017-18 was proposed Rs 916 million, almost 4 per cent higher compare to Rs 881 million allocated for the fiscal year 2016-17.  Similarly, the amount recommended for the presidency was higher than the PM office budget.  It registered an increase of 11 per cent. From Rs 863 million it went up to Rs 959 million.  Separately the PM office had also revised a supplementary grant of Rs 154 million in the current fiscal year.  The entertainment and gift allocation for the PM house saw an increase of 16.6 per cent to Rs 3.5 million as against Rs 3 million in the year 2016-17.

In the last fiscal year, Rs 10 million had been set aside for the president’s salary and Rs 1.2 million. Separately Rs one million had been allocated under the discretionary grant for the president office.

The government of Punjab spends millions of rupees on the security of the governor house.

Promise Tracking

Senior Leader of Pakistan Muslim League-Nawaz (PML-N), Dr Musadik Malik said that his party has been striving to make Pakistan a progressive country and has taken up many developmental projects. He evaded the question of VIP culture saying that the government has curtailed much expenditure however he did not specify what expenses have been cut down.  He agreed that cutting down on VIP culture can only be done incrementally and not at once.

Talking about Punjab the Leader of the Opposition Mian Mahmoodur Rasheed, said that the governor cost the Punjab government Rs2.9 million a day as an expense for the chief minister are over Rs 991,000 and the governor Rs197,400 daily. He further added that the exchequer of a province, a defaulter on loan of Rs712 billion, has been laden with such a massive waste of money.

To make matter worse the chief minister has also bought a helicopter and a fleet of new luxury cars worth Rs1.76 billion.

Last year the government was lambasted by the Imran Khan for reportedly allocating Rs 430 million for refurbishing Prime Minister Nawaz Sharif’s personal home in the popular hill station of Murree.

According to reports, the money was allocated to refurbish the Murree house of the prime minister for the upcoming summit of the South Asian Association for Regional Cooperation (SAARC).

Nawaz Sharif has also been accused of spending public money on upgrading the Raiwind estate and its environs. The Raiwind Road case is pending in NAB without much progress.

Independent view

Talking to Truth Tracker, Dr Qais Aslam, Professor in Economics School of Accountancy & Finance, University of Central Punjab, said the government failed to eliminate the VIP culture by reducing expenditures of the presidency, the prime minister, chief ministers, and governors. He added that such spending at times was considered as side issues, but their effect is central to the governance system.  “An unusual example of the VIP culture, whereby millions were spent, was witnessed on the protocol of the family of the ex-prime minister when they came to face the Joint Investigation Team. A total amount of Rs6.4 million was spent on security and Islamabad was almost shut down to the public the day the ex-prime minister’s daughter went for the investigation.”

Ruling

PML-N has failed to keep its promise of reducing the fiscal budget by curtailing the VIP culture and the expense associated with it.

Previous PPP’s promise to enact laws for domestic workers stands compromised
Next Unearthing the spoils of politics

No Comment

Leave a reply

Your email address will not be published. Required fields are marked *