Finance Division has announced austerity measures, including a ban on the purchase of all kinds of vehicles, procurement of machinery, and equipment, and state-funded medical treatment abroad and the creation of new jobs reposed to manage the costs and expenses of the federal government.
The division issued the notification and claimed that in pursuance of the Cabinet’s procedures for Case No. 232-28-2024, dated 27-08-2024, the following austerity measures are announced until further orders. There shall be a complete ban on the following costs concerning the current budget.
- First, all kinds of vehicles must be purchased except operational vehicles like ambulances and other medically furnished vehicles, fire-fighting vehicles, vans and buses for educational institutions, motorbikes, and solid-waste vehicles.
- The acquisition of machinery, and equipment, except those needed for hospitals, mining facilities, food, and agricultural laboratories, creation of new ports like dependent paid temporary ports
- continuation of dependent or conditional paid temporary ports beyond one year
- Treatment abroad at government cost, and sixth
- All non-obligatory business abroad where government of Pakistan funding is incorporated.
The austerity measures released by the Cabinet Division vide O.M. Nos. 7-1/2023-Min-I and No. 9-148/2002-Min-II dated 28.2.2023 are anticipated to remain applicable unless modified and retracted by the Federal Cabinet.
Read more: Pakistan To Cut Expenses By 15% In Austerity Drive To Save Rs 200 Billion Annually
All the vacant posts for the last three years shall be eliminated. The purchase of durable and recreational posts under PSDB funding projects shall be removed or exempted from the application of this ban. All municipal divisions are asked to distribute and spread the above instructions to all departments under their administrative control for strict adherence.
Strict austerity measures will have various positive and negative outcomes.
Positive impacts
- Firstly, by restricting purchases of vehicles and equipment, and limiting non-essential travel and machinery, the government will be capable of saving massive resources, helping reduce budget deficits, and stabilizing the economy of the country.
- Secondly, government departments may be required to streamline operations and maintain expenses and fewer resources will be accessible. This is anticipated to lead to better utilization of existing resources and innovation in resource management.
- Thirdly, exempting critical services like educational institutions, hospitals, and public safety from the ban, guarantees that essential public services will not be affected while unrequired spending is reduced or curbed.
- Fourthly, minimizing wasteful expenditure is anticipated to improve long-term financial sustainability for the government, assisting in avoiding debt accumulation and guaranteeing that public finances are executed more prudently.
- Fifthly, these measures are taken to enhance the culture of fiscal discipline potentially improve the creditworthiness of the government, and create greater investor confidence in the country.
Negative impacts
- Firstly, limiting procurement and limiting hiring is anticipated to slow down public sector service delivery. For example, a ban on new hires is anticipated to result in understaffing, affecting government efficiency in delivering services.
- Secondly, the elimination of working force restrictions and limitations on salary increases are anticipated to demoralize public servants, affecting their motivation and productivity.
- Thirdly, banning the acquisition of new machinery and equipment is anticipated to stall crucial infrastructure projects by impacting areas like public health, education, and transportation poorly.
- Fourthly, the potential loss in job creation, especially for temporary contract positions, might prove to impact the employment rate and will increase the unemployment rate, which is anticipated to have wider social and economic outcomes or results.
- Fifthly, banning non-essential foreign travel is anticipated to minimize global engagement of Pakistan in economic and diplomatic forums, potentially restricting opportunities for international collaboration and investment.