ISLAMABAD – The government on Wednesday shared its plans for expenditure cuts with the PML-N team by disclosing that it planned to halve the increase in salaries of government employees in this year’s budget for the remaining four months of the current fiscal year, and reduce the Rs 70 billion-flood relief fund by Rs 10 billion.
A source said the PML-N team, however, demanded an across-the-board salary cut, including slashing of salaries of parliamentarians, ministers, the prime minister and president. Both sides agreed to make the final decision on Thursday after consulting their respective party leadership.
The PPP ministerial team headed by Finance Minister Abdul Hafeez Shaikh and PML-N team led by Senator Ishaq Dar continued parleys for the implementation of PML-N’s 10-point agenda for the revival of the economy. The meeting was briefed on measures for 30 percent reduction in expenditures and increase in revenue to keep the budget deficit at a reasonable level.
The government team also shared its proposal to save Rs 10 billion by reducing the size of the flood relief fund, which was provided by the international community for flood affected people and that had so far raised Rs 70 billion. The government team said it would reduce the financial assistance to Pakistan Railways by Rs 10 billion and the power tariff differential subsidy would be completely abolished during the current fiscal year.
However, the government team conceded that despite taking all these measures the budget deficit would hover around 5.4 percent of the GDP, instead of the targeted 4.7 percent. To keep the deficit at 4.7 percent in the ongoing fiscal year, provinces would be required to ensure a budget surplus of Rs 160 billion. During the first half of the current fiscal year, the provinces have maintained a budget surplus of Rs 80 billion, the source said.
However, the PML-N team was reluctant to share the provincial budget surplus with the federal government, saying the provincial governments had drawn up plans to carry out development work in their respective provinces. The government team said that enforcement of flood surcharge and enhanced excise duty of two percent would help generate Rs 31 billion.
Talking to reporters after the meeting, the finance minister said the meeting discussed a one-point agenda of expenditure cuts and revenue generation to control the fiscal deficit. He said that the budget deficit has been curtailed at 2.8 percent of the GDP for the first half of the ongoing fiscal year. Shaikh said the government had already imposed a freeze on non-salary expenditures and efforts were on to improve revenues by curtailing tax evasion.
Ishaq Dar said the rising budget deficit was a major challenge, adding that they would try to settle all issues of 10-point agenda on Thursday.
