Govt seeks Rs 600b budgetary tailoring

ISLAMABAD – The government has sought support from parliamentary political parties for implementing its Rs 600 billion budgetary measures to bring down the budget deficit from over eight percent of the GDP to around the targeted 4.7 percent in the ongoing year.
Talks between the government and the PML-N team were not held on Thursday, as the government sought more time to finalise its recommendations. However, a source in the PML-N said the talks were deferred as two ministers were not available to attend the meeting. Both parties are expected to hold a final round of talks on the 10-point agenda today (Friday), the source said. He said that the government was stressing on budgetary measure to contain the fiscal deficit, as the PML-N’s proposed 10-point agenda was not enough.
The government, he said, had informed the PML-N team that recovery of waived off loans required new legislation, as there was no law under which waived off loans could be recovered. An official source said the economic team spent a busy day while briefing the president and prime minister on the pace of progress with the parliamentary political parties and sought their advice on talks with the PML-N.
The PPP leadership expressed displeasure over the leaking of the proposal to cut the increase in government servants’ salary by half. A source privy to the parleys said that during talks, the government team sought political support for implementing Rs 600 billion budgetary measures to fulfil the key condition of the International Monetary Fund that wanted strict compliance with the fiscal deficit.
The proposed measures include slashing down the Public Sector Development Programme (PSDP) from Rs 280 billion to Rs 140 billion. The government had earlier announced to reduce the PSDP by Rs 100 billion, but due to dire financial needs, it has decided to slash it by another Rs 40 billion, the source said. The allocation of Benazir Income Support Programme would be reduced from Rs 90 billion to Rs 80 billion.
The Pakistan Railways which is seeking Rs 30 billion, would get only Rs 20 billion.
The austerity measures – reduction in the size of the federal cabinet, 25 percent cut in salaries of Grade 17 and above government employees and reduction in VVIP and other official foreign tours – would help save Rs 16 billion in remaining four months of the ongoing fiscal year.
By early repayment of domestic debt, the government anticipates that an estimated Rs 20 billion could be saved in interest payments during the current fiscal year. The proposed salary cut of Grade 17 and above employees would save only Rs 1 billion in the remaining four months, the source said.
A cut of Rs 10 billion is planned in the flood relief fund and about Rs 32 billion have so far been distributed through Watan Cards and Rs 8 billion for Rabi crops. The government asked for support to end power sector subsidies, which was estimated at Rs 67 billion, but have already crossed Rs 100 billion during the first six months of the current fiscal.
Similarly, it sought passing on the increase in prices of petroleum products, as the failure to do so in the last three months had resulted in a loss of Rs 30 billion.
The government also sought support for the enforcement of flood surcharge and increase in federal excise duty from March 1. This would help raise Rs 31 billion in the current fiscal.
After giving additional Rs 300 billion to the provinces under the National Finance Commission Award, the government made its mandatory for provincial governments to maintain a budget surplus of Rs 160 billion at the time of the announcement of the next year’s federal budget in June.
The provinces have maintained a budget surplus of Rs 80 billion during the first six months of the current fiscal year. The PML-N has so far not supported the proposal to provide the budget surplus to the federal government, as it said the provinces had their own development plans.