Cabinet members to forgo salaries, perks, says PM Shehbaz while announcing austerity measures

Prime Minister Shehbaz Sharif on Wednesday announced a bunch of austerity measures, mostly aimed at his cabinet, as Pakistan moved to cut expenditure in the face of severe economic difficulty.

In a press conference alongside cabinet members after a meeting, he stated that all ministers, special assistants and advisers will not draw salaries or benefits.

Pakistan hopeful of securing IMF financing ‘soon’, says PM Shehbaz

They will pay for their utility bills from “their own pockets”, he added.

“All luxury cars being used by Cabinet members will be auctioned and when security is required, one car will be provided only,” he said. “Moreover, they will travel in the economy class while abroad and on local trips.”

The number of people accompanying a government delegation abroad will be cut down and the team will not be allowed to stay in 5-star hotels.

The expenditures of government institutions will be slashed by 15% and purchase of new cars has been banned till June 2024, PM Shehbaz announced.

“For government servants, only obligatory foreign trips will be allowed and that too in the economy class,” the PM said. “Many government servants have a car and they are also availing car allowance which is wrong. One of the two will be taken back by the government.”

He stated that security of government officials will be taken back. Cabinet members will not use luxury cars, the PM said.

The PM announced that travel expenses of government employees will be reduced through teleconferencing and “zoom conferences will be promoted.”

He also said that no new division or unit will be established in ministries for next two years.

To save electricity and gas, offices in summers will open at 7:30am, the PM said.

“Government servants will not be given more than one plot,” he said. “One dish will be served in parties in the ministries and PM House. For foreign guests, there will be multiple dishes but events will not be lavish.”

The PM said more measures will be announced in budget 2023-24.

“The energy conservation plan is still pending complete implementation and it should be followed from today,” he ordered. “If it is not followed, then we will be forced to cut supply of electricity to shopping malls after 8:30 pm.”

Talking about the Toshakhana, he said foreign gifts valued at over $300 will have to be submitted to the state coffers.

“Toshakhana record will also be made public,” he said.

Inflation to increase after IMF deal

PM Shehbaz also announced that inflation in Pakistan will rise following the staff level agreement between Pakistan and the International Monetary Fund (IMF).

“IMF asked Pakistan to reduce subsidies and we complied,” he said.

Earlier on Wednesday, the PM said that Pakistan hoped to secure financing from the IMF “soon”.

While chairing a cabinet meeting, he said some measures are pending for the deal to be approved.

The government is also focused on making austerity a top priority for the economic crisis-hit country, PM Shehbaz added.

“This is a critical time for Pakistan and we all will need to work to improve the state of the economy,” he said. “The ministers, advisers, special assistants and government officials will take a lead in following cost-cutting measures.”

Pakistan is currently witnessing one of its worst economic crisis in history with inflation already hitting 27.6% on year-on-year basis in January 2023 compared to an increase of 24.5% in the previous month. The January reading was above market expectations.

However, the pace is set to increase further as Pakistan moved to implement a bunch of measures in its bid to revive the IMF programme, which was stalled last year.

In a recent interview, a senior economist with Moody’s Analytics said inflation in Pakistan could average 33% in the first half of 2023 before trending lower.

The expectation has also put the markets on edge with experts expecting a further hike in the key policy rate.