Special pay rise for the baboos

A press release from the Ministry of Finance informed the general public that the newly-appointed Minister for Finance Saleem Mandviwalla recommended a 20 percent pay raise for the federal secretariat staff effective from 1st March and his proposal was approved by Prime Minister Raja Pervez Ashraf.
The question arises as to why there was a need to raise the salary of a very select group in mid-year? The story behind this move began when it was pointed out by AGPR staff that there was considerable disparity in the salaries of different federal government departments/entities in spite of the fact that they were on the same scale; and they demanded a 100 percent pay raise. The Public Accounts Committee as well as Pay and Pension Commission headed by Dr Ishrat Husain acknowledged the disparity and recommended that it be eliminated. The federal secretariat group made this as the basis for a demand to increase salaries by 20 percent. This background may perhaps explain why Saleem Mandviwalla stated that the pay rise was linked to the government's objective to further improve the living standard of federal government employees.
Be that as it may, it is the responsibility of the federal government to improve the living standard of the entire population and not just of the federal secretariat staff. And there is simply no economic justification for a raise in salaries in the middle of the year for two major reasons. First and foremost, there is deep concern amongst the Friends of Democratic Pakistan that the budget deficit this year would be higher than what this government inherited, which had compelled it to go on the International Monetary Fund programme with all its attendant politically challenging reform conditions.
While the ongoing budget-making exercise indicates a deficit of less than 5 percent in the current year yet independent economists as well as members of the international donor community are estimating a deficit of over 8 percent, higher than the 7.6 percent inherited by the government. In this economic context, responsible governments resist a civil service pay rise as it would have serious implications on the deficit and thereby on the rate of inflation. In other words, a sort of incomes policy is supported which seeks to convince the civil servants to desist from demanding a pay rise that would in any case erode the value of each unit of currency earned given the rise in the rate of inflation. In Pakistan's context, the budget for fiscal year 2010-11 announced a whopping and unprecedented in world economic history a 50 percent pay rise for the civil servants, a policy decision that was criticised as it did not take account of the impact on the budget deficit; and in the subsequent two years a rise of 15 percent was announced - well above the rate of inflation acknowledged by the government.
In short, there is little if any justification from an economic perspective to increase the salary of the federal secretariat staff by another 20 percent mid-year, an unprecedented step, making their pay rise equivalent to 35 percent for the current year. Secondly and equally pertinently, the Finance Minister ordered the pay rise for a select group consisting of 20,000 to 22,000 individuals. This selectivity would generate objections from other civil servant groups and the matter maybe challenged in a court of law. This is not to argue in favour of an across-the-board pay rise just to bring it home to the government that on the second last week of its term raising salaries of a select group is neither political as the intent is clearly evident to all and sundry but also economically disastrous. There have been accusations of irresponsible spending by political parties in power in the provinces, for example, the decision of the Punjab government to regularise all staff, to spend the development expenditure earmarked for the entire year before the term of the federal and provincial governments end on 16th March and diversion of development funds to key constituencies of the leadership of the coalition government. This must stop immediately and one hopes that the federal and provincial governments begin to act responsibly and focus on the overall economy's needs rather than on political considerations and desist from taking any action that would have major implications on the budget deficit.