 |
| International Monetary Fund (IMF) has urged Pakistan to limit raising salaries for government employees & instead use the funds to meet the demands for its people. |
The International Monetary Fund (IMF) has urged Pakistan to freeze the salaries of government employees and pursue a path of financial stability by showing a nominal deficit in the new budget two demands that Pakistan's government has failed to meet.
The IMF is insisting that Pakistan should move towards financial stability due to a high and unstable public debt that is about to reach 90% of the total value of the national economy.
The outbreak of the deadly novel Coronavirus has exposed the weaknesses of Pakistan's economy, which was already struggling with weak economic foundations, leading to a financial and current account deficit crisis every four to five years.
Sources in the finance ministry said that in view of the current financial situation, rising public debt, and Pakistan's decision to get rid of debts from the G20 countries, the IMF was demanding Islamabad to freeze the salaries of government employees.
However, the government is resisting the demand because of high inflation, which has eroded people's real incomes.
However, it tends to cancel more than 67,000 vacancies that have been vacant for more than a year and is ready to squeeze out existing costs, including a ban on car purchases.
The Finance Ministry has also considered abolishing the car monetization allowance for Grade 20 to 22 officers, but it is unlikely to be implemented at the present stage.
The main demand of the IMF, which was also to try to freeze salaries, was that the government should announce the main target of the budget deficit - gross deficit excluding interest payments.
Pakistan has its own reasons for resisting the IMF's demands as it does not see a significant jump in revenue collection in the next financial year due to the current economic situation. Sources said that the government has also agreed to increase salaries due to inflation which has reduced the real income of the people.
The government will unveil the budget on June 12 and strive to strike a balance between maintaining financial stability and boosting economic growth. The Treasury Department wants to revive the IMF program and is holding video conferences with IMF staff in Washington.
Contrary to the IMF's demand for a 0.4% basic budget deficit, the government has proposed that the target should be 1.9% of GDP or Rs 875 billion. In addition, Rs 3 trillion or 6.5 percent of GDP in the next financial year is spent on interest payments.
This means that the budget deficit target, as proposed by the IMF, will be about 77%, while the federal government's final deficit target is 8.4% of GDP or Rs 3.9 trillion.
For this fiscal year, the projected core deficit is 2.9% of GDP and the IMF wants a fiscal adjustment of 2.5% within a year.
Another issue between Pakistan and the IMF was the FBR's tax target, which the IMF has proposed to be Rs 5.1 trillion. The FBR believes it cannot raise Rs 4.7 trillion. Another FBR target currently under discussion is Rs 4,990 trillion.
For this financial year, the IMF had set a tax collection target of Rs 5.5 trillion but its actual reserves could remain at around Rs 93.9 trillion.
The politically sensitive issue for the government is the increase in the salaries of civilian and military employees.
In the last budget, the Pakistan Tehreek-e-Insaf (PTI) government had announced a 10 percent increase in the salaries of officers in grades 1 to 16 and a 5 percent increase in officers serving in grades 17 to 20.
There was no increase in government and military officers serving in the two higher basic pay scales for grades 21 and 22. The Joint Staff Headquarters has sent a request to the Ministry of Finance through the Ministry of Defense for an increase in salaries.
The Committee of Secretaries has recommended a 100% increase in the basic salaries of all employees working in the Pak Secretariat a federal bureaucracy seat aimed at maintaining skills and eliminating the effects of high inflation.
The government is considering a 10-15% increase in salaries and a 10% increase in pensions. The total estimated cost of running a civilian government in the next financial year is Rs. 49595 billion and it consists of half of the salary bill. An additional Rs 4,575 billion could be allocated for pension payments in the financial year 2020-21.
0 Comments