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Development cuts risk eroding public trust


  • Afshan Subohi
  • Jan 21, 2025

If the government wishes to encourage tax compliance among the populace and significantly enhance public revenues, it must first earn the trust of its citizens. This can be achieved by not only delivering better social and physical infrastructure but also by visibly demonstrating its commitment to serving the masses effectively.

However, this goal becomes unattainable when development spending is reduced, and a significant portion of scarce resources is squandered on sustaining an overstaffed and inefficient administrative apparatus. Trust cannot be fostered through mismanagement or misplaced priorities.

Prime Minister Shahbaz Sharif’s government, already politically weak and controversial, has yet to establish its credentials as being inclusive in its development efforts. The decision to reduce the relatively modest Public Sector Development Programme (PSDP) in the first budget of its tenure risks further eroding the government’s political capital. Compounding this issue is the alarmingly low utilisation of funds allocated for development in the current fiscal year.

This is particularly concerning in an environment where there is little evidence of a frugal approach to expenditures by leaders, the cabinet, and legislators occupying the treasury benches, undermining the credibility of calls for fiscal discipline.

According to official data, in the first half of the current fiscal year, the government has utilised a meagre Rs148 billion of the total Rs 1.1 trillion allocated for federal development schemes. This represents just 12.4 per cent of the revised PSDP and only 10.5 per cent of the original development budgetary allocation of Rs1.4 trillion announced in June last year.

This underperformance persists despite the fact that more than one-third of the total budgeted development outlay has already been vetted and approved for disbursement by the Planning Commission.

This underperformance persists despite the fact that more than one-third of the total budgeted development outlay has already been vetted and approved for disbursement by the Planning Commission. 

Justifying the reduction in the PSDP, a pro-government economist explained that the decision was driven by necessity rather than choice. “It was a compulsion to keep the fiscal gap in check,” he stated. “The government had to implement the cut in the development budget to comply with the IMF’s conditionalities, agreed upon when entering into the arrangement with the key donor.”

He further elaborated that the IMF requires the government to adhere to prudent fiscal and monetary policies as part of the agreement signed in July 2024, under which Pakistan secured a 37-month, $7 billion Extended Fund Facility.

“Moreover, the government’s non-development expenditure is largely fixed, as it includes sustaining the administrative setup and recurring costs such as office supplies, salaries, pensions, and other essential expenses required to maintain the state framework. There is very limited scope to reduce these,” he added.

Critics are unwilling to accept this reasoning. “There is blatant and visible wastage of resources collected from the people and businesses through taxes. While some liabilities, such as timely payment of salaries and pensions, may be unavoidable, there are certainly other areas where spending could be curtailed.

“The media coverage of planeloads of officials travelling abroad, stories and images of lavish hotel stays at public expense, extravagant venues for government functions, and excessive promotional advertising across multiple platforms reinforces the perception of wasteful overspending.

“It’s deeply ironic and disheartening to watch Pakistani leaders, dressed luxuriously and adorning expensive accessories, narrating tales of miseries and appealing for financial support,” remarked a bitterly critical analyst.

Recent actions, such as the upward revision of emoluments for certain segments of the official hierarchy, special increments for select services, and the cabinet’s approval to purchase 1000 new cars for officers, have repeatedly been cited as glaring examples of the disconnect between the government’s rhetoric and its actions. 

“Instead of curbing wasteful spending, recent decisions have revealed a clear intent to expand the privileges enjoyed by the official hierarchy. What justification can there be for the opulence displayed at official events?” an observer remarked.

Khurram Shehzad, Adviser to Finance Minister Muhammad Aurangzeb, defended the government, citing procedural delays, capacity constraints, and ineffective project planning and execution as factors behind the underutilisation of PSDP funds. He emphasised that the issue cannot be attributed to a single cause and highlighted the government’s holistic approach to tackling these challenges.

“The utilisation of PSDP funds is critical to the government’s development agenda. While the spending has been slower than anticipated, it reflects the broader fiscal context and the government’s commitment to prudent financial management,” he stated.

Shehzad pointed out that social sector spending, particularly in education and healthcare, now falls under provincial jurisdiction following devolution.

“The government recognises the pressing needs of its citizens, particularly in areas with poor social indicators, but must balance development spending with fiscal sustainability. We are prioritising ongoing projects with an outcome-driven focus to deliver tangible results”, the finance advisor explained.

Commenting on efforts to curb non-development expenditure, he stated: “The government is driving reforms in right-sizing, pensions, energy, and state-owned enterprises to optimise institutions, establish a sustainable pension system, improve the energy mix, and enhance the efficiency of state-owned enterprises.”.

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Author

Afshan Subohi

The writer is a freelancer

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