Pakistan has been urged by International Monetary Fund (IMF) to Freeze the salaries of government employees in a bid to reduce the budget deficit. This is termed as fiscal consolidation by IMF.
Public debt is set to hit 90% of national economy and it is in the best interest of Pakistan to follow fiscal consolidation path insists IMF.
After four to five years, Pakistani economy struggles with fiscal and current account deficit and this time coronavirus has exposed the vulnerability of Pakistani economy.
Owing to the prevailing tight fiscal situation, growing public debt and Pakistan’s decision to seek debt relief from G20 countries, the IMF was asking Islamabad to freeze salaries of government employees, said sources in the Ministry of Finance.
However, the government is resisting the demand due to high inflation that has eroded people’s real income.
Nonetheless, it is inclined to abolish over 67,000 posts that have remained vacant for over one year and is also ready to further squeeze current expenditures including a ban on purchase of vehicles.
The proposal of ending the car monetisation allowance for grade-20 to 22 officers also came under discussion in the Ministry of Finance but it was unlikely to be implemented at the current stage.
The IMF’s key demand, which was also the reason for seeking to freeze the salaries, was that the government should announce a primary budget deficit target – total deficit excluding interest payments – of only Rs184 billion or 0.4% of gross domestic product (GDP).