In an effort to streamline government spending, the coalition administration has established a committee tasked with reducing the federal government’s size and rationalising pension and development expenditures.
However, this initiative only addresses about 16% of the current year’s budget, casting doubt on its potential for significant savings.
As per media reports, Prime Minister Shehbaz Sharif has formed a seven-member panel, excluding the defense budget and interest payment expenditures from its review—these two areas alone consume nearly two-thirds of the federal budget.
The committee, which includes four government officials and three independent experts such as Dr. Kaiser Bengali, has one week to propose measures to curtail federal spending.
The committee’s responsibilities include scrutinizing pension schemes, a topic of interest to the International Monetary Fund (IMF) in upcoming discussions. The IMF has highlighted the government’s wage and pension expenses as a critical issue.
For this fiscal year, the National Assembly has sanctioned a Rs14.4 trillion budget, with a substantial portion of Rs7.3 trillion dedicated to interest payments and Rs1.8 trillion to defense, not accounting for special programs.
Dr. Jehanzeb Khan, Deputy Chairman of the Planning Commission, will lead the expenditure committee, which also includes prominent figures from both the government and private sectors.
The group is charged with reviewing previous reports, including those from the National Austerity Committee and the Institutional Reforms, to further reduce the federal government’s footprint.
Despite the devolution of certain subjects to provincial authorities, approximately eighteen federal ministries continue to operate. The committee is set to consolidate progress made in downsizing the federal government and develop a strategic plan with clear timelines.
The government has earmarked Rs714 billion for civil administration costs, less than 5% of the total budget. The committee is also expected to provide recommendations for the Public Sector Development Programme and pension schemes, with this year’s allocations standing at Rs900 billion for development and Rs801 billion for pensions, of which Rs563 billion, or 70%, is for military pensions.
The omission of defense and interest payments from the committee’s scope significantly limits its capacity to effect meaningful change. The finance ministry recently increased the budget deficit forecast to Rs8.5 trillion, mainly due to higher-than-anticipated interest payments, now estimated at Rs8.333 trillion.
With the government spending over Rs4.66 trillion on interest payments in the first seven months of the fiscal year—surpassing its net income—Pakistan faces the need for debt restructuring and reduced interest rates by the central bank to achieve notable expenditure reductions.
