PESHAWAR: The Khyber Pakhtunkhwa finance department is understood to be considering a proposal to impose a drastic salary cut on government employees due to the ballooning financial crisis.

Sources told Dawn that the provincial finance department had prepared a summary for the examination of the caretaker chief minister outlining scenarios to impose salary cuts on the provincial government’s employees to prevent default on payments.

They said that three options were currently on the table to impose pay cuts on the provincial government workforce in the view of the province’s deteriorating financial condition.

The sources said on top of the scenarios being considered by the finance department was the withdrawal of the 35 per cent pay raise allowed by the caretaker government for its employees in the current budget.

Finance dept’s proposal meant to prevent default, say officials

“The pay raise’s withdrawal will save the province around Rs9 billion a month,” a source told Dawn.

He added that a straightaway 25 per cent cut in the take-home salary was also under consideration to save the government Rs7.8 billion a month.

The source said the third proposal was to do away with the special allowances in the farm of executive allowance, health professional allowance, technical allowance, planning allowance and other similar allowances.

“Abolition of these multiple allowances given to various cadres of employees will provide the province with a monthly relief of around Rs2 billion,” he said.

The source said authorities were also considering the imposition of strict financial discipline in medical teaching institutions and other entities completely depending on government funds and were likely to adopt the option in the near future.

A senior official confirmed the development to Dawn on condition of anonymity but insisted that it was “still a proposal.”

He said drastic actions were required by the government to avoid default due to mounting liabilities.

The official said the province was not receiving its net hydel profit totalling several billions of rupees from the centre, while allocations for tribal districts, too, stood at the pre-Fata merger levels.

He added that the centre was to release Rs500 billion for the development of tribal districts but it had so far given away just over Rs100 billion for the purpose to the province.

Official documents available with Dawn reveal that the issue of expenditure was taken up in last month’s meeting of the provincial finance secretaries in Islamabad wherein officials of the finance ministry stressed the need for adherence to expenditure targets agreed with the International Monetary Fund (IMF).

“Provinces should ensure that development and recurrent expenditures are kept within the levels agreed with the IMF,” a document read.

It added that the provinces were also conveyed to curtail the recurrent budget as far as possible and that provinces might not increase rates of pay, allowances or pensions during the current financial year. The finance ministry also asked provinces to adopt austerity measures to curtail unnecessary expenditure.

“The cumulative floor on general government budgetary expenditure is a quantitative performance under the IMF programme. For Quarter I, the general government budget is to be in surplus by Rs87 billion. Primary budget deficit stands at Rs311 billion, which needs to be reduced,” the document read.

In its “expenditure authorisation” for the first quarter of the current fiscal, the caretaker government announced a 35 per cent pay raise and 17.5 pension hike for its current and former employees respectively.

Also, the caretakers increased the travel allowance for government employees by 50pc and doubled the secretariat allowance costing the province over Rs600 million. They also increased the deputation allowance of employees by 50pc.

Finance minister Ahmad Rasool Bangash and finance secretary Amer Sultan Tareen didn’t respond to this correspondent’s phone calls and text messages on the matter.

Published in Dawn, October 25th, 2023