Buffaloes, BMWs and Free Lunches End in Pakistan Austerity Drive
(Bloomberg) -- Pakistan’s Prime Minister Imran Khan got the word helicopter trending on Twitter recently.
Khan took a helicopter ride for a nine-mile journey from his hill-side home to his official residence in Islamabad last month. For a new leader who’d pledged to cut the perks of high office and who is trying to fix an economy in crisis, the incident didn’t go down well with Pakistanis, who trolled the prime minister on social media.
Khan led a relentless anti-corruption campaign to win an election in July, describing his opponents as looters of Pakistan’s coffers and holding them responsible for the nation’s current economic mess. He now faces the same scrutiny over spending as the government tries to find the money for a potential $12 billion financial bailout.
The new government is trying to save money in small ways. A fleet of luxury government cars and helicopters are being sold, officials no longer get full meals at meetings, only cookies, and last week eight buffalo housed at the premier’s official residence were added to the auction block.
But the austerity measures will have only a limited effect. Vaqar Ahmed, executive director at the Sustainable Development Policy Institute in Islamabad, estimates the government can save as much as 20 percent from the annual 221 billion rupee ($1.8 billion) administrative budget from these spending cuts and others.
That compares with a budget deficit that Finance Minister Asad Umar estimated on Tuesday may widen to 2.9 trillion rupees, or 7.2 percent of gross domestic product in the year through June. At a Sept. 17 auction of more than 100 luxury cars used by the prime minister’s office, only 61 vehicles were sold, with most buyers complaining that prices were too high, local media reported.
The government has deep problems to fix. Less than 1 percent of the nation’s 200 million people file tax returns, foreign-currency reserves have plunged by a third this year to below $10 billion, the current-account deficit stands at more than 5 percent of GDP and the rupee is down 12 percent against the dollar this year.
While a bailout from the International Monetary Fund is likely, Khan’s government is reluctant to seek aid from the lender, given the stringent conditions attached to the loans. His administration is looking to friendly countries -- including China and Saudi Arabia -- as possible funding sources. Khan left for a two-day trip to Saudi Arabia on Tuesday.
The spending cuts so far are “symbolic measures, which will not have a big financial impact on the economy,” said Shabbar Zaidi, a former provincial finance minister and a partner at Karachi-based A.F. Ferguson & Co., an affiliate of PricewaterhouseCoopers LLP.
Khan told bureaucrats in Islamabad last week that the sale of helicopters and 34 cars, including BMWs and special utility vehicles, reflects a “change in mindset.” But to his critics, his commute by air over a short distance shows that change in attitude isn’t reflected at the top.
Some ministers defended Khan’s helicopter ride, saying it was a practical security measure since a motorcade would clog up the capital’s roads. When in the opposition, Khan criticized the excessive convoys and perks of office enjoyed by former Prime Minister Nawaz Sharif and ex-President Asif Ali Zardari, saying their counterparts in some European countries, like in the Netherlands, rode bicycles.
But a motorcade isn’t exactly cheap. Even though Khan avoids the highways, more than 500 security officials are deployed in three shifts in and around the roads leading to his private hill-top Bani Gala residence, spread over about 38 acres.
“They are desperate and targeting Mr. Khan for these small things as they don’t have anything else against him,” said Senator Nauman Wazir Khattak, a member of Khan’s party. “There are no budgeted targets for this austerity,” he said, though “it puts you in the right direction not only economically, but also professionally.”
With a funding gap of more than $12 billion, the austerity measures announced so far are limited, and Khan’s spending will remain under scrutiny.
“There will be checks on him,” said Umbreen Javaid, the chairwoman of the political science department at Punjab University in Lahore. “Khan is going to have a very tough time.”
©2018 Bloomberg L.P.