Rightsizing is an IMF structural benchmark, says finance minister

• Aurangzeb says cost-cutting process for 42 ministries to be completed before June 30
• Uncertain about financial impact of abolishing 150,000 posts, public funds in banks
• Claims 95pc of committee’s recommendations okayed by cabinet

ISLAMABAD: Uncertain about the financial impact of abolishing 150,000 posts and the public funds held in commercial banks, Finance Minister Muhammad Aurangzeb on Tuesday said the rightsizing of the federal government was a structural benchmark set by the International Monetary Fund (IMF) and would be completed before June 30 this year.

Speaking at a news conference with MNA Bilal Azhar Kiani and ambassador-at-large on rightsizing Salman Ahmad, the finance minister acknowledged that while the rightsizing was an IMF structural benchmark, it was also in the best interest of the country. “We aim to reduce the size of the federal government and cut down on expenditures,” he said.

He said the finance ministry was committed to transferring cash balances held in commercial banks back into the treasury single account — another IMF requirement — to ensure that only net borrowing, rather than funds belonging to various projects and divisions, remains in commercial banks, allowing the government to borrow for other needs. He added that only 15-20 per cent of cash balances in commercial banks were outside the treasury single account, and this issue would be addressed as a priority.

The minister said the high-powered committee on rightsizing under his leadership was constituted by the prime minister in June last year that reviewed assets, human resource and vacant posts in 43 ministries and their 400 attached departments or entities.

He said consultations, recommendations and decision-making had been completed for 15-16 ministries and the entire rightsizing process for all 42 ministries would be completed within the current fiscal year, before June 30, with the aim of making the federal government more efficient and reducing expenditures.

Mr Aurangzeb avoided questions about justifying the burden on compliant taxpayers while granting hefty salary increases to top judges and a select group of bureaucrats. He also refrained from responding directly to questions regarding rightsizing in the judiciary and the Ministry of Defence and Defence Production, but said no ministry would be excluded from the ongoing review process.

Over the last six months, the committee on rightsizing was able to take decisions on abolition of 60pc of regular vacant positions in these entities which meant closure of 150,000 posts against which budget allocations had been made. “This has a fiscal impact,” the minister said, adding that the committee also decided to outsource general non-core positions like peons, gardeners, etc and reduce contingency staff as well, but in an environment of attrition which meant no job loss for existing employees.

Fourth major decision of the committee was to have live visibility to the finance ministry on cash balances of all the ministries and divisions to ensure that decisions regarding abolition of posts, outsourcing of menial services and reduction in contingent staff were actually implemented by all the ministries.

Despite repeated questions, the finance minister and his colleagues were unable to provide the financial impact of the decisions over the past six months, stating that the numbers would be revealed in due course. He emphasised that these entities and ministries had an approved budget allocation of about Rs876 billion this year, and if this figure did not appear lower next year, it would indicate a failure.

The minister explained that, learning from past failures due to across-the-board rightsizing attempts, it was decided to proceed step by step. In the first phase, six ministries were selected: one was ordered for closure, one for merger, and their attached departments were reduced by half, from 80 to 40. Implementation of this phase is currently underway across various ministries, which are now submitting compliance reports. These ministries include Kashmir Affairs and Gilgit-Baltistan, information technology and telecom, industries and production, national health services and capital administration.

In the second phase, which involved the ministries of science and technology, commerce, housing and food security, a total of 25 departments were closed, 20 scaled down and nine transferred elsewhere.

In the third phase, the ministries of federal education, information and broadcasting, national heritage and culture, finance, and power were addressed.

The finance minister disagreed with the claim that decisions regarding these ministries faced resistance in the federal cabinet, as stated in an official cabinet statement, and said that 95-96pc of the recommendations from the rightsizing committee were approved by the cabinet. In the remaining 4-5pc of cases, the matters were revisited with the relevant ministries, and he asserted that no more than 1pc of decisions were later altered.

He confirmed that many public sector entities, departments and their managements admitted their minimal output over the past 20-30 years to the rightsizing committee but requested a six-month grace period to deliver results.

“We did not accept their demand. We will not give them more time because it has consequences,” he said, explaining that if their assets, human resource and other matters are not touched, nothing would improve. “We have to wind them up and in case some of them have to devolve to the provinces, this should be done in an orderly manner,” he said.

The minister said the objective of the entire rightsizing exercise was to optimise government functions by outsourcing or privatising functions that could be done efficiently in the private sector and improve value for public money.

He said the proposed amendments to the Civil Servants Act to align governance practices with modern needs had been cleared by the cabinet committee on legislative cases and would be taken to parliament for urgent legislation. This law would also provide severance packages to the redundant or surplus officers.

Published in Dawn, January 8th, 2025