ISLAMABAD: Provinces have ‘advised’ the federal government to avoid any “irrational increase” in the salaries of government employees.
The provincial governments maintain that due to financial constraints, the finance ministry will find any increase above 15% in the next financial year very difficult to accommodate.
They shared their thoughts after reports suggested that the federal government was looking to announce a significant raise in salaries in its fifth and last budget.
The concern was raised in a meeting of the federal government and provincial finance secretaries held to review budgetary positions, a provincial finance secretary said on the condition of anonymity. Punjab in particular thinks that any such decision would put the provinces in an awkward position, he added.
Punjab’s finance secretary Tarik Bajwa told i that the federal administration did not share any formal proposal on the increase in salaries. He said last year’s revision of basic pay scales and increase in salaries cost Punjab an additional Rs45 billion.
Bajwa added that there are roughly one million regular and contractual provincial employees.
The finance ministry, however, shied away from deliberating on the subject.
According to initial calculations, a 5% increase in salaries will cost an additional Rs11.5 billion to the national exchequer as there are 625,000 federal government employees. The projected expenses for running the government for the next fiscal year have been estimated at Rs240 billion, of which 40 to 45% will be on account of salaries.
Sources said the finance ministry is under pressure from the top leadership to provide maximum relief to employees in light of the upcoming general elections.
The presidency wants a minimum increase of 35% in salaries. This will cost an additional Rs80.5 billion to the federal government alone. “The provinces must be taken into confidence as any such increase will affect their fiscal position greatly,” said a source.
He added the finance ministry has briefed top executives that a maximum increase of 15%, which will cost the exchequer Rs34.5 billion, can be borne.
Deterioration in fiscal framework
The provinces on Monday refused to help the federal government to avoid the embarrassment of having the highest ever budget deficit in the country’s history.
The provincial governments were asked to save Rs154 from their respective budgets to keep overall deficit in check, but have told the federal administration that, at best, they could save only Rs90 billion – and that too if the FBR manages to collect Rs1.952 trillion in taxes.
The federal budget deficit has soared to 6.6 per cent in nine months.
Published in The Express Tribune, May 15th, 2012.