Active Stocks
Fri Apr 12 2024 15:57:45
  1. Tata Steel share price
  2. 163.50 -1.00%
  1. NTPC share price
  2. 362.00 -0.32%
  1. ITC share price
  2. 430.10 -1.56%
  1. HDFC Bank share price
  2. 1,518.90 -1.10%
  1. State Bank Of India share price
  2. 766.75 -1.57%
Business News/ News / World/  Pakistan's annual expenditure on public servants is over PKR 8 trillion: Report
BackBack

Pakistan's annual expenditure on public servants is over PKR 8 trillion: Report

The study emphasised the pressing issue of Pakistan's financial challenge due to the high number of non-productive government employees.

The study highlighted that the Basic Pay Scale (BPS) of 1983 had undergone 12 revisions since its inception, with the latest in 2022. (REUTERS)Premium
The study highlighted that the Basic Pay Scale (BPS) of 1983 had undergone 12 revisions since its inception, with the latest in 2022. (REUTERS)

A recent study has shed light on Pakistan's substantial annual expenditure of over Pakistan Rupee (PKR) 8 trillion on public servants, encompassing 1.92 million employees, pension payments, and numerous perks and privileges, Dawn reported.

The study, titled 'Lifetime Cost of Public Servants,' was conducted by a five-member team from the state-run Pakistan Institute of Development Economics (Pide), led by Nadeemul Haque. It revealed that in Pakistan, the cost of paying these employees amounts to about PKR 3 trillion, while pensions cost approximately PKR 1.5 trillion. Additionally, project workers, personnel in government entities, and other organisations contribute approximately PKR 2.5 trillion to the total cost. The military's wages and salaries alone account for roughly PKR 1 trillion, according to Dawn.

The study found out that when a new government employee is recruited, the public sector incurs costs associated with their salary, benefits, and potential training. These financial outlays are funded through tax revenue. The addition of a new employee increases the overall personnel expenses of the government, contributing to a larger portion of the budget being allocated to salaries and benefits. This can directly affect taxpayers, as the government may need to raise revenue through increased taxes or reallocation of funds from other areas to cover these expenses.

The study further found out that political motivations can lead to governments hiring more people than they need, to reward supporters or to create a sense of job security. Short-term focus can lead to governments not considering the long-term financial implications of their hiring decisions. The lack of economic expertise can lead to governments making poor decisions about how to manage their workforce. And societal xpectations can lead to governments feeling pressured to hire more people, even if they do not have the resources to do so.

An employee when hired represents a stream of commitments from the budget for her lifetime and beyond given guarantees a of lifetime employment and pension and for pension to surviving widows and unmarried daughters. We show here what the expected compensation amounts to. We calculate the present value of the government commitment here. This is the value that the government must place in a bond to make the hiring budget neutral for the coming generation. Otherwise, the cost will inflate in future budgets.

The study pointed out that the BPS system continued with a socialist one-pay scale structure across the entire public sector, favouring the Pakistan Administrative Services (PAS) with non-monetary benefits and better appointments. Technical or professionally skilled individuals remained marginalised both in terms of grades and non-monetary benefits.

Despite attempts to introduce lateral entry to BPS for technical or sector specialists in management pay scales and special pay scales, these efforts were hindered by a system that remained subservient to PAS.

The study concluded that contrary to popular belief, civil servants were not at a salary disadvantage; there were numerous unaccounted-for elements that significantly contributed to their overall remuneration. Perks, allowances, and in-kind benefits, such as government housing facilities, were not reflected in civil servants' salary slips, as reported by Dawn.

Official vehicle usage for personal purposes by grade 20-22 officers increased the total cost by over 1.2 times the basic pay. Medical allowances and medical bill reimbursements further added to the cost.

The study revealed, "Perks and different allowances add to the total cost of civil servants substantially, and if monetised, would break the myth of low salaries in the public sector. The judicial employees receive the highest number of perks, with the secretariat and other ministries' staff also gaining 150 per cent of their basic salary as an allowance."

The study concluded that achieving a balance between short-term gains and sustainable fiscal policies was crucial in addressing this challenge, Dawn reported. 

With Agency Inputs

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 16 Oct 2023, 10:41 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App