Austerity for the People, Spending for the State?

When electricity bills rise, fuel becomes unaffordable and the IMF demands fiscal discipline, the government must answer a simple question: who is actually being asked to sacrifice?

Pakistan’s economic crisis has increasingly become a crisis of who pays.

For the ordinary Pakistani, austerity is no longer an economic policy discussed in budget documents. It is a daily reality. It is the electricity bill that consumes an ever larger portion of a household’s income. It is the rising price of fuel that increases the cost of commuting, transporting goods and running a business. It is the higher price of food that follows every increase in energy and transportation costs.

Yet the question that deserves far greater attention is this: when the country is asked to practise austerity, is austerity being imposed equally?

The International Monetary Fund has become a familiar presence in Pakistan’s economic policymaking. Under the current programme, Pakistan has committed itself to fiscal consolidation, energy-sector reforms and the gradual removal of untargeted energy subsidies. The government has also assured the Fund that electricity, gas and other energy prices will continue to be adjusted.

There is a legitimate economic argument behind some of these measures. Pakistan cannot indefinitely spend more than it earns, accumulate circular debt, subsidise inefficiency and expect the consequences to disappear. Energy-sector losses cannot simply be transferred indefinitely to future generations.

But fiscal discipline cannot mean passing every cost downwards.

The central question should therefore not be whether Pakistan needs austerity. It clearly needs fiscal responsibility. The question is what kind of austerity, imposed on whom, and at what cost?

If a low-income household is told that it must reduce electricity consumption because the country cannot afford excessive energy subsidies, that household has little room left to cut. It may already be using one fan instead of two, switching lights off, reducing air-conditioner use or avoiding unnecessary travel because petrol has become too expensive.

The same principle should apply to the state.

If citizens are expected to sacrifice, government must demonstrate that it is sacrificing too.

Austerity cannot become a one-way street in which citizens are told to tighten their belts while the machinery of government continues to carry expenditure that could be reduced, rationalised or eliminated.

Pakistan should therefore have a transparent public expenditure audit alongside every major austerity programme. Every ministry, department and public institution should be required to identify non-essential expenditure, unnecessary administrative costs, redundant offices, excessive official privileges, avoidable procurement and expenditures that do not produce a measurable public benefit.

This is not an argument against government itself. A functioning state requires functioning institutions. Public servants need to be paid, infrastructure needs to be maintained and essential public services must be protected.

But there is a fundamental difference between essential public expenditure and expenditure that exists because nobody has seriously asked whether it is still necessary.

The government has already introduced austerity and fuel-conservation measures in response to high global oil prices and fiscal pressures. Yet the fact that austerity measures exist does not answer the larger question of whether they are sufficiently deep, transparent or fairly distributed.

There is also a danger in treating the IMF as the sole author of Pakistan’s economic difficulties.

The IMF does not create every structural weakness in Pakistan’s economy. Nor does it determine every rupee that the government spends. Pakistan’s fiscal problems are also the consequence of decades of weak taxation, narrow tax bases, inefficient public enterprises, energy-sector dysfunction, debt accumulation, policy inconsistency and political unwillingness to undertake difficult structural reforms.

The IMF may demand reform, but Pakistan decides how that reform is implemented.

That distinction matters.

When electricity prices rise, policymakers can choose whether to protect vulnerable households through targeted support, whether to eliminate waste before increasing tariffs, whether to reform distribution companies, whether to address transmission losses and whether to make those responsible for systemic inefficiency bear a greater share of the cost.

Similarly, when fuel prices rise, the question cannot simply be how much more the consumer should pay.

It should also be: what is the state doing to reduce its own consumption, waste and dependence?

The government cannot credibly preach conservation to citizens while citizens watch the state spend without seeing the same urgency applied to public expenditure.

This is where the issue becomes one of fairness and, potentially, discrimination.

Austerity that disproportionately burdens people who have the least capacity to absorb higher prices is not merely an economic question. It becomes a question of social justice.

For a wealthy household, an increase in the electricity bill may be inconvenient. For a low-income household, it may mean choosing between electricity, food, school fees or medicine.

For a large corporation, higher fuel costs may reduce margins. For a daily wage worker, higher transport costs can determine whether travelling to work remains economically viable.

The same percentage increase does not impose the same real burden on everyone.

This is why economic reform must be designed around ability to pay, not merely the arithmetic of revenue collection.

Pakistan needs an austerity policy that begins at the top and works its way down—not one that begins with the consumer.

The state should publish what it is cutting before it asks citizens what they must sacrifice. It should disclose the savings generated by each austerity measure. It should explain which expenditures have been eliminated, which institutions have been rationalised and which subsidies have been redesigned.

Most importantly, it should establish a principle that should be obvious in any democracy:

If citizens are being asked to sacrifice for the survival of the economy, the state must demonstrate that it is sacrificing alongside them.

The IMF may insist on fiscal discipline. That is understandable. But fiscal discipline should not be confused with simply making electricity, gas and fuel more expensive.

Real fiscal reform means reducing waste, broadening the tax base, improving governance, reforming loss-making institutions and ensuring that those with greater capacity contribute proportionately more.

Pakistan cannot build economic resilience by making ordinary people permanently poorer.

Nor can it restore public trust by telling citizens that there is no money while failing to convincingly demonstrate where every available rupee is going.

The ultimate test of austerity is therefore not how much hardship it imposes.

It is whether the hardship is shared fairly.

If the government wants citizens to conserve electricity, it must conserve.

If it wants citizens to reduce fuel consumption, it must reduce unnecessary state consumption.

If it wants citizens to accept higher taxes and prices, it must demonstrate that public money is being spent responsibly.

And if the IMF demands reform, Pakistan’s government must ensure that reform does not become another word for asking the poorest citizens to pay for the failures of the state.

Austerity may be necessary.

But austerity without equality is not reform. It is discrimination.