Austerity measures

The federal government headed by Prime Minister Muhammad Shehbaz Sharif, during the financial year 2025-26, continued to implement a host of austerity measures as part of its broader expenditure rationalization strategy to control its spending and maintain fiscal discipline. In this regard, instructions were issued to all Federal Ministries, Divisions, attached departments, public sector corporate bodies and organizations, mainly conveying the austerity measures duly approved by the Federal Government. Such austerity measures are invariably circulated to all concerned from top to down levels, usually after the federal budget for a new financial year is announced. These austerity measures were aimed at minimizing operational expenditure under the recurrent budget and curtailing non-essential spending.

The measures included a ban on the purchase of all types of vehicles, except operational vehicles required for essential services, such as ambulances, firefighting vehicles, buses and vans for educational institutions, solid waste vehicles and motorbikes. Similarly, procurement of machinery and equipment was restricted, except in essential sectors such as health, agriculture and education. The federal government also imposed a ban on the creation of new posts, including contingent-paid staff and temporary posts, besides discontinuing contingent-paid and temporary posts beyond one year. In addition, funding for medical treatment abroad at government expense and non-obligatory official foreign visits involving government funding were also banned.

In order to ensure effective implementation, all posts lying vacant for the last three years were also required to be abolished, while Federal Ministries/Divisions were directed to disseminate these instructions to all departments under their administrative control for strict measures. However, keeping in view absolute operational needs, the Federal Government constituted an Austerity Committee headed by the Federal Finance Secretary for examining cases where relaxation of the ban was unavoidable. Such relaxations are considered strictly on a case-to-case basis after due scrutiny and justification.

The Austerity Committee provides an institutional mechanism for regular review of expenditure items requiring exemption from the ban. This case-to-case assessment ensures that only essentially required and justified expenditures are allowed to be incurred, while unnecessary and avoidable spending is curtailed. These measures, although forming part of the broader expenditure management framework, duly reflect the federal government’s continued commitment to prudent fiscal management, expenditure control, and improved efficiency in the use of public resources.

In addition to the above-mentioned austerity measures, the federal government has also initiated various reforms to ensure long-term fiscal and debt sustainability. The reform strategy as such focuses on rightsizing the federal government, undertaking parametric reforms to contain growing pension liabilities, reducing inefficiencies in the energy sector through cost recovery and cost reduction measures, rationalizing cross-subsidies, ensuring timely gas and electricity tariff adjustments, and improving the efficiency and productivity of State-Owned Enterprises (SOEs) through restructuring, privatization, governance reforms and enhanced transparency.

On the whole, the federal government’s expenditure management strategy seemingly aims to improve the quality and efficiency of public spending, while at the same time also ensuring that available fiscal space is directed toward essential development priorities and debt sustainability objectives. Quite obviously and hopefully, these measures of the incumbent federal government are most likely going to reduce reliance on additional borrowing, limit pressures on reallocation from critical sectors, and support fiscal discipline in line with broader macroeconomic stability goals.