PAKISTAN will decide today how to reduce the cabinet, a ruling party official said, in a concession to the opposition which is unlikely to help garner support for whole scale economic reform as demanded by the IMF.
The main opposition party, the Pakistan Muslim League-Nawaz (PML-N) faction, has demanded a smaller cabinet as part of a 10-point economic agenda accepted by the ruling Pakistan People’s Party (PPP) in early January.
But the faction continues to oppose plans to impose a reformed general sales tax (RGST) – a key condition of the International Monetary Fund for continued financial aid.
A meeting of the PPP’s Chief Executive Committee, to be chaired by President Asif Ali Zardari, “will today decide the modus operandi of how to reduce the cabinet – to immediately dissolve it and form a new one or reshuffle it”, said Imtiaz Safdar Warraich, the president of Punjab chapter of the PPP.
The key ministries of Finance, Foreign Affairs, Information and either Defence or Interior are likely to remain intact, the official said, indicating the government’s desire to maintain continuity in its dealings with the US and the IMF.
Political stability in Pakistan, a vital US Ally, is seen as crucial to the war effort in neighbouring Afghanistan and to combating militancy in northwest Pakistan’s ethnic Pashtun lands along the Afghan border.
“We have told them if the only purpose of the RGST is to raise revenue, then there are other ways to raise revenues,” said said Raja Zafar-ul-Haq, Chairman the PML-N.
Pakistan’s already feeble economy was battered by devastating floods last year that inflicted nearly $10bn (£6.2bn) in damage. Foreign aid has been slow in coming, in part because of concern about the government’s ability and willingness to implement financial reform.
Pakistan’s main financial problem is a chronic lack of revenue. The country taxes only about 10 per cent of its economy, one of the lowest tax-to-GDP ratios in the world.
The IMF says widening the tax base and implementing the RGST is key for securing the next tranche of an $11bn (£6.82bn) emergency loan, which has propped up Pakistan’s economy since 2008.
“The government thinks that if they demonstrate that they are reducing expenditure (by reducing the cabinet) they can mobilise support for the (RGST),” said Hasan Askari Rizvi, an independent political analyst.
But the PML-N says Prime Minister Yusuf Raza Gilani is making too many concession to international donors. Despite the planned cabinet reduction, the prospects of passing the RGST seems more remote than ever.
“This (reducing size of the cabinet) is one of the 10 issues, but there are other important issues where there has been no progress,” said Haq.
The PML-N has also demanded a 30 per cent cut in spending, the removal of corrupt officials and a plan to control inflation.
Gilani is likely to reduce his cabinet of 52 ministers, one of the largest in the world, to between 20 and 30, the senior party official said. Most of the shed portfolios will devolve to Pakistan’s four provinces under a recently passed constitutional amendment.
