Prime Minister Shehbaz Sharif has made a firm commitment to break free from the cycle of dependency by reducing government expenses in Pakistan. However, the nation’s progress and development are hindered by a powerful, narrow, and oligarchic elite that dominates politics and controls the economy, often neglecting the welfare of the people.

According to the UN Development Programme’s National Human Development Report (NHDR), the elite groups in Pakistan, which include the corporate sector, feudal landlords, and the political class, enjoy economic privileges worth around $17.4 billion, comprising approximately 6 percent of the country’s economy. These privileged groups exploit their advantages to secure an unfair share of resources, perpetuating social discrimination and contributing to inequality, all while policies often fail to address these issues adequately.

The corporate sector is the primary beneficiary of these privileges, amassing an estimated $4.7 billion, followed by the richest 1 percent of the population, who collectively own 9 percent of the nation’s income, and the feudal land-owning class, which constitutes only 1.1 percent of the population but owns 22 percent of all arable farmland. These powerful groups also hold considerable influence in the Pakistani Parliament, with major political parties drawing their candidates from either the feudal landowning class or the business-owning elite.

State-Owned Enterprises (SOEs) play a crucial role in the economy but are often plagued by mismanagement, inefficiency, and corruption. This is partly due to political patronage, where government positions within these entities are filled based on political affiliations rather than merit or qualifications. As a result, these SOEs often incur losses and burden the government with significant financial liabilities, ultimately affecting the overall fiscal health of the country.

Pakistan has been grappling with persistent fiscal imbalances and budget deficits. The government’s expenditures have consistently outpaced its revenues, leading to the accumulation of public debt. This unsustainable fiscal policy puts the country at risk of a debt crisis and limits its ability to invest in crucial development projects and social welfare programs.

Pakistan faces challenges in broadening its tax base and ensuring tax compliance among its citizens and businesses. A large informal economy and widespread tax evasion undermine the government’s revenue collection efforts, further exacerbating fiscal deficits and hindering the country’s economic growth and development.

Pakistan has been facing an energy crisis, with frequent power outages and a shortage of reliable electricity supply. Insufficient investment in energy infrastructure, coupled with inefficiencies in energy production and distribution, pose significant hurdles to industrial growth and economic productivity. Despite some progress, Pakistan still faces significant challenges in its education sector. Access to quality education remains unequal across different regions and socioeconomic backgrounds. Additionally, there is a lack of emphasis on skill development and vocational training, limiting the employability of the workforce and hindering economic progress.

Corruption is a pervasive issue that permeates various levels of government and institutions in Pakistan. The lack of transparent and accountable governance undermines public trust and diverts resources away from critical development initiatives.

Pakistan has also faced security challenges due to terrorism and regional instability. These issues not only disrupt economic activities but also deter foreign investment, impeding economic growth and development. The country is also vulnerable to the adverse effects of climate change, including extreme weather events and water scarcity. Addressing environmental concerns and promoting sustainable practices are crucial for ensuring the long-term stability and resilience of the economy.

Rapid population growth and urbanization present both challenges and opportunities for Pakistan. The country needs to invest in infrastructure, urban planning, and social services to accommodate the growing population and to harness the potential of urban centers for economic development.

To tackle these issues and reduce non-development expenditure, there are three significant areas that need attention. Firstly, subjects that were devolved after the 2010 passage of the 18th constitutional amendment are still funded at the federal level, despite the transfer of divisible pool taxes to provinces. Stopping this practice alone could save nearly three-quarters of a trillion rupees annually. Secondly, state-owned entities (SOEs) are operating inefficiently, costing the government one trillion rupees each year. Empowering the administration to make appointments based on education and merit rather than political affiliations could lead to substantial savings.

Recent reports indicate that political pressures are influencing decisions, particularly in light of impending elections, resulting in higher costs associated with appointments, transfers, and the governance of SOEs. Addressing the issue of elite capture in current expenditure allocations is essential, especially considering the limited fiscal space in the current state of the economy.

In addressing these challenges, a comprehensive and holistic approach is needed. This involves implementing structural reforms to reduce elite capture, ensuring merit-based appointments in key government positions and SOEs, improving tax collection and compliance mechanisms, investing in critical infrastructure and energy projects, prioritizing education and skill development, enhancing transparency and accountability in governance, and adopting sustainable practices to mitigate the impacts of climate change.

Moreover, fostering an inclusive and participatory approach that engages civil society, the private sector, and international partners is essential to drive sustainable economic growth and development in Pakistan. By effectively tackling these challenges, Pakistan can unlock its full potential and achieve lasting prosperity for all its citizens.

Although the government managed to secure a $3 billion Stand By Arrangement with the IMF, the 9 June budget did not focus on reducing current expenditure; instead, it planned to increase it significantly. The revised budget passed on 23 June saw a modest reduction in current expenditure, coupled with tax revisions, but stronger commitment is required to cut expenses.

Breaking away from reliance on external borrowings and the “begging bowl” may not be achievable within the next two to three years, primarily due to substantial annual repayments on those loans, amounting to over $20 to $21 billion. However, expedited progress can be made if future governments successfully control current expenditure.

In conclusion, Prime Minister Shehbaz Sharif’s commitment to curtail government expenses is laudable, but it will face challenges due to the entrenched privileges of the elite classes and the current state of the economy. Addressing inefficiencies in state-owned entities, countering elite capture, and implementing structural reforms are vital steps toward achieving fiscal stability and sustainable economic growth in Pakistan.