New Delhi, Feb 12 (NationPress) A significant structural challenge contributing to Pakistan's ongoing reliance on the IMF is its inability to manage expenditures. These costs have ballooned at both federal and provincial levels, with salary hikes far surpassing inflation rates for civil, judicial, and military sectors. This is coupled with the expansion of vehicle fleets, luxurious housing, lavish offices, international trips, and discretionary budgets, often implemented without proper mandates, sunset clauses, or performance evaluations, according to a report in the Pakistani media.

Spending consistently exceeds revenues, not due to productive state investments but rather a lack of discipline in resource creation and consumption, as highlighted in a piece published by the Dawn newspaper.

The federal and provincial administrations operate largely as employment agencies. Even post the 18th Amendment, Islamabad has maintained over 40 divisions and 400 associated departments, employing a total of 1.2 million individuals. Additionally, the establishment of new departments, authorities, and special units, complete with their own secretariats and perks, has become alarmingly easy; a reduction by nearly two-thirds is essential, accompanied by an immediate hiring freeze. Bureaucratic and political resistance continues to uphold existing power structures, the article noted.

State-owned enterprises present another major fiscal challenge. Their accumulated losses have surpassed Rs 6 trillion, increasing by approximately a trillion annually, despite repeated financial bailouts through grants and equity infusions. Projects are often rushed for political reasons, rendering cost-benefit analyses superficial, feasibility weak, and future operating costs neglected. The outcome is incomplete projects, escalating liabilities, and financial deficits addressed through debt or inflation, as lamented by the article.

The perks system lies at the core of the country's dysfunction. When compensation is provided via housing, land, vehicles, and protocol rather than transparent salaries, incentives shift from performance to rent extraction. Bureaucrats cease to optimize the system and instead focus on gaining access to these privileges. Capital becomes tied up in prime real estate and elite enclaves, rather than circulating through the economy, the report observed.

Trade policy quietly exacerbates the crisis, sustaining the dependency on the IMF. Pakistan remains poorly integrated into global value chains, often viewed as a marginal supplier rather than a dependable, scalable partner, the article pointed out.

The nation protects and maintains inefficient groups of incumbents and entrenched special interests through tariffs and non-tariff barriers. Exporters suffer the consequences through inflated costs, an overvalued exchange rate, delayed refunds, and policy unpredictability, resulting in a limited export base and persistent foreign exchange shortages. This anti-export bias functions effectively as a subsidy for rent-seekers financed by IMF loans, as noted in the article.