PM unveils austerity measures as Gulf conflict spirals

Prime Minister Shehbaz Sharif on Thursday approved a nationwide austerity and energy conservation campaign in view of rising global petroleum prices amid tensions in the Middle East. The decision was taken at a high-level meeting chaired by the prime minister to review austerity and energy conservation measures, a Prime Minister's Office news release said. The prime minister said the rise in petroleum prices in the international market had triggered inflationary pressures across the world, stressing that sacrifices should first be made by the government and the elite. He said a fuel subsidy had already been initiated for economically vulnerable and middle-income segments, under which motorcycles, rickshaws and vehicles up to 800cc were being provided a subsidy of Rs100 per litre. The prime minister directed the authorities to ensure immediate and effective implementation of measures aimed at reducing unnecessary government expenditure and ensuring prudent use of national resources. As part of the drive, the government announced a cut in fuel for official vehicles, bans on vehicle purchases by the state, foreign visits by officials, and official dinners, as part of a slew of austerity measures in a bid to conserve energy as fuel prices spike due to the Gulf conflict. The austerity measures, being implemented for the second time this year, also include a ban on government purchase of all durable goods except IT procurement and a switch to teleconferencing for meetings. The government had unveiled similar measures in March, closing down schools for two weeks, cutting fuel use across government and pushing office workers to work more from home in a bid to conserve fuel and cut government spending. The government has implemented a new policy starting on Wednesday that offers motorcycle, rickshaw and small-car owners a subsidy of Rs100 a litre on a capped monthly quota in a bid to ease the impact of rising prices. However, the government also kept a backdoor open to relax any of these measures amid escalating Middle East conflict that could disrupt energy supplies. The austerity and fuel conservation measures will be applicable on the federal government, as the provincial and regional governments of Azad Jammu & Kashmir and Gligit-Baltistan would take their own decisions. The cabinet division notified 11 austerity measures with immediate effect but did not change the office timing, working hours and number of working days. It has immediately notified a 50% reduction of fuel provision for official vehicles for three months, excluding operational vehicles of armed forces, civil armed forces, law enforcement agencies, essential services and the Federal Board of Revenue, according to the notification. But the 50% reduction of the fuel will not apply on development projects –a window that could be misused by the ministries, divisions and attached departments. It was also notified to make a 5% cut in the non-employees related expenses budget for the fiscal year 2026-27, with deduction to be made on a monthly basis. The cabinet division said that the 5% cut will also apply in the case of foreign missions and the officers and officials, belonging to any occupational group or service, posted in these missions. But fiscal obligations relating to their rents, educational fees and medical care arrangements will be met without any cut, according to the decision. The 5% cut will not apply to development projects, according to the cabinet division. But the government has also kept a backdoor open to relax any of these 11 measures. According to the notification, requests for exemption from any of these measures may be considered, on a case-to-case basis, by the Committee for Monitoring and Implementation of Fuel Conservation and Additional Austerity Measures. The committee will submit its recommendation for approval of the Prime Minister and exemptions granted by the committee will not require any further exemption from the Austerity Committee constituted by the Finance Division from time to time. It is the second time since the Middle East war broke that the government has resorted to austerity and fuel conservation measures. The government has not made public any savings from the first such drive. Finance Minister Muhammad Aurangzeb said on Thursday that the central bank and the finance ministry were looking into the possible second and third rounds of impact of the conflict on Pakistan's economy. However, the government has not done much to save people from the impact of higher fuel prices and a daily change in the rates has gravely impacted the consumers. Prime Minister Shehbaz Sharif has announced Rs100 per litre compensation on 20 litre per month used by motorcyclists and 30 litre by small cars. But the petroleum dealers have refused to become part of the scheme, saying they were not consulted before finalizing the arrangements. The government has also refused to cut taxes on petrol and diesel and as a result the fuel prices are the highest in Pakistan among all the South Asian countries. The government notified a complete ban on purchase of vehicles of all types but it exempted the development projects from the ban. There will also be a complete ban on purchase of all durables except information technology procurements but again the ban will not be applicable in the case of development projects. There will also be a complete ban on foreign visits and travel for three months, even in the case of obligatory visits, except in the case of scholarships offered by international development partners, training and courses arranged through the Economic Affairs Division or under institutional agreements of the Government of Pakistan. Prime Minister Shehbaz Sharif was scheduled to leave on Thursday for the United Kingdom and the United States on a 10-day visit. Finance Minister Muhammad Aurangzeb was already in the United Kingdom. The notification stated that the Ambassador or High Commissioner of Pakistan would represent in obligatory and important events. But the government has again provided a backdoor to the foreign visits. "In case of unavoidable visits all ministers, advisers, ministers of state, special assistants to the prime minister, parliamentary and government functionaries shall travel only in the economy class". During the last phase of austerity measures, the ministers and bureaucrats did undertake foreign visits and those who opted business class paid the difference between the economy and business class ticket from their own pockets. According to the notification, official meetings will be held preferably through teleconferencing, except intra-city meetings. No official dinners shall be hosted, except in the case of visiting foreign delegations. There will also be a prohibition on all official seminars, trainings, and conferences funded by the government. In case of unavoidable requirements for such events to be held, the government venues such as auditoriums, committee rooms, and other official facilities will be utilized for such events. The government said that the single dish shall be served in all marriage-related functions and events –in a decision that does not have any implication for the public purse. The government has also retained the old market closing timings. The shops, markets, shopping malls and bazaars, departmental, grocery, general and kiryana stores will be closed by 9.00 pm. The marriage halls, marquees and all other commercial places where festive events are held will be closed by 10.00 pm. Restaurants, cafés, eateries, and food outlets standalone fruit and vegetable shop will be closed by 11 pm. However, there will be exemptions from these timings to pharmacies, medical and medical supplies stores; medical laboratories, clinics, hospitals. Likewise, standalone bakeries, standalone tandoors; standalone milk and dairy shops will also be exempted. The fuel stations, CNG pumps, electrical vehicle charging stations. Gyms, sports facilities and sports/padel courts, information technology companies and call centres will also remain open without any time restrictions.