THE sustained and rapid rise in federal civil administration and pension expenditures over the last five years continues to challenge the government?s claims of achieving fiscal discipline. If anything, the surge in these costs despite austerity measures ? usually the withdrawal of pro-poor subsidies ? job cuts and the ongoing overhaul of federal ministries and departments suggests that the problem is structural.
New finance ministry data shows that the cost of running the government jumped 13pc in the July-September quarter this year ? notwithstanding the move to abolish thousands of civil service posts, which the finance minister expects will save Rs56bn annually. Meanwhile, the long-overdue pension reforms will not yield immediate results. In fact, legacy pension payments, which have spiked by 125pc in five years, will take generations and further reforms to decline.
Against this backdrop, the relentless hike in general administration costs is even harder to justify, with the state trying to cope with a severe financial crunch, mounting debt servicing and reduced development spending. The 80pc spike in civil administrative costs since the first quarter of FY22 underlines the failure to tackle the structural budgetary issues that could deliver quicker fiscal relief.
For years, the government has blamed its fiscal stress on the seventh NFC Award, insisting that higher provincial shares have squeezed its ability to finance debt servicing, defence and other obligations. A recent planning ministry report seeks to reinforce this narrative, claiming that the federal deficit has averaged around 7pc of GDP since the Award?s implementation in 2011, up from 4pc in the preceding years. To compensate for its reduced share from the divisible pool, the centre has imposed billions in development levies on petroleum products and gas, and is now attempting to fully or partially take back the financial resources it had ceded to the provinces or shift major expenditure responsibilities to them.
However, attributing its fiscal problems to the NFC Award is an attempt to obscure the deeper expenditure problems embedded in the federal structure. Islamabad?s fiscal challenges stem less from the NFC formula than its own inability or unwillingness to reform. Blaming the provinces for its budgetary distress will not solve the structural weaknesses driving federal finances into deficits.
With recurrent federal spending climbing, the centre needs a comprehensive and targeted reform plan that goes beyond symbolic austerity to tackle the institutional drivers of its fiscal strain. This includes right-sizing an oversized bureaucracy, shutting down ministries already devolved to the provinces, and fast-tracking the privatisation of SOEs to contain its wasteful costs. The government must also implement serious tax reforms to lift the tax-to-GDP ratio to 18-20pc instead of attempting to chip away at provincial shares. The centre is mistaken if it thinks that there is an easy way out.
Published in Dawn, December 9th, 2025
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