Much to the relief of the civil servants, the government is not going to do away with allowances or slash salaries even if the economy is hit hard and the government is trying to revive it.
There were talks and even fear that worst come to worst, the government will, in trying to be prudent with expenditure, slash allowances and even downsize. All this fear is put to rest with the finance minister putting on record that cutting salaries and allowances or laying off people would be the last solution.
Salaries and allowances comprise a major portion of the government’s recurrent expenditure. It has to be met from domestic revenue. Domestic revenue is already at an all time low. This is obvious. Apart from the export of electricity, almost every business is hit. The tourism and hospitality industry, which contributes significant revenue, is in a sorry state. Many in the industry are surviving on Royal Kidu. Where will we adjust the money to keep the 26,000 or so civil servants unaffected and encourage them to spend?
Some pressure is on the state-owned enterprises (SOEs). There is a directive from the finance ministry to create investment avenues, cut cost, substitute import and create employment. If SOEs can do this, it will help solve a lot of the government’s problems. The reality is some of the SOEs are entering into austerity measures. Even as they prepare to respond to the finance ministry’s order, they are simultaneously working on slashing salaries, allowances and even downsizing.
Meanwhile, the private sector is in a confused state. They cannot blame anyone because it is Covid-19 and not the government that brought the economy to a standstill. They are waiting, watching and wishing what is in for them. The country’s GDP has shrunk to negative 6.7 in the last month.
Many say the government is well prepared and qualified in handling an epidemic or a pandemic, but the economic pandemic caught them off guard. The Gross National Happiness Commission, it was learnt, is in the middle of a big exercise to reprioritise the 12th Plan budget. The joke is that planning officers are given sharp sickles to cut the allocated budget as most planned activities are hampered.
This makes sense. There is no point in, for instance, expanding an airport when flights are grounded or capacity building, when there is no capacity to fund the training. The re-prioritisation exercise, we can surmise, taught us a good lesson in our planning process. The most common complaint among those who hold the purse string, a flat purse in our case, is that agencies and ministries send a shopping list, not a reasoned plan on a viable budget.
What we need today is a clear economic vision. Covid-19 and its impact, the government recognised will stay for a long time. It is time to clear the vision blurred by the face shields and present a picture of what we should expect now and at the end of 2023.