Tightening the belt

We enter a new month, the beginning of fall or autumn from tomorrow. Fall is a season of bountifulness and festivity. However, with a nationwide lockdown and uncertainties surrounding the coronavirus pandemic, the new season is not quite the one we look forward to.

The pandemic has taken its toll. The economy has come to a standstill. Businesses, big and small are affected. Revenue from the domestic market is at all time low. Controlling the spread of the virus is expensive. All resources are directed to fighting it. The government is broke.

The call now is to cut costs wherever we can. The finance ministry has asked state owned enterprises (SOE) to rationalise and cut down on expenditure, wherever it can. Basic economics tells us that if we cannot make profit the best option is cut down on expenditure.

This seems to be the mode many are in. Those on government payroll and in the safety of big corporations and SOE have not felt the impact of the pandemic, at least financially. Some are now and the prospect is bleak.

Cutting down or getting back what is given is difficult and sensitive. But that seems to be the only alternative if we want to see through the year and perhaps, beyond. It’s been only eight months since the government revised the salary with generous allowances. That was when the government was confident of funding the revision. It is different now. Salaries and allowances is the biggest recurrent expenditure both for the government and the state owned enterprises.

Except for a few, most of the SoEs too are panicking as businesses are hit hard.

It is time to implement what the Prime Minister always says, milk the red cow and have milk everyday rather than kill it for meat. Since March, the private sector retrenched employees, sent people on unpaid leave or slashed salaries by more than half. The government’s recurrent expenditure depends on how the economy functions. Internal revenue is more than enough to cover recurrent expenditure like salaries and wages. The source of that revenue has dried up. The fiscal and monetary policies, to help the people, have left a huge dent on the government coffer.

It is time to make some sacrifices. Cutting allowances alone could save the government millions. Allowances are paid for specific jobs. For instance, there is no logic in paying fuel allowance when movement of vehicles is restricted. There are several allowances across the civil service, corporate organisations, parliamentarians and many more that can be witheld or slashed without affecting the income.

SOEs not subsidised by the government would do it even without having to be told. The writing is on the wall. We could pay salaries and allowances for another month or two and close shop thereafter. At this juncture, bold decisions are what is called for while also being able to identify critical areas where people have to be compensated for their sacrifices.

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