Rightsizing the Federal Government Chapter 11: Rightsizing the Federal Government The issue of rightsizing of the Federal Government has assumed importance after the 18 th Amendment whereby functions have been transferred to the Provincial Governments. However, this process of decentralization remains incomplete. Also, in the presence of a growing budget deficit it has become necessary to economize on expenditure to the extent possible. 11.1. Growth in Federal Expenditure The trend in the level of aggregate current and development expenditure is given in Table 11.1. Prior to the 7 th NFC Award in 2010, Federal spending was growing rapidly at almost 19 percent per annum. Thereafter, the growth rate has come down, but it is still at 12 percent. In fact, the total expenditure is growing annually in real terms at 5 percent. This implies that Federal employment continues to increase. Table 11.1: Trend in Aggregate Federal Expenditure(Rs in Billion) 2004-05 2009-10 g 2014-15 g 2018-19 g 2020-21 g (%)*(%)(%)(R.E)(%)* Current Expenditure 719 1805 18.4 3070 10.6 4804 9.0 6561 15.6 as% of GDP 10.0 12.1 11.2 12.5 13.7 Development 153 Expenditure 432 20.8 691 9.3 795 2.8 72.6-4.5 as% of GDP 2.2 2.9 2.5 1.7 1.5 Total Expenditure 872 2237 18.8 3761 10.4 5599 9.9 7287 13.2 as% of GDP 12.2 15.0 13.7 14.2 15.2 *Annual average growth rate Source: MOF Fiscal Operations The next stage in the analysis is to determine the trend in different components of current expenditure. This is shown in Table 11.2. The biggest increase is in the cost of debt servicing, which has gone up from 2.9 percent of the GDP in 2004-05 to 5.5 percent of the GDP in 2018-19. There has been a decrease in the cost of running the civil Government from 1.4 percent to 1 percent of the GDP. However, this effect has been more than neutralized by the 115