The move follows the International Monetary Fund's stern warning in December against fiscal slippage as Pakistan's yawning budget deficit continued to widen amid higher government spending and weak tax revenue.
The government has raised its budget deficit forecast to 4.7% of gross domestic product for this fiscal year ending June 30, 2011, from its prior projection of 4.0%. Economists expect the fiscal deficit to widen to as much as 8.0% in the current fiscal year.
Confronted by weak economic growth and tax evasion by many residents, the government has struggled to raise revenues. The country, a U.S. ally, also continues to grapple with routine violence unleashed by Islamist militants.
The South Asian nation relies heavily on loans from the IMF as it battles to overcome massive damage to infrastructure from unprecedented floods last year.
The IMF, which urged Pakistan in December to tighten its fiscal belt, withheld $3.5 billion in 2010 from its total $11.3 billion loan package in a bid to pressure the country to take action.
The country called in the IMF in 2008 amid a balance-of-payments crisis. The fund's support was due to end on Dec. 31 but the IMF extended the loan by nine months to give Pakistan more time to implement reforms.
Last week, the main ruling Pakistan People's Party authorized Gilani to dissolve the cabinet after powerful opposition parties demanded a smaller team to tackle Pakistan's economic woes.
A reduction in the size of the cabinet is a legal requirement of the 18th amendment to the constitution, which stipulates it should be no larger than 11% of 442 members that make up the current parliament.
Standard & Poor's analyst Agost Benard said the resignations were a "novel" approach to fiscal consolidation, but its effects on Pakistan's credit fundamentals remained to be seen.
S&P rates Pakistan's sovereign credit "B-," six notches below investment grade, with a stable outlook.
This rating, which was affirmed by S&P in November, already factors in the country's volatile politics, Mr. Benard said.
"Nothing really has changed since then. It's just more of a disappointing delay with the implementation of reforms," he said
Pakistan's GDP rose 4.1% last fiscal year, and the central bank is forecasting growth to slow to between 2.0% and 3.0% this year.
The deepening crisis has forced the government to borrow heavily as it tries to speed up reconstruction work that could take years to complete and cost billions of dollars.
The increased borrowing is fueling consumer price inflation, which was at 14.19% in January.
Central bank governor Shahid Kardar warned last month that inflation may remain in double digits next fiscal year. The central bank also raised its estimate on average inflation this fiscal year to 15%-16%, compared with 13.5%-14.5% projected earlier.
The State Bank of Pakistan, in a surprise move, held its lending rate steady at 14% at its Jan. 29 monetary policy meeting, pausing after three consecutive rate increases since July.
The resignations are a symbolic move that reflects the government is ready to clean up the economy and start from its "own house," said Zafar Mueen Nasir, chief of research at the Pakistan Institute of Development Economics. "The impact would not be more than few million dollars," in savings for fiscal coffers, he added.