EDITORIAL: The extension of Prime Minister Imran Khan’s signature pro-poor programmes to an ever larger population is an integral component of his overarching objective to achieve inclusive growth – an objective that countries much richer than Pakistan are also struggling to achieve due to resource constraints. Benazir Income Support Programme (BISP), cash disbursement to the poor, defined as social security payments by the state to the poor and unemployed in Western countries, was very effectively used by the Khan administration to minimize the impact of Covid-19 lockdown on the poor and vulnerable.
BISP was launched during the Zardari Presidency and its budgeted allocation was raised each subsequent year, yet Imran Khan is credited with the largest jump in budgeted allocation during his ongoing five-year tenure – from 120 billion rupees in 2018-19 to 246 billion rupees in the current year or a rise of 105 percent. However, the government needs to determine the poverty levels today to be able to conclude that the percentage of the poor covered under BISP today is more than during the previous administration. The World Bank estimated that poverty ratio in Pakistan stood at 39.3 percent in 2020-21 and is projected to remain at 39.2 percent in the current year and may come down to 37.9 percent by 2022-23 against 24.3 percent in 2015 and 31.3 percent in 2017-18. While Covid-19 no doubt was a major contributor to the rise in poverty ratio last year yet the upfront harsh monetary and fiscal policies agreed with the International Monetary Fund (IMF) in May 2019 also contributed to rising poverty levels.
The budget 2021-22 notes grants/transfers of 100 million rupees for credit guarantee schemes for small farmers – a decline of 400 million rupees from last year though PM’s Kamyab Jawan Programme/Kissan Programme has been allocated 10 billion rupees this year against 2 billion rupees last year. In addition, the Finance Minister during his budget speech noted that 2.5 lakh rupee farm loan and 2 lakh rupees for tractors/machinery per farm household would be made available to 4 to 6 million low-income households and 5 lakh rupees as business loan. Low interest bearing housing loans up to 2 million rupees would also be made available. These are good initiatives also announced by the previous administration; however, they remained largely unimplemented due to: (i) reluctance of the private banking sector to extend loans without collateral and/or without a detailed business plan; and (ii) hijacking of cheap credit for the poor by those not eligible. To forestall the possibility of this programme becoming hostage to the same impediments the government needs to undertake an evaluation on a six-monthly basis to ensure that the spirit of these initiatives is not compromised.
And finally, the Finance Minister stated that every household would be provided with a Sehat Sahulat Card (SSC). Again this initiative has overwhelming support; however, in this context it is relevant to note that in April 2019 an actuarial analysis of the SSC was commissioned by GIZ, German aid agency, and undertaken jointly with International Labour Organisation’s Impact Insurance (a facility that enables insurance companies, governments and partners to embrace impact insurance to reduce households’ vulnerability, promote stronger enterprises and facilitate better public policies). Their findings are as follows: (i) admission rates were very low not only in comparison to developed countries and new economies but also in comparison to baseline survey in Pakistan. The obvious conclusion was there would be a substantial increase in future as more people became aware of this facility; (ii) projected claims costs and expenses (nominal terms) are very sensitive to the assumed increase in utilization, assumed increase in unit cost and fairly sensitive to the family size assumption. In this context, it is relevant to recall that in April 2019 when the analysis was completed (before the country went on an International Monetary Fund programme) inflation was less than 7 percent, rose to around 12 percent in 2019-20 and is projected to be higher than 8 percent in the current year. Drug prices have sky-rocketed as have all other associated costs including the price of electricity; (iii) projected demographic changes – if they are small then there would be minimal impact on cost of claims and premiums; and (iv) the baseline indicative premium required from the projection model is 1,755 rupees per family per annum for 2019-21 - an amount that without doubt would need to be upgraded as more begin to use this card.
The recommendation of the German aid agency was to carry out frequent monitoring of incidence rates, and every two years a full actuarial and statistical experience analysis and premium adequacy review must be undertaken (due this year since the last one was in 2019).
It is therefore important to note that budget allocations, including pro-poor programmes, need to be vigilantly monitored to ensure that public money is not wasted and one would hope a third-party evaluation, a major pillar of Tarin’s strategy, is routinely carried out to maximize the associated benefits of pro-poor initiatives from scarce taxpayers’ resources.
Copyright Business Recorder, 2021