Raise in Ehsaas Kifalat stipend

Special Assistant to Prime Minister on Poverty Alleviation and Social Protection Chairperson Benazir Income Support Programme (BISP) Dr Sania Nishtar announced that the government has increased quarterly cash grant for 4.3 million beneficiaries of Ehsaas Kifalat programme from 5,000 to 5,500 rupees or in effect 1,833 rupees per month.

This 10 percent increase is less than the 11.8 percent projected inflation for the ongoing year by the International Monetary Fund (IMF) in its first review report. If one takes account of the fact that the BISP beneficiaries are likely to spend the bulk of their stipend on food, the 10 percent increase in the stipend would, given that food inflation is over 20 percent at present, enable less purchases than before.

The memorandum on Economic and Financial Policies, a component of the IMF first review, signed off by Dr Hafeez Sheikh, Advisor to the Prime Minister on Finance and Dr Reza Baqir, Governor State Bank of Pakistan, claims that "high poverty and weak social outcomes remain deep-seated challenges as reflected by Pakistan's ranking 150 out of 189 countries in the UN's Human Development Index. However, we are determined to improve social conditions and have prioritized policies to support the most vulnerable. This includes allocation of Rs 180 billion in FY 2020 to expand existing social assistance programmes....we are making progress on a number of additional initiatives including (a) narrowing the educational gender gap, (b) finalizing the update to the National Socio-Economic Registry, (c) mother and child nutrition programme, and (d) scaling up affordable housing."

Notwithstanding these laudatory pledges, the consolidated provincial and federal budgetary operations for the first quarter released by the government indicate that total allocation for social protection was 547 million rupees, less than one percent of the budgeted 200 billion rupees. This was highlighted in the IMF's first review report: "the authorities informed that the end September indicative target on BISP spending was not met due to technical constraints (these relate to the time needed by BISP beneficiaries to enroll in the new bank accounts following finalization of the new banking contracts. The process of re-enrollment is expected to be completed by Q2 FR 2002) but committed to rectifying the shortfall by end-December and reaffirmed the budgetary allocations to BISP were scheduled." This implies that 99.4 billion rupees would have to be released (50 percent of the total budgeted for the Prime Minister's signature ehsaas programme, of which BISP is the largest component) by end of 2019 calendar year.

The implications of this release on the economy would be two-fold. First, it would further fuel food inflation given that the vulnerable are compelled to spend the bulk of their stipend/earnings on food; and, second, the massive reduction in the budget deficit achieved during the first quarter of the year mainly through choking off expenditure for subsidies, grants, public sector development programme and social sector would be reversed and the need to generate resources urgently would resurface.

It is unfortunate that Pakistan's economic team leaders agreed to an unrealistic Federal Board of Revenue (FBR) target with the IMF (5.5 trillion rupees that is now projected at 5.238 billion rupees, still considered unrealistic given the 2.4 percent growth rate). To cover the lower projected FBR target, finance ministry has been insisting on fast tracking privatization (projecting additional non-budgeted non-tax revenue of 300 billion rupees from sale of two power plants) and citing higher than projected State Bank of Pakistan profits. If these two non-revenue sources do not materialize then it stands to reason that the IMF would push for a mini-budget and that would simply add on the burden on the hapless public.

We would, yet again, urge the Prime Minister to take serious cognizance of the fallout of the brutal upfront loading of the IMF programme that his government has signed with the Fund on the general public and take appropriate mitigating measures to cushion their impact with the objective of ensuring that poverty levels remain constant rather than rise.