EDITORIAL: The Kamyab Pakistan Programme (KPP) is indeed a "splendid idea", as the prime minister put it at its launching ceremony, but only so long as the government has money for all the subsidies needed to lubricate its bottom-up novelty to empower the country's lower income groups. Already, it's had to be cut down from some Rs 3.7 trillion in loans to seven million households to Rs 1.4 trillion for 3.7 million because the IMF (International Monetary Fund) wasn't very comfortable with it ahead of the budget. But since the new number wasn't run by the Fund before the programme was launched, and the government has just restarted negotiations to get the $6 billion Extended Fund Facility (EFF) back on track, it remains to be seen really if the government won't have to tighten the screws on KPP once again.
The PM's lament, that such programmes should have been floated when the state was still young, is very strongly felt and echoed by a very big majority of this country's population. And there can't really be a better idea to improve lives of people, especially the poor lot at the very bottom of the food chain, than putting money in their pockets to invest and advance themselves. But since that money has to come from somewhere, and we're still a state that borrows a lot of money to pay back borrowed money and then borrows more just to survive, it's too soon to tell whether it is really practical considering present fiscal constraints. That is why a dampener from the Fund cannot really be ruled out till the negotiations are complete. And there's no way that we can afford to upset the lender at this point because we need its money a lot more desperately than it needs to give it to us.
Since fiscal conservatism is at the heart of its structural adjustment approach, it might even count as a small miracle to get this approved without much hassle. There's also the point that such programmes, appreciated as the spirit behind them is, contradict the direction that both monetary and fiscal policies have started to take with the SBP (State Bank of Pakistan) raising the interest rate and the finance ministry rolling back some incentives that had caused runaway demand in certain sectors. Surely, the reserves look healthy enough not to panic just yet, but the collapsing rupee and widening trade balance could cause a significant portion of them to disappear without much warning; so at such times it's always better to be safe than sorry.
Again, all this is not to say that the thinking behind KPP is not correct. The state must enable the lesser fortunate to stand up for themselves. And loans to support small businesses and enable low- and middle-income housing, while getting microfinance institutions to get money to the unbanked many, is about as smart an idea as any. Yet such money cannot be drawn from reserves alone. It must be generated in a way that the fiscal balance is not disturbed. And at a time when there's practically no elbow room, the whole thing could run out of steam even before it builds any momentum.
No doubt this was necessitated by election compulsions as well. People have been struggling with high prices for too long. No better idea, then, than throwing trillions around in interest-free and low-cost subsidies to win some points by the time campaigning takes off. That would be understandable if this were an election year, because election year budgets tend to be unnecessarily expansionary for purely political concerns. But since this is not such a year, the risk is that much more increased. If people-friendly policies do not work out, even though nobody doubts anybody's intention or the urgent, desperate need for them, simply because the government didn't do its calculation right, then there could be a very steep price to pay at the election. Much depends on whether or not KPP is affordable at this point in time.
Copyright Business Recorder, 2021
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