It’s the economy stupid, so stated James Carville, Bill Clinton’s strategist during the 1992 successful presidential campaign against the incumbent George Bush with two other key messages to campaign workers: change versus more of the same and don’t forget health care.
In Pakistan, the narrative of the big three political parties notably the Pakistan Tehreek-e-Insaf (PTI), Pakistan Muslim League-Nawaz (PML-N) and the Pakistan Peoples’ Party (PPP) has been on cash handouts (Benazir Income Support Programme/Ehsaas programme), cheap or government supported interest free loans for those without collateral in business and agriculture (as well as housing during the Khan administration), Sehat Sahulat Card and free land (5 marla or 7 marla schemes of the past). Unfortunately, there has been little focus on reforms particularly in the power and tax sectors or on key economic indicators including the budget deficit that would have made these programmes sustainable.
Benazir Income Support Programme (BISP) was launched during the PPP-led government (2008-13) and President Asif Ali Zardari reportedly maintained at the time that the party will be reelected in the 2013 elections because of the votes by BISP beneficiaries as well as his success in engaging with the electables. The government went on an International Monetary Fund (IMF) programme soon after elections in 2008, a necessity as the current account deficit had burgeoned to unsustainable levels due to the Musharraf government’s decision to subsidise petroleum and products whose price at the time had risen to a historic high in the international market to over 140 dollars to the barrel. However, the IMF conditions at the time were neither upfront nor as politically challenging as those facing the country today though it is relevant to note that even then the Zardari-led government refused to implement the challenging tax and power sector reforms leading to the Fund programme suspension in 2010 – conditions which remain largely unimplemented to this day. Thus a major trump card, BISP, did not lead to the desired electoral result in the 2013 elections and the state of the economy was such that the newly elected government was forced to go on another IMF programme.
The PML-N government linked poor economic output with severe energy shortages during the PPP tenure and focused on enhancing generation under the umbrella of the China Pakistan Economic Corridor (CPEC); and contractually bound the country to take and pay and repatriate profits in dollars. While its argument that no other investor was willing to enter the Pakistani market at the time has merit yet the PML-N administration must be held responsible for failing to take account of the limited transmission capacity and approval of some obviously flawed projects - coal based generation plants away from the source of coal (high cost of transportation and environment degradation), and those based on an expensive fuel - furnace oil. On the tax side the government legitimized the non-filers by making them pay a higher tax for most consumer items and services. Be that as it may, tax to Gross Domestic Product (GDP) ratio did rise to around 12 percent. BISP of course continued and each year has received more budgetary resources while Ishaq Dar’s focus on keeping the rupee artificially high, to understate his heavy borrowing costs, led to a historically high current account deficit in 2018. The PML-N government extended cheap to free credit to the vulnerable, including youth/students, picking up a percentage of the interest rate, however this was not a successful scheme as banks were unwilling to bear the high risk of lending without collateral.
The Punjab government led by Shehbaz Sharif launched a pilot project titled Prime Minister’s National Health Insurance Programme card which was rolled out in Rahimyar Khan by October 2016 with 382,000 cards distributed comprising 75 percent of the target beneficiaries followed by Narowal, Khanewal, and Sargodha with a rise in target beneficiaries to 1.28 million however with little general awareness of its benefits its use was severely limited. This programme was not followed by the then Khyber Pakhtunkhwa government led by PTI which decided to launch its Sehat Sahulat card on similar lines.
By 2018, the economy was in a state that required going on an IMF programme again. Prime Minister Imran Khan reportedly maintains that his Ehsaas programme (95 percent BISP), other pro-poor programmes (Panahgahs) and the universal Sehat Sahulat card (except Sindh) would ensure his electoral victory in the next elections. The question is whether making the same assumptions as those made by Asif Zardari would produce a different result this time around and the BISP beneficiaries, considerably higher in number, would vote for PTI in the next elections?
The Sehat Sahulat Card much appreciated by the general public has inherent financial lacunas that were highlighted in 2019 by an actuarial study carried out by the German GiZ and International Labour Organization’s Impact Insurance that recommended another study every two years based on the fact that in 2019 admission rates were very low as few were aware of this facility. Claimed costs/expenses are very sensitive to the assumed increase in utilization (projected to cover the entire country by the end of the current calendar year), assumed increase in unit cost (inflation remains in double digits today) and fairly sensitive to the family size assumption. The base line indicative premium in 2019 required from the projection model was 1,755 rupees per family per annum for 2019-20 - an amount that without doubt would need to be upgraded today. The website of the insurance provider, State Life Insurance Corporation of Pakistan (SLICP), does not indicate how much premium has been agreed or key performance indicators like loss ratios, rejection ratios and expense analysis though the Buzdar-led Punjab government had claimed it released 70 billion rupees to SLICP. To complicate matters SLCIP is approved by the cabinet for divestment of 20 percent of government shares and its corporatization is a prerequisite with the Ministry of Commerce charged with this responsibility.
A universal Sehat Sahulat Card envisaged by the Khan administration is therefore likely to become financially unviable. In this context a better option would be to limit the card to the BISP beneficiaries and to undertake the actuarial study this year to determine the premium required to sustain the programme.
The Kamyaab Pakistan programme has yet to be launched in a way that is envisaged by Imran Khan but essentially it envisages free credit to the poor and vulnerable however time will tell how successful it has been as previous such programmes failed as they were largely hijacked by the rich and influential.
Handouts — be they in the form of loans or be they in the form of cash disbursements (BISP/Sehat Sahulat) supportive of the poor/vulnerable must be appreciated but are unlikely to provide the necessary fuel to the economy. For that the government has to make sacrifices by massively reducing current expenditure and raising direct taxes as opposed to sustained reliance on indirect taxes.
To conclude, to get votes from the swing voters (not die hard supporters who would vote irrespective of past performance but their numbers are not enough to win an election for any of the three national parties) reliance on handouts funded by the tax payers’ is unlikely to prove effective. In the words of Carville, it is the economy stupid, and that is once again grappling an impasse with the Fund negotiations on the seventh review reportedly stalled due to handouts given on 28 February and 1 March 2022.
Copyright Business Recorder, 2022
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