EDITORIAL: The Minister for Industries and Production Rana Tanvir informed the House that the federal government has prepared a 20 billion rupee Ramazan package, double the amount budgeted in the current year, which will be extended directly in cash to approximately 4 million deserving people.
The amount per beneficiary is 5,000 rupees, which with an average beneficiary family of 5 implies 1000 rupees per head for Ramazan.
Rana Tanvir further stated that provincial governments are going to follow the same cash transfer formula and denied that the government is going to shut down the Utility Stores Corporation (USC), through which previously Ramazan packages were delivered, adding that USC restructuring followed by privatisation would be the way forward.
The Minister’s statement to the House gives rise to three disturbing observations. First, it raises questions about the source of funds for doubling the budgeted Ramazan package.
In this context, it is relevant to note that it is possible that the additional 10 billion rupees has been diverted from other budgeted subsides, given that the International Monetary Fund (IMF) under the ongoing programme urged the government to target subsidies, read through utilising the scientifically identified vulnerable/beneficiaries by the Benazir Income Support Programme to minimise the abuse of subsidies – abuse through artificial shortages on subsidised items on sale in USC either deliberately by USC staff selling the product on the open market or through selling poor quality items. Secondly, as also agreed with the IMF, half of the subsidy under the BISP is payable by the provinces.
However, Rana Tanvir’s claim that USC will be restructured and then privatised generates multiple concerns: (i) privatisation as a policy thrust continues to be rhetorically supported by the present cabinet members; however, there appears to be no understanding that it is critical to first undertake an empirical study of each proposed entity targeted for privatisation, including a cost-benefit analysis and what is ignored is the cost in terms of future revenue stream that would have to be forgone by the government with the focus entirely on ending losses that are paid for at the taxpayers’ expense; (ii) the climate for investment is not positive at the present time given our fragile economy, which explains sustained negativity in the large-scale manufacturing sector; and (iii) restructuring to date has led to a change in an entity’s top leadership and/or a change in the broad of directors but seldom has this led to improved finances of the entity in question.
Parliamentarians challenged the government’s claim that inflation has come down with protesting employees of Pakistan Secretariat demanding higher salaries that choked traffic flow in the Blue Area. This demand is over and above the fact that the government raised salaries of its employees by 20 to 25 percent in the budget – a raise that was well above the rate of inflation.
However, what is relevant to note is that the government employees (civilian as well as military) paid for at the taxpayers’ expense account for only 7 percent of the country’s total workforce and their protest bears testimony to the fact as noted by independent economists that inflation is understated by taking account only of subsidised prices of utilities and essential items, as well as understating the rent in major cities.
What should be of more serious concern is the remaining 93 percent of the workforce that operates in the private sector, which has been unable to raise salaries since the onset of Covid-19 in 2020 to keep up with high rates of inflation.
The government, like its predecessors, has been particularly compliant with the Fund conditions, which continue to be tilted against the common man as they envisage higher utility rates as well as lower subsidies — measures that account for extremely worrisome poverty rates of 44 percent in the country today.
The IMF team for the first review under the ongoing programme is expected this week or early next week and one can only hope that the negotiating team has gained sufficient experience to expand its leverage with the Fund with in-house out of the box suggestions rather than capitulating on all counts.
Copyright Business Recorder, 2025
Comments