Concessionary loans for youth

Prime Minister Imran Khan seems to be extremely keen to promote employment in the country, with more focus on youth. In keeping with his wishes, the Federal Cabinet has approved Rs 100 billion Wazir-i-Azam Kamyab Naujawan Programme (WAKNP), under which youth will be provided soft loans up to Rs 5 million for establishing their own businesses. Loans of 100,000 to 500,000 will be given at the rate of 6 percent while loans from Rs 500,000 to Rs 5,000,000 will be provided at 8 percent markup rate with 20 percent equity. The programme, according to the Special Assistant to the PM on Information, Firdous Ashiq Awan, would help engage young people in economic and trade activities and create new job opportunities. "The PM believes that the youth is the backbone of the country, as they are 65 percent of the country's population and added that the youth programme would bring about an economic revolution. With 52 percent of the female population, young females would be given 25 percent of the total loans to establish their own small businesses. Under the WAKNP, a number of schemes will be introduced to provide job opportunities and professional skills to youth. A youth database would also be established in the light of information and surveys, conducted by educational institutions and universities for the establishment of PM's Employment Exchange Platform.
It needs to be pointed out that this is not the first time that such a programme has been introduced in the country. Carried away by the plight of the armies of unemployed youth roaming aimlessly and with nothing to do, previous prime ministers also adopted such programmes to create employment and mitigate their sufferings but the end-result of such an approach was not satisfactory. It may be noted that while the level of unemployment in the country is quite high, the authorities in their various documents try to underestimate the problem by attaching certain qualifications to the data on unemployment. Anyhow, the experience with such schemes is that concessionary loans are usually granted to those who have the right kind of contacts with the representatives or office bearers of the party in power and not to really deserving youth. Although Prime Minister Imran Khan may not like such a tradition but he cannot keep an eye or strictly watch the distribution of concessionary loans across length and breadth of the country and there is a great possibility that these loans will end up in the wrong hands who do not have any experience of running businesses. Besides, it must be kept in mind that young people without some professional skills and necessary motivation would try to set up only small shops and other small time trading activities without realising that trading sector in the country is already overcrowded and the established traders would ensure that the new entrants incur losses in the process and remain outside this field.
The most important inhibiting factor is the timing of launching this programme. In the PTI's first year in office, the country's fiscal deficit in the first three quarters of FY19 has peaked at five percent of GDP due to very high expenditures on debt servicing and defence and much lower tax revenues than the target envisaged in the budget at the beginning of the year. Although Awan has not spoken about the source of financing of this Rs 100 billon programme, yet it can be easily assumed that the programme would either be financed through the Federal Budget or commercial banks would be asked to fund the programme. Contrary to the general perception, the default rate of such programmes is also quite high due mainly to the lack of proper collateral and inexperience of the borrowers. It looks like, therefore, that either the fiscal deficit which is already very high would rise further or banks' non-performing loans would increase due to the introduction of this programme. Both these outcomes are not in the country's interest. Seen closely, such schemes usually do not yield the intended objectives. If unemployment in the country is really to be reduced, the best way would be to control the population growth rate, spread quality education in the country with more emphasis on vocational training which is in demand in the market and stimulate investment to create more jobs in the country. Lastly, Special Assistant to the Prime Minister should be a little bit careful with her words. Linking such programmes to "economic revolution", if not a lie altogether, is a highly exaggerated proposition. If such programmes could usher in economic revolution, all the other developing countries would have adopted such schemes a long time ago to realise the dream of economic development.