Covid-19 lockdown: Can we feed the poor?

Public policy debates in Pakistan have suddenly turned over on their heads. Surely, we can no longer afford to look at the economy from a bird eye's view of current account deficit, and GDP per capita. We have to go micro, and we have to think in terms of the impact of policies on people, not big intimidating numbers.

What would a devastating outbreak of a highly dangerous contagion do the poorest of the population? How fast will the dilapidated healthcare system collapse if outbreak happens? What difficult choices would we have to make, what will we have to sacrifice? For a heavily populated country with millions of poor people, if roti, kapra, makaan was our slogan of choice, the buck stops at roti now—how do we get food on the tables of millions of Pakistanis as we try and ‘flatten the curve’.

The simplest answer is a direct cash transfer. The concept worldwide known as a Universal Basic Income (UBI) or what Nobel winning free-market capitalist Milton Friedman called a negative income tax is not entirely a radical idea. The government provides a direct injection of cash into the hands of the people.

A lockdown in Pakistan—in whatever form it is in—will hurt the economy at large but the poorest households the most. Even without the lockdown, thousands might lose jobs, daily wagers and laborers may not find work and the most vulnerable may slip further into destitution. The challenge is to determine what the fiscal burden will be, how we will arrange for those funds and what mechanism will allow the distribution of the funds into the hands of the vulnerable?

Let’s try to estimate a number. The Household Integrated Economic Survey (HIES) for 2015-16 distributes the Pakistani population in five quintiles—each representing 20 percent of the population. Assuming that we reach out to the lowest 40 percent of the population, we see that these households spend 49 percent and 46 percent of their consumption expenditure on food and non-alcoholic beverages (see table). The resultant average monthly spending on food for these bottom 40 percent is about Rs9,700. But these numbers are for 2015-16, inflating them to the food CPI growth between 2016 and 2019 results in roughly Rs10,600. There are 32 million households in Pakistan, and 33 percent of which are living in the lowest 40 percent quintiles.

The total fiscal burden per month in providing these households enough money to cover food expenditure comes to over Rs100billion. That’s a mammoth amount. Per month! Yesterday, PM Imran Khan announced a relief package which includes Rs150 billion of income support for four months. Each household will get Rs3,000 per month (typical BISP payment is Rs2,000 per month for 5.2 million beneficiaries). By that estimate, the monthly allocation is Rs38 billion for 12.5 million households. That’s 39 percent of the total households in Pakistan. But Rs3,000 will not cover food and expenditure. The shortfall is still Rs8,000 per month, per household. In fact, to cover that large a population share (39%), we could require Rs133 billion—an additional Rs96 billion per month!!! But wait, this crisis is not going away in a month.

The World Bank and ADB announced a support of Rs 90billion. This will likely go into the yesterday’s relief package which also includes an allocation of Rs200 billion for laborers, some relief to curb food inflation and funds for SMEs. The government may also have to move around some earlier allocated funds including Rs30billion subsidy that was to be offered for Naya Pakistan Housing Program (NPHP).

Perhaps, some purse tightening or delay of PSDP allocations will also have to be on the cards. It is clear that all hands will have to be on deck. Provinces will have to chip in and the private sector will have to contribute. Companies—small and large will have to keep providing wages and salaries to their employees despite business slump. They will have to do their part. Because, even if the economy could cough up Rs100 billion for a month to cover 33 percent of the poorest households to afford just food, then what? If the question right now is: can we feed the poor in times of this pandemic, the answer is, probably not—but most definitely not without war-footing efforts.