The federal cabinet has announced a 2 billion rupee package for the holy month of Ramazan, designed to ameliorate the hardships of the common man - a package to be administered through the Utility Stores Corporation (USC).
The Managing Director of the USC, in a press conference the same day, revealed that the net relief to be transferred to consumers would amount to 4 billion rupees, which would include a 5 to 10 percent subsidy on around 1000 items of daily use, and an additional one billion rupees would be made available to ensure that sugar is available at 55 rupees per kg in the market in contrast to the market price, ranging from between 65 to 70 rupees per kg. Supporters would no doubt claim that these measures reflect the human face of the government and its determination to minimise the current inflationary spiral that plagues the poor.
Analysts, however, would question where the 4 billion rupees would come from. The budget, which Finance Minister Dr Hafeez Sheikh has repeatedly emphasised, is "realistic", had earmarked 700 million rupees for the USC for Ramazan for the current fiscal year. This particular outlay was more than halved from the previous year's outlay of 1500 million rupees in an attempt, one would assume, to reduce the budget deficit.
Thus, the question where would the remaining 3.3 billion rupees come from becomes critical. Would this larger outlay for the Ramazan package imply slashing the 'realistic' Public Sector Development Programme, for which, unfortunately, there is ample precedence? Or would the government simply add onto the budget deficit at the end of the year? Pakistan's economic managers have been at pains to inform the public that bringing the budget deficit down is the major policy thrust designed to check inflation, and given that the recent figures show that the budget deficit has inched up to 6.1 percent of GDP, any further rise may well take us back to the 7.4 percent that this government inherited. This, no doubt, would cripple the proverbial camel's back, the camel defined as not only the subsistence income earner but also the lower-middle income and middle-middle income earner, which surely constitute over 100 million people.
The other question that must be asked is whether 4 billion rupees is adequate to check the inflationary spiral as it impacts on the common man directly. The effectiveness of the USC as a medium through which essential items are subsidised has been known to be limited on two counts. First, there have been many instances where the USC employees were found to be complicit in sabotaging the system of fair distribution of subsidised commodities. And second, the long queues that are necessitated if the distribution system is to be fair and impartial is itself a form of considerable public inconvenience, exacerbated during the month of fasting. Perhaps to mitigate this, the USC announced that the special Ramazan package would be available to the public from the 5th of August.
It is for this reason that distortions in the market, and providing subsidies do create distortions, need to be dealt with in a different way in the long run. The government, of course, has been unable to police the profiteers of food items that are to be found at every street corner during Ramazan. Perhaps citizens committees need to be formed and complaint against any vendor registered with these committees, which must take up the matter with the appropriate authorities who, in turn, must have the power to impose a fine and, upon repeat offence, close their business.