Addressing the World Economic Forum in Davos, International Monetary Fund Managing Director Christine Lagarde urged the world community to implement redistribution policies through strengthening the social safety net, fiscal and structural reforms and education.
In Pakistan's case, the 2016 evaluation of Pakistan's social safety programme, Benazir Income Support Programme, launched last week pointed out that calculating poverty from Food Energy Intake (FEI) to Cost of Basic Needs (CBN) combined with a recalibration of the basic basket of consumption needs has increased poverty by 33 percent but added that "using the FEI poverty line BISP reduces the poverty rate by 7 percentage points but has only a weak impact on poverty gap. Using the CBN poverty line as a reference we find that the BISP is associated with a reduction in the poverty gap by 34 percentage points but does not have a statistically significant impact on the poverty rate." The report further adds that this "finding results from the large increase in the poverty line resulting from the adoption of the CBN methodology. With the CBN poverty line the average poverty gap is PKR 496, with the average per adult equivalent monthly value of the transfer of PKR 270 insufficient to push significant numbers of beneficiaries above the poverty line when poverty is referenced in this way". Be that as it may, BISP, in spite of some continuing bottlenecks in delivery, provides critical support to the vulnerable; and is acknowledged by multilaterals as essentially a good social safety net programme. In addition, the evaluation report itself reflects facts on the ground and would therefore provide valuable input to further improve the programme.
Pakistan continues to perform poorly insofar as fiscal and structural reforms are concerned. The tax structure remains heavily reliant on indirect tax collections, whose incidence on the poor is greater than on the rich. Direct taxes include withholding taxes (around 70 to 75 percent of all direct tax collections are from withholding taxes) and the bulk of these are on consumption or in the sales tax mode which should have been credited to indirect taxes. And finally, local industry is urging the government to extend similar tax concessions to them as are being extended to Chinese companies under the China Pakistan Economic Corridor (CPEC). Thus the need to render fiscal system fair, equitable and non-anomalous is as pertinent today as it was a couple of decades ago.
Structural reforms in the energy sector, the largest recipient of subsidies from the taxpayers' money, are still as badly needed as say a decade ago and the evidence for this is in the level of inter-circular debt that has not changed - a debt that continues to debilitate the sector from operating at capacity and periodically compromises the capacity of Pakistan State Oil to open letters of credit to import petroleum and products that the country needs.
And finally, education remains a non-priority sector in our budget. And while education was devolved under the 18th Constitutional Amendment, the federal budget did contain Rs 21.4 billion allocation for Higher Education Commission and Rs 2.2 billion for federal education and professional division for the current year. The largest allocation to education in absolute terms is naturally by Punjab given that it is the most populous province with the largest budget accounting for an allocation of Rs 310 billion in 2015-16; however it is Khyber Pakhtunkhwa (KPK) that allocated 21 percent of its entire budget on education in the first year of the Pakistan Tehreek-e-Insaf government while Sindh data reveals that it allocated 22 percent (though a whopping 90 percent was for current expenditure as opposed to only 82 percent in KPK and Balochistan); Balochistan spent 21 percent of its budget on education. This rise in provincial education budgets is a good sign and though the sector is mired in governance issues (with ghost schools and ghost workers) yet higher allocation does reflect a change in the provincial governments' perception about the rising relevance of this sector in politics.