This is in response to the observations made by the Ministry of Finance on my article on 'Pro-poor spending' published recently in Business Recorder. 'Pro-poor expenditure' as the title suggests should disproportionately benefit the poor. That is, if the share in the population of the poor is approximately 40%, then at least 40% of the expenditure should directly benefit the poor. Only then can the expenditure be characterized as pro-poor.
However, a very broad view has been taken of expenditures, which are considered to be pro-poor by the PRSP Secretariat of the MOF. There are, in fact, four categories of the expenditure included. First, there are income supplements, like the Benazir Income Support Programme (BISP), which are exclusively targeted to the households below the poverty line. Also included in this category are subsidies which involve price reduction on goods and services consumed by the poor. A prime example of this is the large subsidy offered to small electricity consumers. In addition, there is also a subsidy in the procurement of wheat.
The second category includes services which primarily benefit the poor. This includes services like primary and secondary education, vocational training, preventive and curative health, water supply and sanitation. The third category comprises of services which do benefit the poor somewhat but are of greater value to upper income households like expenditure on law and order, justice and rural development. The last category consists of expenditure on highways and roads which cannot be characterized in any way as being pro-poor. As such, this last category is excluded from pro-poor expenditure.
In fact, when the PRSP Secretariat starting preparing reports on pro-poor budgetary expenditures in 2002, even the expenditure on the two services of law and order and justice was not included. If this is repeated in 2016-17 then this reduces pro-poor expenditure further by Rs 398 billion. This brings down the total expenditure to Rs 2.1 trillion, under 7% of the GDP in 2016-17.
The MoF needs to appreciate that the difference in estimates is due entirely the exclusion of expenditure on roads, highways and bridges from pro-poor expenditure.
Nevertheless, I would like to place on record once again my appreciation of the work being done by the PRSP Secretariat of the MoF.