Ehsas: show me the money

Updated 08 Jun 2019

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RESPONDING to the massive development challenge — the deepening multidimensional deprivation of a significant proportion of Pakistanis — the PTI government launched Ehsas, a social safety programme, last month. With the introduction it added a new division to already bloated government machinery.

It is good that the government has shown empathy and is mindful of the painful impact on poor households of the policy options available in the current stabilisation phase.

To avoid default and unsustainable debt, the government had to strip the pretence of economic normalcy, expose reality and align fiscal and monetary policies accordingly. A curb on imports, utility rates rationalisation, devaluation and interest rate hikes were deployed to cool down the economy.

There is no way to perfectly shield the poor from the fallout of a dip in investment, employment and consumption. With the hike in inflation and the exchange rate, the government chops development spending and the private sector assumes a cautious stance. The job market squeezes as the real income and value of assets deplete.

The lack of clarity regarding the programme’s finances is the key reason why the plan is not being taken seriously and is being treated instead as a political move

Those belonging to the lowest social rung are already caught up in a stressful battle for survival. The country ranks low on most global indices related to human development.

According to the Global Hunger Index 2018, Pakistan ranks 106 out of 119 countries assessed. With a score of 32.6, people suffer from a level of hunger that is categorised as ‘serious’. About a third of the population lives in the shadow of multidimensional poverty. The last National Nutrition Survey showed that in some districts half the children under the age of five are stunted and about 20 per cent suffer from wasting.

Ehsas sets an overarching policy direction for initiatives directed at providing relief to economically venerable segments such as the Benazir Income Support Programme. It proposes to amend the Constitution to legally bind the government to provide food, shelter and basic social services to all citizens.

The new division, created for the implementation of the social protection policy, will serve to supervise all pro-poor projects. The entity will create a dependable database of needy households. It will also develop a network of centres that serve the poor by helping them with legal aid, skill development, job placement and access to banks for micro-loans.

Prime Minister Imran Khan has promised special schemes for women to allow them to better care for themselves and their families.

The elaborate social safety plan, however, failed to start a debate or excite the public. This could partially be because the government has not clarified where the money to finance the new initiative is going to come from. Both debt repayment and defence spending are rising and prospects of higher revenue generations are grim.

Mr Khan committed to scrabbling another Rs80 billion for pro-poor spending in his speech at the launch but did not elaborate how the government plans to afford it.

Eminent policymakers told Dawn that in their opinion the lack of clarity regarding the programme’s finances was the key reason why the plan was not being taken seriously. It was being treated more as a political move aimed at diluting criticism of the government for perpetuating the status quo at the cost of the masses.

“The unprecedented ascent of the PTI in the last elections means the party should be willing to try better policy alternatives and develop a proactive management. It should be unafraid to bring about economic corrections without exerting avoidable pressure on people who are already struggling. The PTI can do so by diverting the cost towards a segment that can endure the pressure without experiencing a significant impact on its lifestyle,” an expert in Karachi commented.

He mentioned chopping the development budget while providing direct subsidies worth about Rs100bn to businesspersons.

The expert went on to criticise dual standards such as accommodating the violations of real estate tycoon Malik Riaz but ejecting petty traders who had been operating on encroached property. And the government’s capitulating to pressure by carmakers and real estate operators on the ban on non-filers and letting utility companies increase rates without showing any indication of structural improvement.

Dr Ijaz Nabi, a professor at LUMS who is also associated with multiple economic research institutes, welcomed the launch of Ehsas though he had yet to review the details of the programme. He, however, raised the issue of financing of the politically savvy initiative.

Dr Nabi mentioned the cycle of boom and bust over the last three decades and pointed out how successive governments were forced by circumstances to take corrective measures in the initial period of assuming power. In later period of their tenure they went for unsustainable expansion to build political capital with eyes only on the next general elections, or to extend their dictatorial rule.

“What the successive government missed was the next step, i.e. to persistently carry out structural reforms, improve the quality of governance and stop revenue leakages. There has been a lack of sustained focus on policy design. The government will have to resist the temptation to compromise the long-term economic strategy for short-term objectives,” he commented over phone.

Published in Dawn, The Business and Finance Weekly, April 8th, 2019