Welfare considerations

06 Apr 2020

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The writer teaches politics and sociology at Lums.
The writer teaches politics and sociology at Lums.

NEARLY a month into the pandemic, there is little indication that the worst is behind us. Ominously, a host of projections suggest an exponential rise in cases to continue till at least the middle of April. We find ourselves in uncertain and unprecedented times, and all front-line medical professionals, administrators and volunteers deserve our gratitude for steering us through them.

Times of crisis help highlight the centrality and desirability of efficient public healthcare and redistributive mechanisms. They also shed light on underlying institutional and structural factors that shape and condition responses by different states. Barring some belated decision-making by the federal government, Pakistan’s overall response to date has generally been efficient and competent. The constant focus on welfare and socioeconomic concerns from the federal and provincial governments has, in particular, played an important and applause-worthy role on this front.

At the same time, the nature of the government’s response and who it caters to is revelatory in its own right. To this end, in my view, the government has drawn on existing resources quite well for some impacted populations, but requires more creative thinking for others.

In terms of getting it right, the mobilisation of an expanded direct cash transfer scheme using existing BISP enrolment, National Socioeconomic Register (NSER) and Nadra data has been the most appropriate response for a large segment of the vulnerable population. Expanding beyond the original 4.5 million to an additional 4m through NSER by relaxing the poverty score threshold seems relatively straightforward. The real feat is getting to an additional 3.5m vulnerable citizens across the country through a combination of SMS-based self-enrolment, Nadra data and district-based verification.

Barring some belated decision-making by the centre, Pakistan’s response has generally been efficient.

In terms of outreach, according to government data, as of April 3, nearly 12m SMS entries were deemed eligible for district-based verification, which is an impressively high number. The next challenge for the government is to expand the scale of assistance being provided beyond Rs12,000 over the next four months, by urgently redirecting fiscal resources from other allocations.

If this is carried out successfully, this would be a real feat of drawing on existing other-use resources (citizenship records, security surveillance data and local administration) for welfare purposes. Experiences from disasters and crises in other countries show that once expanded, welfare provisions are relatively hard to roll back. As a positive externality, the hard work being put in now could form the basis of a more expanded welfare mechanism in the future.

A similar basket of social protection measures are also being implemented by the provinces relying on existing welfare instruments like zakat committees, social security offices, and labour department data. Additional cash transfers seem to be the preferred option, but Punjab is also considering a large public works-based employment scheme, which would be able to target a particular strata of daily wage workers and labourers impacted by the pandemic. It remains to be seen how efficiently these interventions are implemented, and in conjunction with private charitable efforts, how well they can blunt the adverse impact of the virus.

If the government scores well on the planning part of its direct cash-based assistance to vulnerable populations so far, it has more work to do on helping out other adversely impacted segments of society. Most notably, the lockdown combined with an already slowed-down economy coming to a screeching halt will pose significant livelihood challenges for various sectors.

Based on the material put out so far, it is apparent that the government’s economic stimulus to date remains skewed towards large enterprises in the formal sector. A host of refinancing schemes, quicker refunds, interest payment deferments, and tax rebates to particular sectors are important instruments, but they do not hold as much value to the thousands of micro, small and medium enterprises, many of whom do not meet documentation thresholds, and do not exist within the realm of formal banking relations.

Turning attention to the informal sector is important not just because they contribute extensively to the economy, but because businesses within this segment also absorb large amounts of urban labour (employing upwards of 60 per cent of the urban workforce). This means there is both an economic stimulus and a welfare and social protection argument to be made for their assistance.

Existing data on domestic commerce (wholesale retail trade, transportation, storage), which is largely informal in nature shows that the biggest costs incurred by these businesses are utility expenses, land/rental costs, and labour expenses. What can be managed with relative ease, and what the government has reasonably good data on, is utility bill deferment and some relief in utility expenses. Regardless of the level of informality, nearly every fixed brick-and-mortar business (shops, godowns, small manufacturing entities) has a commercial electricity connection. Past consumption data can be used to categorise businesses by scale, and targeted relief through deferment or a subsidy, for example, can be provided, especially for expenses incurred for the time period immediately preceding the crisis.

On the other hand, given the high levels of informality, directly targeting these small businesses to provide wage-bill support is not as easy an option as it is in other parts of the world. The government would have to come up with new, possibly microcredit options to improve cash-flow circumstances if it wants these segments to retain labour at this point in time.

Lastly, there is also an urgent need to think about possible rental relief for both vulnerable commercial and residential tenants. This might be the most difficult one to carry out given the lack of data on rental agreements and the generally undocumented nature of commercial and residential rental markets. But we’re currently going through a crisis that requires creative solutions, and for socioeconomic welfare purposes, now is the time to think through some of them.

The writer teaches politics and sociology at Lums.

Twitter: @umairjav

Published in Dawn, April 6th, 2020