The distressed people of Pakistan will need to act smartly, learn to live with less, find constructive channels to vent their frustrations and revive family/community bonds to save and sustain their households. The PTI’s budget announced on June 12 did little to provide financial relief or instil hope in ordinary families.
Many Pakistanis find the stress to provide for their families so compelling that the rationality of the lockdown is lost on them. They are desperate to work. If it demands exposure, so be it. Probably they can’t afford to lose the living income as they have nowhere to turn to. They do not qualify for the government cash grant.
The proposed national budget has not made the task of family budget makers any less daunting. Like the government trapped between dwindling resources and rising demands, the person controlling the family wallet will have to make tradeoffs. Unlike the government, however, it could be a tormenting exercise for them. It could mean moving children’s school or shifting home to counting rotis per meal or turning to the soothsayer for ailments.
The capacity of households to meet their basic needs is an important measure of economic stability. The impact of the national budget on the family income offers a broader measure of budget assessment. In Pakistan, roughly 70 per cent of households fall between the two extremes on the social scale — the rich (6pc) and the poor (24pc).
Vanishing jobs, pay cuts and retrenchments have squeezed the nominal family income of the salaried class/self-employed technicians. Double-digit inflation has eroded the value of money. Falling property prices have deprived small homeowners of the comfort that they cherished. The dynamics of rural families is different, but the locust attack must have instilled fear in the farming families already at the mercy of nature.
If at all, the current budget will alienate people further when horrid stories of death and suffering caused by the rising count of coronavirus patients already haunt them. Will the compounding hardships shake their trust in the system and democracy? My guess is as good as yours.
It is, however, certain that the measures announced by Minister for Industries Hammad Azhar couldn’t have inspired confidence in the PTI government and its ability to shield ordinary people from the vagaries of the pandemic, financial crunch and looming food security challenges.
With the International Monetary Fund (IMF) breathing heavily down its neck, no one was expecting wonders from the government. But the budget should have reflected the gravity of the crisis. Unfortunately, it appears to be a vain attempt to deal with the after-effects when the pandemic is still raging in Pakistan.
The allocations for health and food security are insufficient. The development budget has been scaled down to Rs650 billion and subsidies slashed by half. The allocation to health doubled to Rs25bn, but it translates to barely Rs125 per head in a country where the health infrastructure is too scant. The pandemic emergency fund of Rs70bn is also miniscule eyeing the deepening crisis.
The budget shows sensitivity to the needs and demands of the classes on both ends of the social scale. But the majority of citizens in between have largely been ignored by the PTI government, which won the election on the strength of the middle class in 2018.
Tax breaks, concessions and handouts are directed to the corporate and construction sectors. Similar expensive support packages failed to yield results citing depressed demand among other factors. The Pakistan Economic Survey acknowledges this. The budget thrust is still on concessions to producers while consumers have largely been ignored. The government’s economic team failed to appreciate the centrality of consumer and export demand for businesses, which has precedence over the cost of production.
Mr Azhar also proposed that the allocation for the Ehsaas programme be enhanced for the poorest of the poor. It was scaled up moderately from Rs187bn last year to Rs 208bn. No direct relief is being offered to the middle-class working families that primarily drive local demand sans vague promises of employment and housing. About Rs10bn allocated to ensure food security is a joke in view of the looming challenge.
The middle class could have been incentivised by revising down income tax rates or revising up the benchmark for taxable income. For the purpose of this analysis, urban households with income in the bracket of Rs50,000-200,000 fall in this category. For rural families, the bracket might be lower. If passed in its current form, we believe that the kitchen expenditure as a percentage of total income can rise significantly for the middle class at the cost of utilities and savings.
Adjustments can be drastic for families at the lower rung, compromising their quality of life going forward. Collectively, kitchen, rent, utilities and transport will almost exhaust their monthly budgets with little left for health or education. On average, the biggest jump is expected in the kitchen budget while savings may be wiped out completely. Savings used to be about 5pc of the family income.
Miscellaneous spending may be squeezed to a fraction of what it was before. Education spending may drop as children are pulled out of tuition centres and moved to cheaper schools in extreme distress. How long the middle class would suffer in silence is anybody’s guess. Watching mass protests across the West over racial injustice, top business leaders shudder with the possibility of discontent spilling over into the streets in Pakistan that has multiple fault lines waiting to explode.
Published in Dawn, The Business and Finance Weekly, June 15th, 2020