THE federal government appears to have drastically reduced the size of its flagship Kamyab Pakistan Programme because of strong objections raised by the IMF ahead of the upcoming talks for the resumption of its suspended $6bn loan facility. But even the abridged initiative may not be liked by the lender whose support will be crucial for Islamabad in the next few years for external-sector stability. Kamyab Pakistan aims to alleviate poverty, grow the economy and generate jobs ahead of the next elections through disbursement of small, interest-free and cheap loans. This involves significant government guarantees and subsidies. Although the government has also integrated some similar, existing projects into the programme and stretched its countrywide rollout to early 2022 to reduce its impact on the national budget, it doesn’t agree with the kind of fiscal discipline the IMF wants implemented under its bailout facility. Neither does the initiative match the measures taken by the central bank and finance ministry in recent weeks to decelerate the rapidly growing domestic demand and curb expensive imports to ward off a balance-of-payments crisis. How IMF and the economy would react to it is uncertain.

The government had expressed its intention of launching this ambitious initiative in the budget for the present financial year as part of its new ‘bottom-up’ attempt at growth since, according to Finance Minister Shaukat Tarin, the ‘trickle-down’ approach had failed to transfer the benefits of economic growth to the poorer classes. Initially, the authorities planned to give out loans to the tune of Rs3.7tr to some 7m households, but now they seem to have cut down the stimulus size to Rs1.4tr and 3.7m owing to new economic realities. These loans will be given out to support smallholders, small businesses and (low-middle-income) homebuyers. Kamyab Pakistan will also cover health insurance for all and offer scholarships for skill training, as well as increase financial inclusion by connecting the unbanked to banks. Mr Tarin claims that the programme will lessen poverty by empowering the deprived segments and helping them transform their lives. While launching the scheme, Prime Minister Imran Khan also expressed similar thoughts, terming the programme a “splendid idea”. There are no two opinions about that. But the question remains whether the economy can afford this expansive stimulus which will impose large costs on the budget at this point in time. The jury is out on that.

Published in Dawn, October 5th, 2021