Inclusive growth under renewed focus

Published October 11, 2021
Despite the PTI government’s commitment to the poor, owing to resource constraints, an analyst points out the allocation in budget 2021-22 for the Ehaas programme at Rs246bn was a mere 2.89pc of the total budget outlay. — Dawn/File
Despite the PTI government’s commitment to the poor, owing to resource constraints, an analyst points out the allocation in budget 2021-22 for the Ehaas programme at Rs246bn was a mere 2.89pc of the total budget outlay. — Dawn/File

In the past few weeks, major issues of public concern — rising unemployment, high food prices and uncongenial conditions at workplaces — a reflection of the plight of the poor and the vulnerable — were spotlighted in intensified, up scaled public discourse.

The occasion for the debate was initially provided by the publication of Pakistan Bureau of Statistics Labour Force Survey (LFS) data in the newspapers and projected by the electronic media. It activated many analysts to scrutinise various aspects of the LFS report which showed that the unemployment rate had increased from 5.8 per cent in 2017-18 to 6.9pc during 2018-19 — the first year of PTI’s government in power. In absolute terms, the number of people looking for jobs increased to 4.71 million in 2018-19 from 3.39m the previous year.

This was followed by Pakistan’s Institute of Development Economics (PIDE) research report that gave a different picture of the unemployment scene from that of LFS. The PIDE study showed that 16pc of the country’s uneducated population was unemployed. And among the educated population 24pc with graduates or undergraduates were jobless of whom 40pc were female.

The higher rate of inflation is eroding the value of cash handouts under Ehsaas and BISP

The Senate Committee on Planning, Development and Special initiative was informed by PIDE officials that there were hidden numbers in their figures such as those people who failed to get a job and were forced to take admission to MPhil/PhD courses to improve their employment prospects. An analyst observed that ‘rampant unemployment essentially means that the middle class is slowly withering away.’

However, Information Minister Fawad Chaudhry has claimed that the PTI government has created over 10m jobs during the past three years and 1.6m Pakistanis have gone abroad. This stands in sharp contrast to protests staged some weeks ago by thousands of people in Gwadar and Turbat against rising unemployment and shortage of essentials like drinking water and education facilities in their area.

Finally, the rampant violation of constitutional provisions and labour laws for the protection of worker rights was a topic of a recent illuminating speech by Supreme Court Justice Mabool Baqar. He summed up: “our workers are suffering the worst kind of exploitation. Woes of the common man are multiplying every day. The judiciary also needs to fully morph into a people-sensitive judiciary and a more compassionate organ of the state.”

Though constrained by the lack of enough resources, the PTI leadership is struggling to address these major public concerns. On October 4, Prime Minister Imran Khan announced a 40pc targeted subsidy for the poor on the purchase of wheat, flour, sugar and ghee (cooking oil).

Finance Minister Shaukat Tarin says direct food subsidies would be provided to around 12.5m poorest households, though he concedes that distributing cash handouts through the Ehsaas Programme is not a permanent solution.

Mr Khan launched Rs1.4 trillion Kamyab Pakistan Programme (KPP) for disbursement to 3.7m low-income households reportedly in the next three to five years. It would take some time before the first borrower gets a loan as the relevant authorities have yet to hire partner commercial banks that would disburse loans through microfinance institutions. Mr Tarin says banks do not have the appetite to give small loans and this gap will be filled by microfinance institutions. He recalled that banks gave merely 10,000 loans despite receiving hundreds of thousands of applications under the Kamyan Jawan programme.

The government reportedly intends to disburse 7,38,180 loans worth Rs228 billion in the last two years of its constitutional term. That includes Rs152bn for 152,100 people for buying low-cost housing units and Rs23bn for 237,000 small farmers. Of the total loans, the PTI government will give Rs37bn in subsidies to pick up the interest cost. Of the estimated interest cost of housing loans of 15pc, 13pc will be picked up by the government and 2pc will be borne by the borrower. Interest-free loans will be provided up to Rs50,000 for doing business and for procuring inputs and machines.

“Our people need 3-4m jobs every year. If the economy is not allowed to grow, how will these jobs be created?” says Mr Tarin. When our economy grows more than 5pc then it would have a trickle-down effect. As of now, we do not have accurate data but there are very encouraging signs, that the GDP growth rate would exceed 5pc.

According to a media report, Tarin wanted to target a growth rate of 6pc but the PTI government is now considering a sustainable growth rate to avoid a repeat of the 2017-18 macroeconomic crisis it inherited.

Despite the PTI government’s commitment to the poor, owing to resource constraints, an analyst points out the allocation in budget 2021-22 for the Ehaas programme at Rs246bn was a mere 2.89pc of the total budget outlay, lower than the 3pc budgeted for the Benazir Income Support Programme (BISP) in the last year of the PML-N government.

And the higher rate of inflation is eroding the value of cash handouts. As per budget documents, in 2017-18 the inflation rate was at 4.5pc in 2017-18 and at 6pc in 2018-19. According to the World Bank data, the inflation rate was 10.7pc in 2019, 9.74pc in 2020 and 9pc in 2021. To quote an analyst “inflation is the key macroeconomic indicator critical to the general public perception of well-being.”

The government is reported to be seeking $600m from the Asian Development Bank (ADB) to enhance social protection and access to education, health services and nutrition requirements for poor households.

Gender-related employment experts Hadia Majid and Karin Astrid Siegmann point out that “the dividends of growth are not always equitably distributed.” GDP growth may not result in equitable access to employment but may well see one gain at the expense of the other. And the GDP is not an end in itself.

They point out that a closer look reveals that increased jobs for women in export industries have largely been driven by lower average wages of around 70pc of men’s. This way, a gender wage gap that has widened over time has made cost reductions possible, enabling exporters of, for instance, textile and garments, to weather downward pressure on export prices.

According to the LFS, male unemployment rose from 5.1pc to 5.9pc and the female jobless rate jumped from 8.3pc to 10pc. Urban employment stood at 7.9pc, up from 7pc a year before and in rural areas it surged to 6.4pc from 5pc, owing to the higher female unemployment which spiked to 8.5pc from 5.9pc.

“Covid-19 has taught us that the old economic and social paradigm no longer works,” says United Nations Educational, Scientific and Cultural Organisation Assistant Director-General for Social and Human Sciences Gabriela Ramos.

Published in Dawn, The Business and Finance Weekly, October 11th, 2021

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