PESHAWAR: The home-grown economic stabilisation programme said to be endorsed by the IMF speaks about social safety nets to protect poor, but most of the ongoing and forthcoming projects of support are unlikely to shield them from harsh impact of the bailout package.
Experts say cuts on development budget, phasing out the subsidies on utilities, raising taxes and interest rates, some of the major conditions of the IMF, will hit hard the commoners, driving even the middle class towards the poverty trap.
Dr Mohsin Khan, a Peshawar-based economist, foresees that the number of poor will grow in 2009 because he believes: “the government doesn’t have a long-term plan to increase earnings of the people. The IMF package may help tackling some structural issues, but it will affect the purchasing power of the people.”
Protecting the poor and vulnerable segments from the impact of economic stabilisation measures through safety nets is the second and important pillar of the so-called programme, which brought back into business the international lender that is criticised for its anti-poor policies.Safety nets are considered as short-term instruments to protect target groups from economic pressures. Cash grants in shape of Zakat and different packages of Bait-ul-Mal are the major existing examples of safety nets. Both the instruments are in place still the country doesn’t have any success in containing poverty. The reasons for the failure are flaws in these models.
A system of cash grants under Zakat was initiated in 1980 to use private contributions to assist the poor. Under this initiative, funds are collected based on voluntary collection of 2.5 per cent on private savings and assets listed in the First Schedule of Zakat and Ushr Ordinance. The Zakat funds are used to assist the needy, the indigent and the poor, particularly orphans, widows and the disabled and for assistance of those affected or rendered homeless due to natural calamities.
Zakat provides various programmes of cash transfer to assist the poor and needy. Of the total allocated budget, the guzara allowance and education stipend represent 80 per cent. These grants given to the target groups in different forms are the biggest intervention, but still it cannot be considered as an effective initiative in many ways.
Zakat committees at district, tehsil and local level are responsible for selection of beneficiaries and disbursement of funds. Despite the fact that many volunteers are involved as Zakat committee members, a major portion of the funds are spent on administration of the programme.
For example, the administration cost for 2006-07 of NWFP was Rs44.5 million (allocated by the provincial government) and Rs32 million (allocated by the Federal Zakat Funds). This was 10 per cent of the total budget of the Zakat programme.
A study conducted by Social Policy and Development Centre in 2003-04 had pinpointed inequity among different groups of Zakat recipients.
It says “the upper quintile receives more funding per applicant and their applications are more likely to be accepted. Guzara payment for the ultra poor (Rs3,175) and poor (Rs3,653) are lower than non-poor (Rs4,388).”
It further says, in terms of number of beneficiaries, 29 per cent upper quintile receives guzara allowance and 18.4 per cent of lowest quintile receives it. Almost 50 per cent of those who applied for cash assistance among the lowest quintile do not receive the funding.
Similarly, it considers the Zakat disbursement a time consuming process, saying it takes over 11 months to receive guzara allowance for the ultra poor and eight months for the non-poor. For rehabilitation grant, it takes over a year (14 to 17 months) for the poor and ultra poor to receive two rehabilitation grants.
“When people are asked why not getting the assistance from Zakat, 72 per cent answered that no one listens to the poor,” the study says.
Another major flaw in the government’s Zakat system is that there is no clear selection methodology at the local level to determine who is eligible. It is up to the local Zakat committees and their discretion. Establishing clear methodology might improve targeting and transparency. Likewise, lack of trust in the current Zakat system has a negative impact on fund collection.
As a result, people prefer to distribute directly to the poor and deserving. Private contributions amount approximately Rs60-70 billion. Regaining trust and confidence in the Zakat system is crucial for Zakat to be financially sustainable.
Pakistan Bait-ul-Mal (PBM) is another form of safety net, which was established in 1992 by the PPP government, to provide social protection to the poor and marginalised segments and is still working.
Their assistance, under the programme, varies from cash transfers through Food Support Programme (FSP) to financial assistance to individuals and institutions through Individual Finance Assistance (IFA) mechanism so that the poor and vulnerable are protected from unpredictable shocks.
In addition, Bait-ul-Mal provides education to working children and vocational training to poor women through National Centres for Rehabilitation of Child Labour (NCRCL) and Vocational/Dastakari Schools (VDS).
As the case for Zakat, on national average, it takes up to one year for some recipients to receive their first payment. Overall, 50 per cent of the recipients, according to a study, had to wait for 1-6 months. It is also noted that one in ten household had difficulties in receiving funds after they were approved. Issues of bribery are also a concern as in some cases, recipients paid on average 10 per cent of the transfer to the PBM officer or the person in charge of payments.
In nutshell, Zakat and PBM provide a social safety net to a large number of poor, but keeping in view the number of people living below the poverty line only six per cent of the poor is covered by these two instruments alone in NWFP, the poorest province.
Benazir Income Support Programme (BISP) is the latest model of the safety net, which has been initiated by the government and cleared by the IMF. President Asif Ali Zardari launched the project on Oct 9 with an initial allocation of Rs34 billion.
Under the scheme, a poor family with a monthly income of less than Rs5,000 would be given Rs2,000 every two months. Initially, about three million families will benefit from the scheme.
The government claims to have kept the BISP model out of political motivation, but the disbursement procedure requires MNAs and Senators to recommend 8,000 each deserving families from their constituencies, which makes the initiative highly political.
As the first disbursement under the BISP is yet to be started, concerns and reservations are expressed about its viability from different segments of society even from the political parties. There are complaints that the MNAs and Senators are obliging only their supporters and ignoring their political opponents.
“The BISP has been launched in the name of our Shaheed leader, but it will benefit only our political opponents in areas, where we don’t have an MNA or a senator,” says Khawaja Yawar Naseer, the PPP spokesperson for NWFP.
Since each MNA and senator has been given 8,000 application forms, the initiative is also going to benefit the Punjab because of its greater representation in the National Assembly. NWFP and Balochistan are the two poorest and backward provinces, but the allocation of funds, on the bases of population, make them the lowest recipients of the programme.
Dr Mohsin argues the past experience of safety nets shows that governments lack capacity and competence to run income generating programmes. Improvement of people’s socio-economic conditions, in his views, is possible only if government channelises maximum resources for long-term initiatives and giving lead role to the private sector.
He says the IMF-backed economy stabilisation programme doesn’t have any major component for reducing vulnerability of local income groups to get trapped in the poverty nets except so-called short term cash grants.
“Whether it is Zakat or Bait-ul-Mal or now BISP, these all are ad hoc arrangements,” opines Mr Khan, saying “It cannot prevent or protect poor anymore in the coming days.”
Safety nets, he suggests, should not be for designed only for target groups, saying “Everyone should get benefit from on the bases of his or her income.”
He opines microfinance credit, soft loans for productive sectors particularly agriculture and income generating projects are the better alternatives of existing and forthcoming safety nets.