ENSURING SUSTAINABLE INCOME FOR PEOPLE ON THE DOLE

TARIQ AHMED SAEEDI - tariqsaeedi@hotmail.com
Mar 23 - 29, 2009

Public spending on social safety net or improving people standards of living by the government is necessary to bring down graph of poverty or to minimize headcounts of poverty in a country. Poverty reduction is not just a social service, but adequate funding of pro-poor sectors leads to increase in productivity of an economy.

The previous records of spending on reduction or alleviation of poverty in Pakistan showed positive outcomes in terms of decline in poverty in percentage, for instance, from 34.46 percent of the population in FY01 to 23.9 percent in FY05. A press release quoted Dr. Junaid Ahmed Poverty Alleviation Fund as saying that at present, 50 percent of Pakistan's population is living below poverty line with daily income of below $2. Ministry of finance in the poverty reduction strategy paper (PRSP-II) ascribed structural weaknesses such as fiscal and trade deficits to inadequate government spending on social services, accepting that disallow poor to endure economic hardships.

While total tax and non-tax revenue collection determines the flow of federal and provincial expenditures, often priority in allocation changes the direction of federal and provincial funds. It is relevant to note that Pakistan's defence budget has been increasing every year and war on terror that incurred an estimated Rs484 billion during FY08 would cost Rs678 billion during FY09, which is more than an eight month collection of large taxpayers unit in this fiscal year.

The fiscal deficit of first half of this financial year was approximately Rs250 billion since government earned cumulative Rs8.34 trillion federal and provincial revenues and registered Rs10.8 trillion expenditures. That budget deficit compels government to slash expenditures is a fact. But, even though repeatedly enunciated from many platforms that government should focus on curtailing non-development expenditures and development outlays for pro-poor sectors be recouped as a last resort, waste of public money of Rs43 million reportedly on purchase of cars for cabinet members in Punjab is citied as a contrary case. In a country, where clean water is out of reach for 44 percent of the population, and 42 percent is undergoing improper sanitation this is just a preposterous instance.

Amar Guriro delineated miserable conditions of despondent dwellers of hinterlands of Thar who vegetate with not a single government health facility, no school around, and without sanitation in his news story, which is a true reflection of living standards of a large population in Pakistan. World economic report 2008 on global competitiveness reported Pakistan's weak global economic standing due to its poor public health. Saying that scarcity of funds has been an impediment in developing health, education, and other public development sectors has no credence as over a period a sizeable amount has been allocated for pro-poor sectors. During FY1-08, total budgetary and non-budgetary actual expenditures under PRSP-1 were not less than Rs2,432 billion. Government allocated and spent Rs573 billion or 5.46 percent of GDP in last budget for roads, highways, water and sanitation, health and education, irrigation, food subsidies, etc.. Originally, the major obstacle is misappropriation of funds, mainly because of political interference. Tawana scam can be recalled as an example.

Critics are dissatisfied with the outcomes of non-budgetary expenditures on Zakat, Pakistan Bait-ul-mal, EOBI, and micro credit disbursement. However, government is satisfied with outcomes of poverty reduction and strategy paper initiated in 2003, mentioning, for example, full immunization in rural areas from 46 percent in FY 02 to 73 percent in FY07 in the paper. Labour force increased from 38.88 million in FY02 to 47.65 million in FY07 surpassing the target of 42.03 million in FY06. Annual population growth rate of the country is 1.9 percent. Numbers of unemployed declined from 3.51 million in FY02 to 2.65 million during FY07.

Favourable macro economic indictors were supportive to poverty reduction programmes at that time. Average GDP growth rate 2004-07 was about seven percent. In fact, FY08 registered 5.8 percent growth. Recent industrial production slowdown causing unemployment, inflation spike, and fiscal deficit are dimming prospects that poverty reduction strategy paper II would arrest upsurge in poverty, dragging directly people close to income borderline.

Designed for a timeframe (FY09-FY11), PRSP-II focuses on areas of education, employment, water and sanitation, gender, and social safety programme to reduce poverty. The paper envisages GDP growth rate of 7% by 2012-13, employment opportunities, improvement in income distribution, global competitiveness through economic liberalization-presently Pakistan's share in international trade is around one percent-, and privatization and deregulation. Direct provisions in the budget were for employees old age benefit institution, workers welfare fund, and zakat.

Benazir Income Support Programme that initially earmarked Rs34 billion, specifically Rs1000 per month per household has reportedly come under IMF disagreement over mechanism of recognizing qualifying household. Moreover, government planned to adopt market based interventions such as micro finance, minimum wage, and lifeline tariff on electricity as actions to attain PRSP-II targets. Although, government initiatives like setting minimum wage benchmark of Rs6000 per month, regularization of government employees, medical insurance of Rs15,000-20,000 per year to poor are pro-poor, there is a concern that how government would continue with direct provisions in the face of mounting foreign debts servicing and high fiscal deficit. Certainly, liquidity crunch will leave no fiscal space to fund infrastructure development-roads, highways, dams, energy, transport-, which is essential to make poor eliminate poverty. Provision of low cost housing is not only a direct relief to homeless people, but it will give impetus to construction industry that runs wheels of more than 30 industries. Similarly, micro finance will make poor eliminate poverty by themselves. Success of PRSP-II lies in ensuring sustainable income for people living on the dole.