ISLAMABAD: In order to comply with the ADB’s loan conditions, the government has released the countercyclical development expenditure report under which utilization of funds for social protection and targeted subsidies stands at just Rs197.8 billion against the budgetary allocation of Rs510.778 billion.
According to the first-quarter report from October to December 2022, in order to comply with the ADB’s loan condition under Building Resilience with Active Countercyclical Expenditures (BRACE) program, the Ministry of Finance stated that the countercyclical development expenditures consisted of three major components under (i) social protection, (ii) food security, and (iii) support for businesses. Progress would be discussed in this part of the report by (i) comparing the budgeted and actual expenditures, and (ii) measures taken by the government to implement Countercyclical Development Expenditure Program (CDEP).
An amount of Rs3.7 billion had been allocated to the Pakistan Bait ul Mal under IB-5194, Demand/Grant No 083 for FY 2022-2023, and as per strategy for the release of the budget being issued by the Finance Division, 40%, i.e., an amount of Rs1.48 billion, was released to the Pakistan Bait ul Mal till 31st December 2022 which has been fully utilized on different initiatives.
For BISP, the government had allocated Rs364 billion during this period out of which the actual expenditures up to December 31, 2022 stood at Rs152 billion.
In addition, the BISP has also disbursed an amount of Rs50.420 billon on account of Emergency Flood Relief Cash Assistance i.e. 50.188 billion in the 1st Quarter and 0.232 billion in the 2nd Quarter as per direction of the federal government.
The scheme was an extension of the Fuel Subsidy Scheme launched in mid-June 2022 to provide Rs2,000 per family to cushion against the negative impact of unprecedented rise in the prices of petroleum products.
The amount could be utilized for purchase of fuel or any other household item as per requirement of the targeted family.
The government allocated Rs25 billion for the program but only Rs16.76 billion was utilized to cover 8.36 million families.
To continue the benefits of the scheme in next financial year i.e. 2022-23, an amount of Rs48 billion was allocated to the BISP under the Fuel Subsidy Scheme. However, due to the unprecedented rains in July and August 2022 and subsequent floods in low-lying areas, the amount for fuel subsidy was re-allocated to Flood Relief Cash Assistance, whereby the government committed an amount of Rs70 billion.
For PM’s Youth business loan scheme, a total of Rs297.9 million was disbursed in the first and second quarter of the last financial year.
The government disbursed Rs1.3 billion and Rs3 billion under PM’s Kamyab Jawan Youth Entrepreneurship Scheme. Under this scheme, the target of Rs30 billion has been assigned to 15 banks for small and medium (SME) and agricultural loans combined, of which Rs15 billion will be disbursed to the agriculture sector.
The PMYBALS portal has been launched as of 10 February 2023. As the scheme was revised and relaunched in December 2022, therefore, the expected financing and budgetary impact would be during 2023.
Till December 2022, a subsidy amounting to Rs14.03 billion was given to the five export-oriented industries in gas/RLNG supply tariff on the Sui Northern Gas Pipeline (SNGPL’s) network out of which Rs4.55 billion was released to the SNGPL against the tariff differential whereas Rs9.47 billion subsidy was estimated to be required for the export-oriented sectors.
Dwelling upon the challenges, the compliance report highlighted that overall, the impact of Russian-Ukraine war on the economy of Pakistan was significant, mainly due to high fuel prices.
The fuel prices have relatively high multiplier effects and high fuel prices can cause reduction in economic activity across different sectors. High fuel prices not only reduce direct consumption of petroleum products but also shrink other sectors such as electricity production, industrial demand, goods transportation, travelling, mining, construction, and many others.
Edible Oil: After fuel, edible oil has the most impact on the GDP and household consumption, but it is almost double for the poor. Owing to the relatively higher elasticity of oil with its price, the demand shock is greater than wheat and almost double in poor households. As Pakistan remains largely dependent on imported palm oil (all from Malaysia and Indonesia), it remains highly prone to any upward shock in prices and can also cause deterioration in the healthy diet structure of children.
Poverty: The Russian-Ukraine war crisis has a serious impact on poverty that can increase the burden on the already tightened fiscal space.
The Post-Disaster Needs Assessment Report of the 2022 floods, released by Ministry of Planning, Development & Special Initiatives, stated that the national poverty rate might increase by 3.7-4.0 percent by pushing 8.4-9.1 million more people into poverty due to devastating calamity. Any potential cash handouts or expansion of Benazir Income Support Programs (the existing transfer payment program) can further increase the existing high fiscal deficits.
Inflation: The rising inflation, particularly food inflation (highest in the history of Pakistan), increase in the administered prices of petroleum products, electricity, and gas and continuous depreciation of the country’s currency have a negative impact on household consumption which will lead to greater poverty, particularly in rural areas.
