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February 23, 2021

Teach them to fish

Business

February 23, 2021

LAHORE: There is no denying the fact the poor need the government’s help but the way it is being provided is adversely impacting our economy without making any dents in the poverty.

Almost every government in Pakistan announces public appeasing programs to reduce poverty. No concrete measures are taken to improve the quality of food, health and education for the poor. The poor consume carbohydrate-rich foods to fill their stomachs. The rich have access to nutritious foods good for health and growth. The poor visit dysfunctional government clinics and hospitals or quacks when ill. The rich enjoy treatment in five-star hospitals having best medical facilities. The poor go to substandard government school while the rich prefer to pursue foreign high school certificates at expensive private institutes.

Like previous regimes, this government doles out a fixed amount to the poor under Ehsaas program (earlier Benazir Income Support Program). Such dole-outs have made the poor dependent on government support as they get them without doing any work. The economies that addressed poverty provide conditional cash transfers.

In India the rural poor are provided paid jobs in development projects for three months per year. Some countries provide cash to the parents that send their girls to school -we too did that on an experimental basis during the tenure of Shaukat Aziz in South Punjab. Some link cash to the poor on the basis of full immunisation on their infants like free preventive injections and vaccines the government provides to all children under the age of five. Resistance against Polio and typhoid vaccination could be diluted this way. Besides this there are less expensive ways of alleviating the sufferings of the poor.

We provide billions of subsidies on wheat that is availed by rich and poor equally. Such subsidies should be targeted. We provide subsidies on daily use items sold at thousands of utility stores that are equally accessible to rich and poor. We do not realise the actual poor cannot buy groceries available at these stores in bulk. The rich and middle class avail this facility with pleasure. All governments look the other way when it comes to the poor quality of food that does not contain essential nutrients. The missing vital micronutrients impact the health of the poor adversely and impact their productivity. It is indeed deplorable that micronutrient initiatives launched in Pakistan in 1997 have not been taken seriously by the planners.

The 2004 Nobel Laureate in Economics Finn E. Kydland had said there would be high benefits from providing micronutrients – particularly vitamin A and zinc – to undernourished children in South Asia and Sub-Saharan Africa. These help prevent neonatal death.

The cost is tiny: reaching 80 percent of the world’s 140 million or so undernourished children would require a commitment of around $60 million annually, while the economic gains would eventually clear $1 billion a year. For the undernourished children in Pakistan the cost would be around $15 million or Rs2.4 billion. Providing iron and iodised salt is another top investment according to Kydland. He said fortifying products with iron costs as little as $0.12 per person, per year. For Pakistan the total iron fortification cost would be $19.2 million or Rs4 billion. Iron deficiency leads to cognitive and developmental problems. We can spare this amount from the Ehsaas budget or other unconditional subsidies that the state provides to the poor.

In times of high food and oil prices the government would have to choose between temporary high growths at the expense of its fiscal cushion or to curb consumption and create surpluses for a little slow but sustainable growth. A growth based on smart and prudent interventions helping the poor to regain health and vigor would help them improve their productivity and incomes.

Former Chief Economist IMF Kenneth Rogoff in an article regretted that in order to maintain high growth all governments, rich and poor, pass out even more checks and subsidies so as to keep the boom going.

He said Keynesian stimulus policies might help ease the pain a bit for individual countries acting in isolation. But if every country tries to stimulate consumption at the same time, it would be counterproductive and put further pressure on prices, Rogoff adds.

He said desperate to sustain their political and economic momentum, most have taken a wide variety of steps to prevent their economies from feeling the full brunt of the commodity price hikes. As a result, higher commodity prices are eating into fiscal cushions rather than curtailing demand.

The government must aim at sustainable growth instead of going for populist programs that given the level of corruption in the country seldom reach the poor. Selected low-cost interventions would bring higher benefits for the poor than the programs that the government is pursuing.