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Wednesday June 29, 2022

Small sigh of relief

May 29, 2022

The Shehbaz Sharif government has taken the apparently inevitable 'tough economic decisions' the government was being asked to take. It was then only in the fitness of things to announce a relief package aimed at giving at least some reprieve to a people already reeling under soaring inflation. Though Finance Minister Miftah Ismail in his press talk on May 28 tried to sound sanguine, the truth is that the recent hike in fuel prices has added to the financial woes of the citizens of Pakistan. While there was no other option left by the previous PTI government for the new dispensation, it must be highlighted that the people of Pakistan have high hopes with each new government. The ‘Sasta Petrol, Sasta Diesel’ relief package has set certain criteria for the people to avail of it. One good feature of this package is that women whose household income is less than Rs40,000 a month can text their CNIC numbers on 786 or call the number to receive Rs2,000. How this mechanism works is not clear as yet but on the face of it, it sounds good. This new mechanism will be only as successful as the responses to those who try to utilize the package.

The package is a much-needed relief but there are questions over where and how the government plans to get resources. With soaring inflation, the amount of just Rs2,000 may not be enough to make much of a difference but it is better than no relief at all. The next budget-making exercise is around the corner and there should be a substantial relief amount in it for the lowest socio-economic strata. There is also a need to augment the Benazir Income Support Programme (BISP) that is benefitting millions of people and there should be no compromise on resources allocated to it in the upcoming budget. It will also be a challenge to verify the level of income of households earning less than Rs40,000 a month. As most people work in the country’s informal economy without any pay slips or tax documents, or even appointment letters to verify their incomes, it will be an uphill task to check millions of applicants.

An estimated 14 million households are likely to benefit from the relief package. This is in addition to the existing beneficiaries of the BISP. Such targeted cash transfers are much better than the subsidies given to the rich – which are in any way anathema to IFIs like the IMF. Another issue that looms is a potential increase in power tariffs for common consumers. Power tariffs in Pakistan are already one of the highest in the region and any further surge would be detrimental to both domestic and industrial users. The government must find a way around this mess that the PTI government has left, while also taking care of the fast-depleting government coffers which put the country in such a precarious situation. The government is hopeful that the IMF will authorize the release of bailout funds, but such funds are only a temporary solution. What the government needs is a long-term strategy that should also include a reduction in non-productive expenses that are bleeding the national exchequer.

The IMF package is tough, but for now Pakistan has no choice. The key task of the PDM, depending on how long it intends to hold office, will be to write out a feasible and viable economic policy for Pakistan and offer relief to the tens of thousands of people who the government says had been rendered unemployed by Imran. One of the key problems Pakistan has faced over the years is the fact that there has been a complete lack of consistency in economic policy. Each incoming government brings in its own schemes, its own ideas, its own economic agenda. This has added to the crisis the country now faces. Pakistan needs consistency and an economic plan that will work. For now, a dole out of Rs2,000 will not go far but is at least a start.

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