Strategically targeted social safety nets offer a potential solution to current economic challenges
akistan’s economy is currently facing multiple crises, with economic growth stagnating as prices skyrocket. The World Bank has forecast that Pakistan’s economy will grow by only 0.4 percent in the current year, down from its earlier forecast of 2 percent. Meanwhile, the Pakistan Bureau of Statistics reports that the CPI inflation has surged to 35.4 percent year-on-year, up from an increase of 31.5 percent in the previous month and 12.7 percent in March 2022.
In this challenging economic environment, strategically targeted social safety nets have the potential to cushion the poor from stagflationary shocks and potentially lead to demand-led recovery.
The Benazir Income Support Programme (BISP) is the government of Pakistan’s flagship social safety net programme. It is the largest and most systematic social protection initiative in the country. The BISP is an unconditional cash transfer (UCT) programme that provides quarterly cash payments directly to female beneficiaries within households that are deemed eligible through the implementation of the BISP poverty scorecard. This scorecard targets households for the programme based on their level of poverty.
The BISP has also launched complementary programmes, including a conditional cash transfer (CCT) known as the Waseela-i-Taleem programme. This programme aims to support access to education by providing top-up payments to eligible children between 5 and 12 years of age, who are currently attending school.
Previous evaluations of the BISP during the high inflation period of 2008-2009 showed that the programme had a significant impact on reducing poverty, especially among women. The programme has also helped empower women by providing them with financial independence and decision-making abilities. Additionally, the BISP has increased financial inclusion by giving beneficiaries access to financial services like bank accounts and ATM cards.
However, a 2019 evaluation by Oxford Policy Management found that the BISP was not reducing poverty, whether measured by a food-based or cost of needs-based poverty line. Several factors contributed to this result, including the decrease in the real value of the transfer by 9 percent between 2011 and 2019, and implementation challenges that led to a decrease in the proportion of the transfer that beneficiaries received between 2016 and 2019.
It is crucial to recognise that the value of the transfer is critical to the success of any social safety net programme. Under the original design of the BISP, it was expected that the original monthly stipend of Rs 1,000 would equate to 20 percent of the average consumption expenditure of eligible households. Unfortunately, BISP payments have been far from this benchmark, ranking the lowest in terms of the size of the transfer relative to per adult equivalent consumption expenditure of its beneficiaries. This finding is essential because it suggests that the value of the transfer must meet a crucial threshold of 20 percent of per adult equivalent consumption expenditure to have a transformative effect on beneficiary households.
Furthermore, an experimental approach to testing reforms to the BISP should be undertaken, which is evidence-based and includes pilots that are rigorously evaluated. This approach can help the authorities understand the impact of transfers at various levels, as well as exploring conditions not just for education but for bundles that combine education with conditions for human capital needs more broadly, including health, vaccinations and nutrition.
It is also crucial to empirically test how cost-effective the BISP is compared to other types of social assistance models. Over the last decade, the emergence of a graduation approach targeting the ultra-poor and supporting them with a multifaceted package of interventions, including cash or asset transfers, has shown promising results in allowing them to escape poverty. A typical programme provides a one-off transfer of a productive asset or a lump-sum cash grant, small regular cash transfers, training to acquire skills needed to succeed in the chosen income-generating activity.
To ensure that the BISP remains effective in the long run, it is essential to re-target the programme towards the poorest 20 percent of households in Pakistan and maintain the real value of the transfer. Despite the programme‘s significant strides in reducing poverty and empowering women, there is still much work to be done to ensure its continued effectiveness in the face of economic challenges. By investing in targeted social safety nets like the BISP, Pakistan can ensure that its citizens have access to the resources they need to weather economic shocks and build a more prosperous future. This includes ongoing evaluations of the programme‘s impact, as well as exploring innovative approaches to reform and improve the programme. With these efforts, Pakistan can make progress towards a more equitable and resilient society, where more of its citizens have the opportunity to thrive.
The writer is a senior economist at the American Institutes for Research