Islamabad:
The government increased the monthly allowance of Benazir Income Support Program (BISP) beneficiaries by 20% to meet an International Monetary Fund (IMF) condition, falling short of a commitment to increase the amount equal to the rate of inflation.
The BISP Secretariat has notified the increase in the monthly cash subsidy from Rs 2,916 per family to Rs 3,500 with effect from January 1, 2024. There is an increase of Rs 583.3 per family, or 20%.
The government has also increased the conditional cash transfer to families on account of health and education costs by Rs 167 per month. Not all families receive the conditional transfer.
The 20% increase in unconditional cash grant was Rs 831 crore, or nearly 33%, less than the required increase in allowance.
Under a $3 billion standby agreement with the IMF, Pakistan is supposed to announce an increase in monthly compensation equal to the rate of inflation effective January 1.
Average national inflation last fiscal year remained at 29.2% and was 32.6% in rural areas. The December inflation measure stood at 29.7%.
The government had pledged to the IMF during the first review talks that “the generosity of BISP’s unconditional cash transfer will be protected”.
The IMF staff report further said the government had told the global lender that BISP remains its primary program to provide public support to the most vulnerable people.
The IMF highlighted that the current level of unconditional cash transfer program generosity – 11.7% of the monthly consumption of the bottom two income quintiles – was expected to remain below the global best practice standard of 25% even after adjusting for January inflation. . However, the government has given even below the increase in inflation.
The condition of the program was that “the planned inflation adjustment of the Kafaalat (unconditional) subsidy in January 2024 will protect the current level of real generosity of the scheme”.
Pakistan has also pledged to add another 300,000 families to the BISP program, increasing enrollment to 9.3 million families. By the end of September, the government had increased the number to 9.2 million families.
Reading BISP disburses Rs 63 billion to more than 7 million families
Conditional cash transfers also help encourage parents to send their children to schools. Before conditional payments began, around 70% of children from the poorest families were out of school. This ratio has improved significantly, but still around 25% to 30% of children do not go to school.
Similarly, now conditional subsidies related to health and nutrition also provide additional cash transfers to these families.
For the current financial year, the government had allocated a budget of Rs 472 billion for BISP, which the IMF welcomed as even higher in nominal terms. Out of the Rs 472 billion, an amount of Rs 361.5 billion was earmarked for the unconditional cash transfer.
Pakistan’s poorest households have been hit hardest by the ongoing wave of inflation. The interim government massively raised gas and electricity prices.
The gas price hike for the lowest income group earning just over Rs 17,000 per month is a staggering 1,108%, according to the Pakistan Bureau of Statistics (PBS).
Food costs have also skyrocketed in recent months. The Sensitive Price index, which covers basic goods used mostly by the low- and middle-income groups, has risen 43.8% since this week, according to PBS on Friday.
Gas bills for the poorest people rose by more than 1,108%. Tomato prices increased by 133%, chili prices increased by 81%, wheat flour by 62%, sugar by 58%, garlic by 55%, eggs by 47% and rice by 44%.
Despite the rise in prices, the caretaker government has suggested to the IMF that it may impose a federal excise duty of Rs 5 per kg on sugar, in case the FBR’s revenue collection falls short of the target. It also agreed to raise gas prices further before February 15, according to the IMF report.
The allowance of Rs 3,500 per month, or Rs 42,000 per year, helps these people bear some of the additional burden. However, the BISP program lacks an exit strategy for people who over the years received cash handouts instead of getting help to set up small businesses. The government has committed to the IMF that it will disburse Rs 185.5 billion among BISP beneficiaries in the first half of the current financial year.
Published in The Express Tribune, January 28u2024.
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