By Kashif Habeeb
Pakistan is a country where the debt to GDP ratio is increasing every year. In fiscal budget 2021-22, 41% budget was used just for interest payments on loans that Pakistan has taken in previous years and the total budget deficit for the same fiscal year was RS3.5 trillion.
Despite this situation, Pakistan’s governments prefer to invest in the projects which give them political benefits and later become white elephants for the country’s economy. For the completion of these projects, Government approaches different international financial institutions for loans and then entraps in the vicious circle of debt. Ultimately the gap between the revenues and expenditures is widening year by year and the government is forced to cut its spending on education, health, research & development, and other related departments. Metro Bus Service, Benazir Income Support Program, Ehsaas Langar scheme, and now recently launched Sehat Sahulat Program are some recent additions to these white elephants.
Benazir Income Program was started in 2008 by the People’s Party government with a total allocation of $425 million which has increased to RS150 billion in 2021. During the first year of the program, the beneficiaries of the BISP were identified and selected by the Parliamentarians through a process of recommendations and each Parliamentarian received 8 thousand forms to distribute in his/her constituency, which was a big flaw in itself as political favoritism is all at peak in Pakistan.
Later on, Poverty Scorecard was used and every beneficiary receives RS4834 quarterly. This amount can neither uplift the lifestyle of beneficiaries in the long run nor a permanent solution to the problem but annually Pakistan is throwing RS150 billion into this black well while compromising on the budget of health, education, and other necessary departments. Similarly, the Islamabad Metro Bus service is contributing Rs 2 billion loss every year in the form of subsidy. This subsidy is other than the US$240 million which Pakistan borrowed for the completion of the Islamabad Metro Project and on this amount we are already paying interest while the principal amount is still there.
Sehat Sahulat Program which was launched with the title of Prime Minister’s National Health Insurance Program in 2013 is also another white elephant for Pakistan’s economy because no premium is determined for the beneficiaries. Recently different research studies (including my own study) found that beneficiaries of the Sehat Sahulat Program are willing to pay for this health insurance but the government didn’t seem interested to set any premium. On one side this premium can reduce the moral hazard and on another side, the revenue collected in the form of a premium can be used to fund the project. Globally it is considered that any risk-sharing mechanism is appropriate only when a part of the cost is covered by the beneficiaries and countries like Pakistan cannot afford such expensive and subsidized projects.
Ehsaas-Saylani Langar Scheme, though a great initiative by the recent government but the same question is here can Pakistan afford such a program in which the beneficiary is not contributing anything? Before starting any social welfare program Pakistan needs to think about the innovative ways through which the appropriate revenue can be collected which at least covers a part of that program. Otherwise, such programs will become a burden on the economy and because of a lack of sufficient resources, we have to face the budgetary cut for other departments which will lead to a decrease in the growth of the country. Poverty alleviation is a long-term phenomenon and poverty cannot be reduced with such subsidized initiatives.
Currently, there are about 200 state-owned enterprises in Pakistan and because of operational inefficiencies, mismanagement, ailing infrastructure, and political interventions, the majority of them are at loss. According to the fiscal year 2021-22, Pakistan Steel Mills contributed an annual loss of more than RS 200 billion, Wapda RS 200 billion, PIA RS 48 billion, and Pakistan Railways RS 33 billion simultaneously. Collectively, state-owned enterprises consumed RS 1.4 trillion of taxpayer money only in 2021. Such new initiatives may give political benefits to a political party but in long run, these initiatives can be fatal for a country’s economy.
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The writer is an Economist and works as Assistant Director for the Government of Punjab.