FEDERAL BUDGET 2009-10
The economy moving slow and steady
War on terror and the increasing level of corruption in the country is only adding to the hardship of the poor as a vast amount of resources are being diverted towards the areas in the north

By M. Osman Ghani

As per Pakistan Economic Survey, the economy of Pakistan has witnessed over 200 per cent increase in the price of palm oil; and an increase of 150 per cent in wheat prices, while over 100 per cent increase in the price of oil in the international market. Latest assessments point towards a strong likelihood of a sharp increase in the poverty incidence in Pakistan as a result of unprecedented food inflation and transmission of international energy prices to domestic consumers.

The Report of a UN Inter Agency Assessment Mission fielded during June-July 2008 found that food security in Pakistan in 2007-08 had significantly worsened as a result of food price hike. The total number of households falling into this category was estimated to be seven million households or about 45 million people in 2008. The report shows an increase in the share of severely food insecure population, from 23 per cent in 2005-06 to 28 per cent in 2008. The planning commission's constituted panel of economists, in its interim report based on 2004-05 poverty head count suggested an increase of around 6 percentage points in poverty incidence for the year 2008-09.

War on terror and increasing the level of corruption in the country is only adding to the hardship of the poor as huge resources are being diverted to unwarranted head of expenditures. According to a study conducted by the Institute of Public Policy of Beacon House National University, economic cost of war on terror has been estimated since 2004-05 to be $31.4 billion, far in excess of what Pakistan is getting from the friendly countries. Huge expenditure on war on terror and rehabilitation of IDPs severely curtail the capacity of the government to address poverty related issues, thus only increasing the number of poor and the deprived. Indirect costs of war on terror includes, drop in investment, inability to proceed with development work, loss of production time, increase in joblessness and logistic costs etc. According to a report of "Transparency International" covering the period up to 17th June 2009, corruption in Pakistan has increased by 400 per cent during the last 3 years. According to its assessment Rs45 billion went into corruption in 2006, this amount increased to Rs195 billion in 2009, only acceleration poverty, hardship and deprivation among a growing number of people.

To address the growing poverty level in Pakistan government has assigned due emphasis to the social sector development programme and by promoting the scope of the various safety net programmes. As compared to deep and growing poverty and deprivation levels in Pakistan provisions kept in 2009-10 budgets may not be enough. However, a total of Rs176 billion are directly related to safety net and poverty related activities including: BISP, IDPs, People's Work Programme, Microfinance, SMEs and Livestock and dairy development are good enough if properly and timely utilised to benefit the poor and the deprived. Moreover, entire PSDP allocation of Rs626 billion is also indirectly related to the employment and poverty related activities.

During FY2008-09, Rs22 billion was distributed to 1.8 million beneficiaries under BISP. During FY2009-10, it is proposed to increase the allocation of BISP to Rs70 billion to benefit five million families. The government plans to bring in legislation during the next financial year for creating a social security protection programme for the haris. The government also plans to revamp the ministry of social welfare by replacing it by a Ministry of social protection and development in order to provide a common platform for safety nets and enhanced institutional capacity for social service delivery. An allocation of Rs35 billion is proposed for Peoples' Works Programme in the FY2009-10 for this purpose. This well creates sizable employment opportunities and, therefore, will increase the incomes of the less privileged. For the FY2009-10, an amount of Rs10.8 billion has been allocated for different worker welfare development schemes in the housing, health, education and technical education sectors.

The government has set the target to increase of the microfinance services from 2 million to 3 million borrowers in fiscal 2009-10. Increasing productivity and value addition in agriculture will receive high priority. There is a move towards creating self-reliance in commodities, food security through improved productivity of crops as well as development of livestock and dairy. Overall PSDP allocation for agriculture will be increased by 25 per cent from Rs14.4 billion in FY2008-09 to Rs18 billion during FY2009-10. An amount of Rs2.5 billion is proposed for FY2009-10 to ensure food security and productivity enhancement of farmers. Poverty reduction through small holders live stock and dairy development worth Rs3,539 million, from which an amount of Rs400 million will be allocated in FY2009-10. More model dairy community, biogas and breeding farms; cooling tanks, rural services providers and pasteurisation plants are planned. In order to support the SME sector by providing access to credit, a fund worth Rs10 billion for credit guarantees is going to be established.

In addition to increasing the volume and outreach of existing safety net and poverty related programmes, agricultural and industrial productivity should be increased along with overall efficiency in governance and financial management. In order to expand the out-reach of services; the government can involve non-state providers of services also. Infrastructure development and sustainable macroeconomic growth and effective targeting of welfare service become more important and challenging today than it has ever been in the past. The government will have to develop a new set of institutional norms and regulatory frameworks and change the way they have been doing business in the past in order to achieve this important goal. Islam also provide the basic framework of a comprehensive programme of safety net consisting of Pity, Charity and Sadaquat (both compulsory and voluntary), the same need to be promoted wholeheartedly in Pakistan. If all out efforts are made by the government and the private philanthropists the country may ultimately create a fund of up-to one per cent of our current GDP, which will be equivalent to Rs135 billion, out of Charity and Zakats etc.