By: Dr. Muhammad Shahid
Pakistan ranks fifth in the list of countries having population of more than 212 million people with human development indicators that ranks below world average. Prior to the current crisis caused by the pandemic, people faced economic hardships due to economic reforms and stabilization program of the government. Stabilization policies, including tight monetary and fiscal policy discouraged economic activities and shrank employment and other economic opportunities for the people.
The recent Covid-19 pandemic and the resulting economic crisis will send millions below poverty line. Asian Development Bank has revised the loss to GDP upward. The current crisis diminished economic activities and left millions without jobs in Pakistan. IMF data revealed that Pakistan’s economic growth will contract by minus 1.5 percent this year. Development at the global level as well as shrinking domestic activities will lead to a decline in consumption, investment and export.
The current pandemic and the subsequent lockdowns in the country provided clear picture of the deep fault lines in our economy. This also exposed the vulnerability of the people. Majority of the poor and low skilled workers do not have enough resources, food and savings to live few days without work. Few weeks of ceased economic activities left no option with these indigent people but to stand in queues for food to rescue their families from hunger and starvation. This is alarming that we don’t have effective economic and social policy for the majority of our population who are poor and facing increased risk of insecurity.
The effectiveness of robust social safety nets in times of crisis is hard to deny. Director ILO Shahra Razavi considers social safety net program as investment rather than cost to the government. Considerable segment of population in Pakistan are clustered very close to the poverty line. This has both positive as well as negative aspect with significant policy implications. The positive aspect, a small positive shock to the economy could lift millions out of poverty. The negative aspect, a small negative shock can send millions below the poverty line. The recent crisis caused by Covid-19 will increase unemployment to approximately 16 percent which means a significant number of around 20 million people. Research conducted by eminent Pakistani economist and former finance minister Hafiz Pasha along with former governor of the Central Bank, State Bank of Pakistan, Shahid Kardar indicates that the current crisis will add approximately 20 million people to take the poverty figure above 100 million in Pakistan. Lockdowns and the disruption in economic activities also reduces access to essential services, loss of physical assets, rising number of school dropouts among the poverty-stricken communities further aggravate the already weak human capital, exacerbate chronic poverty.
We have seen that the recent crisis has exhausted the capacity of the small businesses, retail sellers and daily wage earners. The unskilled and poor households hit hard to deal independently with the negative social and economic consequences. In third world or poor countries, communities are not resilient and usually the informal arrangement wipe out very quickly with crisis. Similarly informal arrangements become less effective if the crisis gets prolonged. The resource constrained government in Pakistan responded well. Government established Prime Minister’s Covid-19 Pandemic relief Fund-2020 to provide relief to the affected people.
Social safety nets are important and need to be incorporated in the anti-poverty strategies. Prime Minister Imran Khan also announced the country’s biggest ever Ehsaas Emergency Cash Programme worth of 144 billion rupees to disburse 12,000 rupees each to 12 million beneficiaries to reduce their miseries instigated by the current pandemic. The largest social safety net program in the country, Benazir Income Support Programme (BISP), transfers cash to vulnerable and marginalized families irrespective of their political affiliations, racial identity, geographic location, and religious beliefs.
Social safety nets are vital in addressing deprivation and minimize the sufferings experienced by the indigents in the society. The grave economic and social conditions in the country forced policy makers to respond aggressively.
Government of Pakistan was quick in response to the pandemic adopting measures as expansionary monetary & fiscal policy, surge health spending and support to small businesses to compensate for the loss in income and revenues.
What the government should do? We know there is no free lunch and no doubt that social safety net programs involved a considerable cost. Easing the burden of lockdowns on labor class, unskilled daily wage earners, vendors, small shopkeepers and above 80 million poor people undoubtedly involved significant cost. Wise public policies, economic and social, are needed to uplift and strengthen the existing ill-equipped health care system and alleviate the socioeconomic disruption. This is possible only with effective social protection measures including unconditional cash transfer and food rations to the destitute and impoverished segments of the society. The provision of direct cash transfer to the indigent and needy will make the lockdowns somehow bearable and people will be receptive to government instructions.
Here this is worth to mention that social safety net is one component of the comprehensive strategy to make the society more resilient. The other components include stimulation of economic growth and investment in humans to make the society more resilient and shock absorbing.
The author has a PhD Degree in Economics from PIDE and has 15 years’ experience as a journalist and economic editor. He also teaches Public Policy, Governance, Poverty and Development, Gender, Political Economy and Development Economics as a visiting faculty member.