EducationNationalVOLUME 15 ISSUE # 21

Pakistan’s widening poverty line

The coronavirus pandemic is projected to push over 10 million more people below the poverty line. Lockdowns and restrictions aimed to contain the spread of the disease are feared to cause a loss of 1.4 million to 18.53m jobs in the country. These are government’s own estimates mentioned in the Economic Survey 2019-20 and the situation could be even worse if analyzed independently.

With a view to bridging the gap between the rich and the poor, the government has planned to extend the social safety net programme to 12 million poor from the existing 4.3m. In the budget 2020-21, the government has also enhanced the monthly financial assistance to Rs3,000 per month from Rs2,000 per month presently being paid to Benazir Income Support Programme (BISP) beneficiaries. The measures are commendable but they do not offer a permanent solution to alleviate poverty.

According to the Economic Survey 2019-20, Covid-19 is expected to have a negative impact on the Pakistan’s economy, and the number of people living below the poverty line may rise from the existing figure of 50 million to 60m. Calculated on the basis of the Cost of Basic Needs (CBN) approach for poverty estimation, which was estimated to be Rs3,250.3 per adult per month by the Planning Commission, 24.3 per cent of the population is below the poverty line. However, poverty headcount will rise depending on the aggregate consumption of households in the post-coronavirus scenarios estimated by the subcommittee of National Coordination Committee on Covid-19 on Economic Analysis.

If a household’s consumption goes down by 5pc, the headcount will rise from existing 24.3pc to 29pc, and that would lead to around 10pc people falling below the poverty line. If a household’s consumption goes down by 10pc, the headcount in the case could rise to 33.5pc.

Lockdowns and restrictions required to limit the spread of the virus are also expected to cause a loss of 1.4 million to 18.53m jobs in the country. According to the Economic Survey, in case limited restrictions are imposed, 1.4m jobs will be lost, which is 2.2 per cent of the employed workforce. In monetary terms, the wage losses will translate into Rs23.6 billion. Under moderate lockdowns, employment loss could be up to 12.3m, around 20pc of the employed labour force, and wage loss will be Rs209.6b. And if a complete shutdown is imposed, it is expected that 18.53m people or 30pc of the labour force will be rendered unemployed, with job loss worth Rs315b. In the current situation of global economic disruption, the possibility of laying off Pakistani workers by foreign employers can’t be overruled.

The government claims to have devised a strategy to tackle the impact of the Covid-19 pandemic on labour and employment. According to the survey, the federal cabinet has approved the Rs1.24 trillion Prime Minister Economic Relief Package to deal with the outbreak and its repercussions in Pakistan. The relief package is aimed to provide financial support to different sectors of the economy affected by the economic slowdown.

The government has allocated Rs200b for the labour class that is severely hit by the pandemic. To support the industrial sector, especially the export sector, it has been decided to release tax refunds of Rs100b, besides deferring interest payments to improve the liquidity position of the enterprises. For the small and medium industry and the agriculture sector, another Rs100b is set aside with deferred interest payments. Concessional loans will be extended to farmers to bring down input costs.

The government has also announced a Rs100b package for the construction industry to keep the country afloat amid the pandemic. The construction industry, which is considered the backbone of the economy because it provides enormous employment opportunities to skilled and unskilled workers, also provides stimulus to its allied industries and the economy as a whole. Hence, the government in collaboration with the provinces plans to make an all-out effort to generate economic activity in the country by adopting a strategy of smart lockdown with established standard operating procedures (SOPs).

Besides, the provincial governments have also announced relief packages to mitigate the adverse impact of the pandemic. The Punjab government has announced a Rs10b relief package to financially support 2.5m families of daily wage earners. The Khyber Pakhtunkhwa government approved a Rs32b stimulus economic package to provide relief to the masses and the business community. It includes Rs11.4b, benefiting 1.9m deserving families and Rs5b exemptions from taxes for the business community. The Sindh government has announced the Corona Emergency Ration Package for which Rs20m has been allocated for each district of the province to distribute food items to daily wage earners.

Besides extending the social safety net programme to 12 million poor from the existing 4.3m in the budget and enhancing the monthly financial assistance to Rs3,000 per month from the present Rs2,000 being paid to BISP beneficiaries, the federal government provided special cash assistance of Rs3,000 per month for four months to 4.5m registered low-income groups under the Kafaalat Programme; emergency cash assistance of Rs3,000 per month for four months to 4m beneficiaries from updated National Social Economic Registry (NSER) of the Benazir Income Support Programme (BISP); and emergency cash assistance of Rs3,000 per month for four months to 3.5m beneficiaries to be identified by the district administration.

According to the Annual Development Plan 2020-21, the social welfare systems would enable society to advance the well-being and security of their citizens by protecting them from vulnerability and deprivation, so that they can pursue a decent life. However, Rs2,000 and Rs3,000 each to poor families is not enough. The poor families are usually large. They need jobs to come out of poverty. It is the only permanent solution to their problems. Undoubtedly, the government cannot create so many job opportunities in the public sector. However, it can encourage the public sector for the purpose.