Adjustment with an inhuman face

While the ordinary people suffer from rising poverty, food inflation, joblessness, lawlessness and the resulting loss of hope, the government is adding insult to injury by failing to protect the already low public spending for the poor. A disproportionate burden of macroeconomic adjustment is being shifted to them. This is the stark reality emerging from an analysis of the data available for July-December, 2010. The Consumer Price Index stood at 14.6 per cent, the Sensitive Price Index at 19.3 per cent and the Wholesale Price Index at 22.3 per cent, and all were way above the corresponding numbers of 2009. Food and energy were the main sources of inflation. In this inflationary environment, development expenditure in 14 out of the 17 poorly defined pro-poor sectors declined.Except for one, these declines were in double digits and some even in three digits. The declines were the highest at the federal level, followed by Punjab and Sindh. There was an increase of 15.8 per cent in overall pro-poor expenditure, development plus current, implying that almost the entire increase was in current expenditure. In absolute terms, the increase amounted to Rs65.9 billion, evenly shared by the sectors of education and natural calamities and other disasters. While the expenditure in education was on account of salary raises, the natural disaster in this case was the devastating floods in July 2010. Thus the money spent on floods, a legitimate pro-poor charge, was diverted mainly from pro-poor development expenditure. The latter declined by 47.2 per cent.

Education is the largest sector in pro-poor expenditures. After the declaration as a fundamental right under the Eighteenth Amendment to the Constitution, one would have expected the highest increase in primary and secondary education. However, it was reserved for professional and technical universities and colleges. Expenditure on teacher and vocational training actually declined. In the largest province of Punjab, the highest expenditure increase was experienced in university and college education. Balochistan, never failing to be the odd province out, showed the highest expenditure growth in the unexplained category of ‘others’. In health, general hospitals and clinics, the so-called tertiary subsector, not only claims the largest share, but this share has increased during the period under study, from 74.5 per cent to 75.8 per cent. The crucial mother and child health witnessed a serious expenditure cut. Both Punjab and Sindh allowed accelerated funding to tertiary health, while Balochistan and Khyber-Pakhtunkhwa emphasised primary and preventive health. With the devolution of health and education under the 18th Amendment, federal spending is likely to reduce when the full year data is taken into account.

Rising poverty, aggravated by the increasing number of the working poor, requires a system of direct cash transfers to provide immediate succour to those unable to make ends meet. Budgetary schemes include the Benazir Income Support Programme (BISP), the Pakistan Bait-ul-Mal and social security and social welfare. On the other hand, zakat, the Employees’ Old-Age Benefits Institution, the Workers Welfare Fund and microfinance are the main non-budgetary instruments. The BISP is the largest of all, with a share of 83 per cent. In July-December 2010, Rs26.2 billion were disbursed compared to Rs11.8 billion in July-December 2009. What is intriguing is that while the amount disbursed more than doubled, the number of beneficiaries has declined from 4.42 million to 3.74 million. The Mid-year Progress Report for 2010/11 issued by the ministry of finance gives no explanation. All schemes together cover no more than 5.5 million beneficiaries. It is, therefore, important to keep the largest scheme transparent.

Published in The Express Tribune, September 3^rd, 2011.