Interest-free loans

After several recent efforts to stimulate economic growth with incentives for big business and the upper classes, Prime Minister Imran Khan returned to one of his government’s more pro-masses projects, the Kamyab Pakistan Programme (KPP).

Imran launched a Rs407 billion interest-free loan programme targeting entrepreneurs from lower-income backgrounds, who would typically struggle to raise capital through banks or personal connections. Imran said about 4.5 million families would benefit from the funds, which would also support lending to buy homes and pursue further education. The expanded loan programme would offer loans of up to Rs500,000 for businesses, Rs350,000 for farmers, and Rs2 million for building houses. The total figure dwarfs the numbers for support directed at lower-income people so far. Imran said his government had disbursed Rs2.5 billion among low-income groups in various welfare schemes, while banks had given loans worth Rs55 billion after the government incentivised such lending.

While the KPP has had some hiccups, the plan itself always had potential. This expansion is no different. While some may question its timing as the government enters its final year before scheduled elections and with the threat of a no-trust motion looming, strong execution would make many people ignore any such questions. But with poverty rising and real spending on social services falling, any programmes that actually address these problems are welcome. On that note, Imran also spoke proudly of one of his government’s unqualified successes — the Naya Pakistan Health Card. He said all families in Punjab should have their health cards by month-end, which matches up with the timeline he offered at the end of last year. Making the cards available nationwide before the end of the government’s term would rank among the best things any recent government has done.

Imran also justified the recent fuel and electricity price cuts which came despite rising international prices, saying that “record” tax collection provided a cushion to do so. However, as opposition leaders have warned, despite the high collection figures, the government is still borrowing money, meaning that even the record revenue is not enough to make ends meet. The cuts essentially amount to a negative tax, reducing revenue for a cash-strapped government.

Published in The Express Tribune, March 6^th, 2022.

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