Budgetary lifeline: ADB considers $430m in support for BISP

Social protection programme reaching 4.4 million vulnerable families.

ISLAMABAD:

After staff level understanding between Pakistan and the International Monetary Fund (IMF), the gates for other avenues of multilateral financing have opened up for the country with the Asian Development Bank (ADB) reported to be in negotiations for a $430 million loan in budgetary support.

The move comes as prospects of restoring support from multilateral financing institutions, seems to be improving for economic managers of the country after a hiatus of three years.

According to officials at the Economic Affairs Division (EAD), Pakistan is seeking the $430 million in a bid to shore up the Benazir Income Support Programme (BISP), one of the world’s largest social protection programmes.

Sources add that the proposition of the $430 million in loan came under discussion during talks between ADB’s Director General for Central and West Asia, Klause Gerhaeusser and Secretary EAD, Nargis Sethi. Talks on this new financing have so far progressed satisfactorily, with officials optimistic of an agreement subsequent to the signing of the IMF’s $7.3 billion bailout package.

In 2010, Islamabad’s inability to initiate crucial reforms in the energy and fiscal sectors led to suspension of budgetary support by international lenders, including the IMF, ADB and the World Bank.

However, with the IMF all set to consider Pakistan’s request for $7.3 billion in a bailout package on September 4, other multilateral donors have warmed up to bridging any financing gaps the country might face between an upcoming IMF payment and the fresh loan received by Islamabad.

According to the ADB officials, if an agreement is reached on the $430 million for BISP, the loan will be disbursed within a period of three to four years, with its first disbursements occurring as early as the current financial year.

Project documents reveal that the additional financing will strengthen BISP as the country’s prime federal social safety net system by expanding coverage of the cash transfer program through the issuance and verification of computerized national identity cards (CNICs) to the so far excluded eligible beneficiary families.

Social Security

The lending institution has estimated that vulnerability to poverty is very high in Pakistan, with more than 56% of the population living under the international $2 a day poverty line. Based on a scientific nation-wide poverty scorecard survey, BISP has identified 7.2 million eligible poor families for monthly stipends under BISP.

However, according to the ADB documents, currently a staggering 2.8 million eligible families are not receiving the cash transfer as they are unable to present the CNIC cards for female heads of the household.

According to various studies, families which receive the monthly stipend spend the extra money on meeting food, education and health requirements of their children.

The BISP also has started piloting a number of so-called graduation programmes in health insurance, skills training, and micro-lending, aiming to strengthen the BISP beneficiaries’ resilience and productive abilities and reduce the likelihood of intergenerational transfer of poverty. The ADB’s lending will supplement these graduation programmes.

Given the success of BISP and its efficiency in targeting poor households for cash transfers, the PML-N government has not closed down the programme started by the previous government, but instead has demonstrated its confidence in the programme by increasing total allocation for the umbrella Income Support Programme to Rs75 billion for the current fiscal year.

Published in The Express Tribune, July 31^st, 2013.