A ‘welfare state’ for Pakistan’s poor?
At 12% of minimum wage, cash transfer will remain too low to distort incentive to work or create ‘dependency culture’.
The writer is the outgoing Director General at the UK’s Department for International Development
Every week we hear about Pakistan’s appalling poverty indicators. Every week somebody declares an ‘emergency’. Every week a politician says we must do better. Every week a disillusioned public refuses to believe this can happen.
But, imagine a Pakistan where the government has identified the poorest and the most vulnerable families; where every month, the mother receives a small amount of money to keep her family from destitution and extreme hunger; where Pakistani taxpayers help to send the family’s children to school and provide vocational training to help develop the skills necessary to earn a living. And where the government, NGOs and donors target their support towards the same people so that they can lift themselves out of poverty permanently.
Is this possible? Yes. In fact, the Benazir Income Support Programme (BISP) has already identified the poorest households across the country, using a carefully designed and tested scorecard. Five million women and their families are already receiving small cash payments every month so that they can purchase essential food items and medicine. This will expand to seven million families by 2018 –– nearly 50 million people. Recognising the strength of the BISP, Shahbaz Sharif’s new Khidmat programme will provide an additional Rs1,000 each month for the poorest families in Punjab. But to realise the vision of a ‘welfare state’ for Pakistan’s poor, the government needs to go further.
The basic cash transfer needs to be delivered on the same day each quarter so that the poor know that this is their haq, not sadqa. Only then can they plan to use the money effectively. In his first budget, Finance Minister Ishaq Dar took the bold decision to increase the basic transfer by 20 per cent to begin to restore its value after years of inflation. Further increases will be needed in the coming budgets. Even then, at 12 per cent of the minimum wage, the cash transfer will remain too low to distort the incentive to work or create a ‘dependency culture’. And to ensure effectiveness, the poverty scorecard survey will need to be rerun every few years.
At present, only 30 per cent of children in the poorest families go to school. The government needs to roll out its plan to provide each family with an additional Rs200 a child every month if their children have an 80 per cent attendance record at school. All the evidence indicates that this will help keep their children in school and that basic education will improve their children’s prospects. Nearly half of all under the age of five in Pakistan are chronically undernourished. This stunts mental and physical development, lowers IQ and achievement at school, and reduces earnings in adulthood. These children are half the future workforce of Pakistan. So why not use the scheme to provide them with essential food and nutrients so that they have a productive future?
Instead of wasting money and time designing new targeting mechanisms for every anti-poverty programme, the government and donors need to use the same poverty scorecard for all interventions. Can it work? Yes.
International evidence shows women receiving cash grants invest in their families, keep their children in school, feed them better, and buy medicine and healthcare. Over time, this future earning potential helps to break the cycle of poverty from generation to generation.
In Brazil, the anti-poverty scheme BolsaFamilia helped reduce poverty by a remarkable 28 per cent during the first term of President Lula da Silva’s administration, and helped reduce inequality by 20 per cent since 2001.
Can Pakistan afford to follow something similar? The BISP’s total cost is around Rs75 billion a year, only 1.6 per cent of the federal government’s expenditure. This compares with 26 per cent spent every year simply paying interest on debt and another 14 per cent on the military. Having helped develop the methodology along with the World Bank, the UK has pledged £300 million over eight years. Given the cost of poverty to the economy and society, the question is: can Pakistan afford not to invest in its people?
Published in The Express Tribune, February 7th, 2014.
But, imagine a Pakistan where the government has identified the poorest and the most vulnerable families; where every month, the mother receives a small amount of money to keep her family from destitution and extreme hunger; where Pakistani taxpayers help to send the family’s children to school and provide vocational training to help develop the skills necessary to earn a living. And where the government, NGOs and donors target their support towards the same people so that they can lift themselves out of poverty permanently.
Is this possible? Yes. In fact, the Benazir Income Support Programme (BISP) has already identified the poorest households across the country, using a carefully designed and tested scorecard. Five million women and their families are already receiving small cash payments every month so that they can purchase essential food items and medicine. This will expand to seven million families by 2018 –– nearly 50 million people. Recognising the strength of the BISP, Shahbaz Sharif’s new Khidmat programme will provide an additional Rs1,000 each month for the poorest families in Punjab. But to realise the vision of a ‘welfare state’ for Pakistan’s poor, the government needs to go further.
The basic cash transfer needs to be delivered on the same day each quarter so that the poor know that this is their haq, not sadqa. Only then can they plan to use the money effectively. In his first budget, Finance Minister Ishaq Dar took the bold decision to increase the basic transfer by 20 per cent to begin to restore its value after years of inflation. Further increases will be needed in the coming budgets. Even then, at 12 per cent of the minimum wage, the cash transfer will remain too low to distort the incentive to work or create a ‘dependency culture’. And to ensure effectiveness, the poverty scorecard survey will need to be rerun every few years.
At present, only 30 per cent of children in the poorest families go to school. The government needs to roll out its plan to provide each family with an additional Rs200 a child every month if their children have an 80 per cent attendance record at school. All the evidence indicates that this will help keep their children in school and that basic education will improve their children’s prospects. Nearly half of all under the age of five in Pakistan are chronically undernourished. This stunts mental and physical development, lowers IQ and achievement at school, and reduces earnings in adulthood. These children are half the future workforce of Pakistan. So why not use the scheme to provide them with essential food and nutrients so that they have a productive future?
Instead of wasting money and time designing new targeting mechanisms for every anti-poverty programme, the government and donors need to use the same poverty scorecard for all interventions. Can it work? Yes.
International evidence shows women receiving cash grants invest in their families, keep their children in school, feed them better, and buy medicine and healthcare. Over time, this future earning potential helps to break the cycle of poverty from generation to generation.
In Brazil, the anti-poverty scheme BolsaFamilia helped reduce poverty by a remarkable 28 per cent during the first term of President Lula da Silva’s administration, and helped reduce inequality by 20 per cent since 2001.
Can Pakistan afford to follow something similar? The BISP’s total cost is around Rs75 billion a year, only 1.6 per cent of the federal government’s expenditure. This compares with 26 per cent spent every year simply paying interest on debt and another 14 per cent on the military. Having helped develop the methodology along with the World Bank, the UK has pledged £300 million over eight years. Given the cost of poverty to the economy and society, the question is: can Pakistan afford not to invest in its people?
Published in The Express Tribune, February 7th, 2014.