FAISALABAD (October 29 2008): Asian Development Bank will provide US $450 million (Asian Development Fund US $100 million and Ordinary Capital Resources US $350.00 million) for Sustainable Economic Growth Governance Accelerating Economic Transformation Programme-2 during the year 2009.
According to official sources, the Technical Assistance programme of ADB will be implemented over a period of two years starting in October 2008 and running until September 2010. This sub-project will focus on the design and implementation of targeted safety net programs for the poor and vulnerable, gradual elimination of wheat and energy subsidies, and restructuring of the electricity sector debt.
Pakistan Government has agreed with the ADB that the targeted safety net program coverage expanded to over 5 million households, while market-based pricing for farmers and flour millers will be adopted by 2010. It was also agreed with the ADB that the electricity subsidy will be brought to zero by June 2010, and would be maintained at that level, except for lifeline tariffs.
The design for this new TA takes into account existing TAs and will be supplemented by a sub-project from ADB's ongoing governance TA cluster, financed by the Department for International Development of the United Kingdom. This sub-project will focus on the design and implementation of targeted safety net programs for the poor and vulnerable, gradual elimination of wheat and energy subsidies, and restructuring of the electricity sector debt. In addition, an ongoing TA will also support Pakistan's anti-money laundering efforts.
The TA is estimated to cost $1,040,000 equivalent. ADB will provide $800,000 on a grant basis from its TA funding program. The Government's contribution of $240,000 equivalent will cover office accommodation, training and workshop facilities and counterpart support.
According to official sources, the Ministry of Finance will be the executing agency for the TA and will help co-ordinate the work of the TA with the implementing agencies. For the financial sector component, the work wil
l be co-ordinated and supervised directly by the concerned regulatory agencies. The TA will be implemented over a period of 2 years starting in October 2008 and running until September 2010. The AETP will provide significant benefits and will have a positive impact on the poor.
First, the immediate outcome of AETP, particularly under sub-program-1, will be to help Pakistan overcome the short-term exogenous shocks of spiralling food and fuel prices and meet the immediate and large fiscal needs. Second, it will help the Government move away from inefficient and untargeted subsidies to a targeted safety net program for the poor. Beginning with about 2 million households immediately, and expanding to cover 5 million households during the 2008-2009 fiscal year if the safety net program implementation is smooth, the AETP could potentially target up to 9 million households.
In parallel, the AETP will also assist the Government in embarking on a medium term reform agenda. As such, third, the AETP will raise public confidence in the banking system through a depositor protection scheme, and stronger financial intermediaries that are better able to mobilise and allocate resources and risks.
Fourth, the AETP will open the way forward for structural transformation, and in the process, it will help cut transaction costs for businesses (eg, by reducing red tape in tax payments) and improve the investment climate. Fifth, the AETP framework will enable ADB to sustain policy dialogue on structural reform in sectors where ADB has been actively involved through past and current investments.
Commenting over the "Social Protection and Safety Nets in Pakistan", ADB expert mentioned that the National Social Protection Strategy which aims to bring social safety nets to 6.2 million households in the next five years was approved by the Government of Pakistan in 2007.
Pakistan's existing safety nets include: (i) cash transfers (Zakat, Pakistan Bait-ul-Mal's Food Support Program, and conditional cash transfers); (ii) Old-age income security (pension for Government employees, employees old age benefit institutions); (iii) other employment-based programs (Workers Welfare Fund, programs through various foundations); (iv) Micro credit and NGO programs (Pakistan Poverty Alleviation Fund, Khushhalibank, Rural Support Programs etc); (v) Public works Programs; (vi) food based programs (Tawana Pakistan Mid-day school meals); (vii) wheat subsidy; and (viii) social security programs (pension - old age, survivor and disability and benefits to formal sector workers).
Prior to the 2007 Strategy, there was no overarching social protection strategy in Pakistan. It obviously led to lack of direction and poor co-ordination on the part of individual agencies and programs working in this area. The absence of a social protection strategy could also explain the low and irregular budgetary allocations for the purpose. Public spending on key safety net programs is only 0.5percent of the GDP.
This is low by international standards and inadequate to meet existing needs. It is hard to assess the effectiveness of these programs in addressing poverty and vulnerability given a lack of monitoring and supervision system, any third party verifications, and feedback loops for self-correction and learning.
Organisations implementing safety net programs are involved in multiple activities not part of their core competency (running schools, hospital, training centre etc) hence thinly spreading limited resources and providing no synergies between agencies and program. There is no systematic targeting and beneficiaries are selected on the basis of administratively determined criteria.
Ad hoc selection process of beneficiaries, distribution system and discretion of the government functionaries leaves room for leakage of funds. All this has reduced the effectiveness of the programs and lowered their credibility in public eye, they pointed out.
ADB report stated that Pakistan offers income support through two cash transfer programs, Zakat and Bait-ul-Mal. Zakat, managed by federal Ministry of Religious Affairs, Zakat and Ushr, is a State-based option for Muslims to meet their charitable obligations through a deduction once a year at the rate of 2.5 per cent on the value of certain financial assets.
It applies only to Sunni Muslims and others can choose not to be included in the scheme and pay their zakat privately. Pakistan Bait-ul-Mal (PBM) is a semi-autonomous organisation within the Ministry of Social Welfare and Special Education. Bait-ul-Mal's objectives as stated in the Bait-ul-Mal Act are to provide financial assistance to destitute and needy widows, orphans, invalid, infirm and other needy persons.
Unlike Zakat, Bait-ul-Mal benefits are open to all regardless of creed. Also, unlike Zakat, the funds are entirely controlled by public servants. It has offices at provincial and district levels that are closely linked to, but not part of provincial administrations.
Bait-ul-Mal's main programs of direct assistance to individuals are the Food Support Program, Individual Financial Assistance, National Centres for Rehabilitation of Child Labour, Vocational Training Institutes, Tawana Pakistan (school feeding program) and building of homes. It also gives grants to NGOs to provide institutional support for orphans, the disabled and abandoned and destitute women, and the aged. It also provides some grants for water supply. In the past, it has also completed a housing development scheme for the poor in Sindh.
The PBM programs face problems of poor targeting, fragmentation, duplication, inadequacy, poor monitoring and sustainability. The government has laid out its strategy to deal with these issues in the National Social Protection Strategy. The Vision of the Strategy is to develop an integrated and comprehensive social protection system, covering all the population, but especially the poorest and the most vulnerable.
The Core Instruments proposed by the Strategy include expanding the coverage of cash transfers using conditional cash transfers (CCTs) supplemented with unconditional transfers (through the Food Support Program (FSP) and Zakat) among others. PBM is undertaking efforts to improve targeting, delivery mechanisms and monitoring through a number of initiatives.
They are in the process of cleaning-up their database and creating a comprehensive computerised Management Information System based on relatively authentic Computerised National Identity Cards (CNIC). Developing, piloting and expanding proxy means tested targeting mechanism in combination with community validation is expected to enhance transparency and credibility of the system. Fiduciary risks are being minimised through improved financial management and introduction of consolidated accounts at the field level to ensure effective reconciliation, they added.
ADB report mentioned that the Pakistan Government has announced the launch of a new cash transfer program in addition to the already existing program of Zakat, Bait-ul-Mal, and provision of food items at subsidised rates through the existing and expanded network of government-run Utility Stores.
The new program, named after the former Prime Minister of Pakistan, is called "Benazir Income Support Program". For this purpose, the Government has allocated an amount of Rs 34 billion to be raised to Rs 50 billion in the future.
The program entails provision of a cash grant of Rs 1000 per month to each qualifying household to be selected through a means tested program based on the CNICs. Relying on this system will require the Government to address the coverage issues of the CNIC database. Additional TA will be required to develop systems for the new scheme.
Despite challenges, ADB experts pointed out that it is very clear that the Government not only has existing safety nets but also intends to improve their coverage and targeting. The programs are expected to target more than 5 million households.
They have also substantiated their intentions by allocating substantial amounts in the budget. Subject to improving systemic issues, the programs have a significant scope and need for expansion. World Bank is working with the Ministry of Social Welfare and PBM to improve targeting of their existing programs. UN has fielded a joint mission to assess the situation and propose immediate and medium to long-term measures in the wake of recent food crisis, they concluded.
