The International Monetary Fund (IMF) has expressed alarm about Pakistan’s consistently low social sector investment, stating that the country’s poverty and inequality are being sustained by this underinvestment.
The Fund’s most recent report, “2024 Article IV Consultation and request for an Extended Arrangement under The Extended Fund Facility,” made this claim.
It is imperative that the government sustains significant budgetary contingency reserves in order to guarantee the Benazir Income Support Program’s (BISP) ability to provide emergency cash payments.
According to the report, this would be essential to constructing climate resilience.
In addition to committing to gradually boosting these investments to 2.4% of GDP by fiscal year 2025 and 2.8 percent by fiscal year 2028, Pakistan has announced plans to broaden the scope and coverage of BISP, a historic social safety net program that offers cash transfers to the nation’s most vulnerable households.
Additionally, the government declared a large budget increase for the fiscal year 2025 of the BISP. The amount allotted has increased to Rs599 billion, a 27% increase.
By January 2025, the Kafaalat program’s quarterly unconditional cash transfer (UCT) would increase from Rs10,500 to Rs13,500.
This will lessen inflation and provide the poorest households more financial support.
Towards the end of 2025, there will be 500,000 more homes participating in the UCT program, for a total of 9.8 million beneficiaries.
This extension will guarantee that assistance is provided to more families in need.
The government will keep enhancing the management of BISP.
To make cash transfers more efficient, computerized payment technologies will be tested nationally and the National Socio-Economic Registry (NSER) will be extended to include all low-income families.
Pakistan was recommended by the IMF to switch from direct cash transfers through BISP to energy tariff subsidies.
It argued that doing so will lessen market distortions and guarantee that help for disadvantaged households continues.
The IMF also emphasized that attempts to promote economic inclusion have been hampered by the low levels of investment on social safety, health care, and education.
The labor force remained concentrated in low-productivity industries, such agriculture, and was unable to shift to more productive jobs due to a lack of investment in these areas.
