PTI’s Budget and The Dream Of a Welfare State
From the outset of his political campaign, Imran Khan focused on three themes: corruption, justice and the welfare state.
In his view, the latter two objectives cannot be accomplished without eradicating corruption, and by and large, he has earned the trust of the people in his vision of distributive justice. The big challenge now facing the PTI government is how to finance its dream of a welfare state. With too much spent on debt servicing and defence, little room is left for development.
It is for various reasons that Pakistan has consistently failed its poor. Every fourth person lives below the poverty line and successive democratically elected governments and military regimes have paid mere lip service to poverty alleviation.
Benazir Bhutto was the only prime minister who launched a programme worth mentioning during her tenure—the Benazir Income Support Programme (BISP). Now, the PTI has placed BISP under its Ehsaas (compassion) programme, and has increased the number of families receiving a cash stipend of Rs. 5,000 from 0.9 million to 5.7 million in the budget announced on Tuesday.
From overhauling the state bureaucracy to restructuring the economy and political institutions, Imran Khan has an ambitious agenda of reforms. Many of those plans are still in the making, but one area where he has rolled out one project after another is the building of a welfare state.
In his very first speech to nation, he talked about an under-discussed health problem—the stunted growth of children due to poverty and malnutrition. And so it is important to note, that even as his government has announced austerity measures to deal with an ongoing economic crisis, it has decided to double the budget for social security and poverty alleviation for the coming financial year.
In its first tenure in Khyber Pakhtunkhwa province, the PTI issued health cards to the poor which entitled them to free medical operations and hospitalization in both government and private hospitals. For the next financial year, it has announced an extension of the health card facility to 3.2 million more people.
Under the Ehsaas initiative, the government will provide interest-free loans to 80,000 people to address mother and child nutrition problems. It will build homes to house 10,000 orphan children. It has encouraged and supported private charities to establish and run shelters for the homeless in Lahore, Peshawar, Rawalpindi and Islamabad—a well-received initiative that has set a good example of cooperation between the government and private sector.
Furthermore, the PTI’s Naya Pakistan Housing Scheme is a critical flagship programme aimed at turning an elitist state and political economy into a welfare-oriented one. Under this, ten million apartments are to be built for the poor. But after ten months in power, the government has yet to launch major construction activity.
It is for various reasons that Pakistan has consistently failed its poor. Every fourth person lives below the poverty line and successive democratically elected governments and military regimes have paid mere lip service to poverty alleviation.
Rasul Bakhsh Rais
The problems are familiar: identification of suitable pieces of land in urban areas, financing and most importantly a legal framework. But while presenting the budget, the Minister of State for Revenues, Hammad Azhar, informed the Parliament that land had already been acquired in some cities and finances were being arranged.
To create job opportunities for the youth, the government has unveiled a new initiative -- the Sasta Karobar (Affordable Business) scheme in the new budget -- which allocates Rs. 40 billion to provide interest-free loans for businesses.
The very essence of distributive justice is that those who make wealth must share a part of it with the poor. And the proposed system depends on the capacity and ability of the state to collect taxes and to use them for welfare and poverty alleviation.
Europe is a good model to learn from. Its modern welfare states are financed through high tax rates. For example, the Scandinavian countries tax more than forty percent of GDP, while Pakistan’s revenue authorities can tax only twelve percent. On Tuesday, Azhar announced that during the coming financial year, the government would raise the ratio to twenty percent by broadening the tax base and rationalizing the existing tax regime.
Over the past two decades, revenue collection has remained stagnant with little or no reforms in the tax collection machinery of the state. The question is, how is this time going to be any different from previous governments?
Perhaps Pakistan has reached a breaking point where it cannot evade tackling the twin crises of fiscal and current account deficit, but it remains to be seen whether the PTI will be able to collect more taxes and adequately finance social safety net initiatives. Creating a welfare state will require a balance between security expenditures, debt-servicing and big commitments of distributive justice.
The military has accepted a freeze on defense spending and the government under the austerity programme is going to slash its spending by Rs. 23 billion.
Good intentions seem to be in place, but the months to come will reveal just how effectively Imran Khan counters resistance from vested interests and a dynastic political class.
A great deal now depends on the success of these painful but necessary reforms.
