Pakistan Supports Its Most Vulnerable During COVID-19


Latest posts by Callum Reeves (see all)

The Pakistani government’s Ehsaas Emergency Cash Policy (EECP) aims to limit the economic hardship placed on the several million Pakistanis who work in the informal and daily wage sectors of the Pakistani economy and who often lack the finances and monetary assets to afford the essentials, even during stable times of work. Thus, while this labour force is statistically employed, they subsist significantly below the poverty line. Subsequently, the implementation of the Pakistani government’s ‘stay at home’ orders to combat the COVID-19 pandemic which came into effect at the end of April 2020, deprived a minimum of 12 million families of this source of income. In response to this, the National Socio-Economic Registry (NSER) implemented a widespread and technologically enabled system of Keynesian Fiscal Stimulus to limit the negative financial and economic effects that the lockdown has caused. To finance this process, Pakistan has received massive debt repayment reprieve and further monetary support from the International community. The NSER recognized early on that strident transparency and anti-corruption measures would make multilateral organizations more likely to support the entire stimulus package so they have made transparency and security key facets of the EECP.

How the Policy Works

The Pakistan government expects the EECP to provide for 12 million families that fit into 3 specific categories;
(1) 4.5 million existing Kaffalat (social security beneficiaries),
(2) 4 million new beneficiaries (to be decided by the socio-economic database) and
(3) 3.5 million new beneficiaries that the districts will manage.
Eligibility of categories 2 and 3 will be determined through an automated SMS system that will check their registration card number with their eligibility. The system checks the validity of the person and returns a customized message that suggests to visit the nearest payment centre and the date for which they are to collect their emergency handout of Rs. 12,000. These custom messages are to be staggered to prevent a run on the payment centres and enable social distancing. Each payment at a center is conducted through the personal teller’s set-up using government personnel, with everyone who receives a payment having to provide their fingerprint in a biometric check.

Benefits of the Policy and its Implementation 

While the EECP may on the surface present a target for Pakistan’s vast network of corrupt officials and businessmen, the NSER seems dedicated to quickly punish any individuals attempting to steal the amounts given out. This anti-corruption drive has been spearheaded by NSER’s head minister, Sania Nishtar who has implemented, through the SMS identification method, an automatic rejection from the program of any civil servant’s identification numbers thus making it much more difficult to facilitate the easy transfer of funds. Nishtar has also become the face of the Ehsaas program and has through social media (namely Twitter) identified and shamed individuals accused of corruption and has sought to efficiently return the stolen funds to their correct recipients.

The openness of the EECP is quite simply incredible and overwhelms the data provided by significantly richer nations. The government’s Ehsaas online platform has regularly updated detailed financial information on the provinces, regions, eligible participants, signups, deposits, and withdrawals. This gives a heavy air of legitimacy to the program in a nation where skimming has become widely accepted as normal practice. This is vital as the wider Pakistani Government relies on debt forgiveness and billions in international aid to keep its fiscal stimulus programs running. It has also allowed an in-depth look at how much of the stimulus is currently being withdrawn in the early stages of the crisis instead of being left in the accounts of the recipients thus giving a very loose understanding of how long the stimulus is going to last over the next four months and allows for retroactive analysis of withdrawal patterns as the demand for Ehsaas funds increases over the coming months.

Issues with the Size of Dependents

Unfortunately, unemployment rates are assumed to be increasing at a much higher rate than would be considered normal. While total unemployment was only 5.79% in 2017-2018 fiscal year however 38.49% of total employed or 81,681,565 Pakistanis, are employed by agriculture, forestry, and fishing. While it is assumed that these roles provide a basic day to day income for the employed labour, it seems highly unlikely that many would have enough spare financial and monetary assets to last for four months of unemployment. It’s assumed to be equally unlikely that landowners and fleet managers will be willing to pay workers for labour they are not receiving, as they are facing increased maintenance costs of idle machinery and perishing inventory and the extra cost that this applies to their businesses. If even 10% of these roughly 81 million laborers are laid off, then 8.1 million newly unemployed would completely overwhelm the 7.5 million grants established for Category 2 recipients thus creating an additional cost to the program of Rs. 97,200,000,000 which is unsustainable over the long term.

Potential Issues with the Policy

The issue with such a comparatively large lump sum payment (of Rs. 12,000) to impoverished people, with what is assumed to be very minimal education instead of the fully rational and educated species of homo economicus. The latter would never be inclined to value money received now as more valuable than money later as humans do. When this concept is applied one step further along the chain it implies that when ‘gifted’ a comparatively large lump sum; say four months income at once, the recipient will value the total sum at what it can purchase in the short term significantly more than the potential benefits of setting aside the sum for each forthcoming month as an educated econ would do. This is vital to understand as the Rs. 12,000 stipend is an improvement on pure poverty yet the Average Monthly Net payment (after tax) is Rs. 18,754. So assuming that the recipients of the stimulus are not econ’s a minimum of 26.87% of the population’s monthly wage earners may view this lump sum as a healthy increase to their bank and spend it as such and completely disregard the monthly income of Rs. 12,000/4 = Rs. 3,000 or 84% lower than the average monthly income. This behaviour has already become apparent with data on withdrawals made in the first 25 days of the program demonstrating every state recording over a 50% withdrawal rate with most in the high 70% to low 80% range. Therefore, it’s expected that without a series of concerted ‘nudges’ aimed at recipients of EECP, many recipients will soon be left fully destitute without any way of earning extra government support, assuming they act as similar case studies have shown.

However, while EECP is far from perfect, Pakistan’s government should be congratulated for its quick and effective attempt to keep the process as transparent as possible and understanding the vulnerability that the nation’s most desperate people face. While Ehsaas may only provide an income if managed correctly with a few small improvements, all evidence currently available demonstrates that it would stand as a model for other developing nations seeking to protect those whom are historically ignored and thus stand to face the most harm from COVID-19’s crippling financial impacts.

Leave a Reply