Even before the current global food and oil price increase crises hit Pakistan we had been passing through a rather difficult period. The claims of the last government, of having reduced poverty by about 8 percentage points or more over the last few years had started to sound rather hollow: growth rate was starting to falter, inflation was on the rise, unemployment was high, there were no high growth industrial sectors, and inequality - of wealth and income - was increasing. So, well before the current crisis, we knew that the poor of the country were headed for difficult times. And then the current crisis came. It not only brought with it increasing and increased food and petroleum prices, it also brought with it other crises as well and of a degree that has almost derailed the economy of the country. Nobody is talking of the "impressive growth" of the last 5-6 years or the gains in poverty reduction that were made or the fact that the economy was at a "takeoff" stage and we were on the verge of becoming a middle income country. The fact is that even at the time when growth was high we knew large sections of the population were vulnerable to poverty and destitution, and almost as much as two-thirds of our population was in the vulnerable group. But the government of the time was not willing to listen to dissenting voices. They could not see that industry was not performing, exports were not increasing by much, agriculture was not catching up with the performance in other countries, energy supply was not increasing, and there were no "growth engines" being created. The rising number of mobiles, the sale of motorcycles and cars was taken as evidence that the economy was booming. It is interesting to note how quickly everything changed. In less than a year our trade deficit is becoming unsustainable, fiscal deficit has gone out of control, exchange rate is dropping, reserves are dropping, investment ratings are going down, growth is faltering, inflation in going out of control, energy crisis is reaching mammoth proportions and the government is asking for help from everyone again: the bilaterals, the multilaterals, friends as well as foes. The return of the IMF should be a matter of time only. At the time when the economy was doing well, some commentators had argued that given the government was claiming it had a lot of money and given that debt rescheduling had created some "fiscal space", it was a good time to create a social protection net or safety net for the poor. It was envisaged that the net would: a) help, on a regular basis, those who, for one reason or another, are unable to enter the labour market permanently (older people, the handicapped etc.); b) help those who cannot make enough money to sustain a life of dignity by directly supplementing their income in the short run and by allowing them to make investments in education, capital or skills in the medium run so that they can move out of poverty; and c) help those who cannot pay for their or their dependents' health and/or education. The basic idea behind the plan was that since we had the capital at that time, and the government was insisting on it, we would be able to create the net needed to catch the very poor and help them either sustain a minimal standard or, if it was possible, help them raise their income to be able to climb their way out of poverty - poverty traps make it very hard for people trapped in them to be able to break them without this outside help. But though the government of the time kept saying it had a lot of money and kept throwing money away through dubious schemes such as untargeted subsidies on wheat, electricity for tube wells, domestic consumption of electricity, sasta atta, five thousand utility stores and so on, it refused to support the idea of putting a comprehensive safety net mechanism of the kind mentioned above in place. One wonders, had the government been bolder and more responsive to the poor, could it have done better in the elections? And, more importantly, could it have given us, today, an effective instrument through we could have reached the poor. We really need such an instrument now. It is clear that the recent food and fuel inflation has hit the poor very hard, and it is also clear that neither the food crisis nor the fuel crisis is over yet. When the drought goes away in Australia and some of the other countries and all countries have tried to produce more food for next year, the food crisis will go away, at least for a few years, but by then it would have taken a heavy toll on the poor in developing countries such as Pakistan. The poor and the lower middle class in Pakistan, almost 50-60 percent of the population of the country, was not in a position to face the food inflation that we have seen and will be seeing in the next year or so. By the time the crisis is over, though most of them will survive the crisis, majority will have less savings, will be more in debt, will have cut corners on needed educational or health expenditures, will have starved or half starved their children or their elderly parents of needed medicines or food and most of them will be even more on the edge: the edge that pushes perfectly sane and normal people to do immoral and illegal acts. We are a society that is on the edge anyway with unstable political, legal and social systems and with a lot of things simmering just below the surface. One wonders what all could happen to such a society if a significant number of its poorer citizens are further squeezed. Will we see more suicides; it seems that numbers are rising. Will we have more ethnic, religious and/or individual based violence; the law and order situation is already precarious. The million dollar question for the budget is going to be: given the current squeeze on the government and that the fiscal space is no more there, but at the same time the need for a good social protection net, the demand for relief and the expectations of relief from a people-friendly government are high, will the government create a proper social protection net, or will it again like the previous government, choose to throw money at visible but quite ineffective "schemes" of relief. A good system will take a lot of work to create, though blueprints for such a system are already with the government. It will also take time and effort on the part of the government (federal, provincial, and local) and it will take a significant amount of money as well, but the upside is that once created the system can help manage relief of all sorts for the people. The crucial issues in creating a social protection net are: a) how do we identify the deserving households, b) how do we design programmes that target the specific needs of classes of households, and c) how do we create confidence, for the larger population, in the integrity of the system. The current mechanisms of relief, Bait ul Maal, Zakat and so on, apart from being underfunded, do not have any one of the three mentioned above. Or even if they do have reasonable levels of the first two, since the people have no confidence on these institutions, their contribution, in combating poverty and in reducing vulnerability will remain minimal. The poor are hurting and badly, and the next year or so will not be easy for them. The government needs to do something about this, and it has even promised to do so. Apart from other programmes that foster growth and employment generation, we need an effective social protection net to support the poor before they get too deeply and irrevocably into poverty. It will be expensive to create such a system now, but this is perhaps the only way to address the issue of relief for the poor on a sustainable and effective basis. Will the peoples' government have the political will to take on this task in its first budget? We will know in less than a week. E-mail: faisal@nation.com.pk