Earlier this Sunday, PM Imran Khan announced that 40 percent of deserving families will receive a direct subsidy December onwards under the Ehsaas Programme to reduce inflationary pressures. This is a great initiative which will help families below the poverty line survive the impact that Covid has had on the economy. It remains to be seen when some semblance of normalcy will return as the fourth wave of the pandemic wreaks havoc in different parts of the country. The impact of this uncertainty is disproportionate however, as it severely impacts daily wage workers across the country.
Even earlier during the summer in June, the government had announced a direct subsidy for 30 million families to enable them to get essential food items. The government’s administration of welfare initiatives must be appreciated, especially considering the frequent upgrade of the National Socio-Economic Registry (NSER) that identifies the ineligible and those graduating out of the programme.
The continuity of these welfare initiatives is great, but more long-term measures also need to be pursued in conjunction. Given how food inflation is consistently in double digits and fiscal space remains limited to counter rising poverty levels, a more holistic approach will have to be adopted going forward.
For instance, regarding the issue of inflation, it is important to note that the Federal Budget 2021-22 has set the FBR’s tax collection target at Rs5,829 billion which is approximately 17.5 percent higher than last year’s Rs4,963 billion. What is perplexing however is the fact that the increase in the tax collection is over-reliant on indirect taxes, which are regressive in nature. This will inevitably cause inflation to go up and only further add to the burdens faced by the common man. Raising the tax-to-GDP ratio is essential for Pakistan to grow in a sustainable manner by creating jobs and alleviating poverty. However, the focus must be on improving the direct tax regime to make it more robust and people friendly, and to bring more citizens into the tax net.
