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March 26, 2020

Relief package

Editorial

 
March 26, 2020

The few extra days taken by the federal government to announce an eagerly awaited financial relief package have been worth the while. While naturally there will be demands for more in a country where so many are desperate for relief, ranging from giant corporations to labourers who live below the poverty line, the package worth around Rs1.2 trillion appears to be extensive for the most part. In addition to focusing on the lowest income strata of the country, the package also includes reductions in fuel prices and policy rate. This reduction was necessary and already long-overdue because of the declining oil prices in the international markets. Thanks to this unexpected downward trend in oil prices, the government has been able to accumulate benefits worth billions of rupees that will stand in good stead while offering relief to the needy in the country. Second, a monthly stipend of Rs3,000 for daily wagers is good in principle but certainly not enough relief. As many have been pointing out, the rising inflation has made it not difficult but actually impossible for even a lowest-income family to survive for less than Rs15,000.

Since the ADB, IMF and World Bank all are ready to open their coffers and relax conditions to help any debt repayments at least for the time being, the government should seriously think about raising the amount to no less than Rs10,000. Adviser to the PM on Finance Dr Abdul Hafeez Sheikh has also elaborated that Rs200 billion have been assigned for labourers who lose their jobs or see a reduction in employment opportunities. But this comes with a proviso that the amount will be given in consultation with the business community and the provinces. This creates more confusion, as most labourers are not registered with the business community and unemployed daily wagers will have to find a business to testify on their behalf that they have lost jobs. There must be some other mechanism.

It is good that the government has allowed utility bills to be paid in installments, but for some lowest income households a minimum threshold of bills must be waived. The finance adviser also announced Rs100bn tax refunds to the export industry to provide them liquidity. Exporters have already been demanding an immediate release of tax refunds. This is a welcome move but cannot be termed as an incentive as it was already pending. Giving Rs50 billion to Utility Stores may not be the best idea as their outreach is limited and there have been reports of corruption and poor quality. Perhaps it will be better to use this amount for disbursement to the poor. The same applies to the Rs50 billion allocated to purchase health workers equipment and protective uniforms. China has already sent a ship load of such supplies so perhaps it is better to request China to help more in this regard. In the same vein giving Rs50 billion to the NDMA needs some serious rethinking and planning, since its performance has been less than ideal in previous years.

In the meanwhile, the State Bank of Pakistan has cut the policy rate by just 150 basis points which is again too little to help our exporters and industrialists, substantially. We just need to look at the prevalent interest rates around the world; in most countries it is below five percent and in other cases it is between five to ten per cent. But still bringing down our interest rate to 11 percent should be welcome. Finally, with the relief package for the poor a high level of transparency is called for. Sadly, there are many in the system who look for corruption opportunities even in the time of crisis. All distribution of aid and help must be transparent and aboveboard. The package is, on the whole, a welcome one. We do not know however what the days ahead hold. But a start has been made and we hope it can be built upon if the corona crisis continues for a prolonged period of time.