FAISALABAD (April 07 2009): International Development Association (IDA) will provide 200 million dollars for "Pakistan Social Safety Nets Development Policy Credit", while government will arrange 425 million dollars to establish an effective social safety net that provides the poor with basic income support both in times of social and economic stability and growth and in times of crisis and to provide access to opportunities for graduating out of poverty.
According to a Project Update Report of World Bank, the proposed Pakistan Social Safety Nets Development Policy Credit (SSN DPC) aims to support the implementation of Pakistans Second Poverty Reduction Strategy Paper (PRSP-2). In particular, the SSN DPC would provide support to the third pillar of the PRSP: Protecting the poor and vulnerable through improved targeting of safety nets and cash transfer programmes.
The proposed SSN DPC is also consistent with Pakistans National Social Protection Strategy that supports the development of an effective and financially sustainable safety net system to promote the re-distributive goals of society and protect those who are suffering from chronic or transient poverty, WB report added.
According to WB report, Pakistan faced both external and internal shocks in the past year. Externally, international oil and food commodity prices rose sharply and inflated Pakistans import bill. In parallel, the slowdown in the global economy dampened the external demand for Pakistans exports, and the deterioration in international credit markets affected the supply of funds. Internally, Pakistans political turmoil and uncertainties affected investor confidence. These concerns coupled with the rapid rise on macro-economic imbalances, led to capital outflow as well as downgrading of Pakistans rating by international rating agencies.
The government did not pass any of the international price increases to consumers until after the parliamentary elections in 2008. These price increases were financed through the government budget by increasing subsidies. As a result of the global external shocks and internal causes the fiscal and balance of payment imbalances widened substantially, inflation rose sharply, growth slowed, and governments macroeconomic programme was set off track, WB report added.
In March 2008, WB report highlighted that the authorities started to take some steps to stabilise the economy. These included passing on some of the international fuel price increases to consumers, restricting the size of the fiscal deficit in the 2008-09 budget, increasing the policy discount rate, and allowing greater flexibility in the exchange rate. However, these actions soon proved to be inadequate and too late.
Faced with the risk of an impending full-blown balance of payments crisis, the authorities in the fall 2008 decided to put in place adjustment measures that facilitate the resumption of inclusive growth with low inflation over the medium term. In November 2008, the government entered into a standby arrangement with the IMF to stabilise the economy.
In this context, the government also requested assistance from the Bank to support the structural adjustment process in a manner that would provide relief to the poorest households in Pakistan by putting in place an efficient and expanded social safety nets programme, WB report mentioned. WB report stated that the proposed Pakistan Social Safety Nets Development Policy Credit (SSN DPC) aims to support the implementation of Pakistans Second Poverty Reduction Strategy Paper (PRSP-2).
In particular, the SSN DPC would provide support to the third pillar of the PRSP: Protecting the poor and vulnerable through improved targeting of safety nets and cash transfer programmes. The proposed SSN DPC is also consistent with Pakistans National Social Protection Strategy that supports the development of an effective and financially sustainable safety net system to promote the re-distributive goals of society and protect those suffering from chronic or transient poverty.
ACCORDING TO WB REPORT, THE PROPOSED SSN DPC SUPPORTS:
-- Establishing a national targeting system through the launch of the national poverty-scorecard based targeting method by developing partnerships with institutions for data collection, and eligibility determination essential for its implementation and national rollout.
-- Establishing an effective institutional framework for programme implementation through the development of legal, institutional, administrative institutions for the safety net system and the development of graduation and exit strategies to facilitate households movement out of poverty.
-- Enhancing fiscal sustainability and strengthening the fiduciary environment through ensuring adequate budget allocation for benefit payment and programme administration and developing a reliable and transparent payment system, with strong fiduciary and social accountability controls.
