The Pakistani government proposed expanding the Benazir Income Support Program (BISP) to include 20–30% of the people living in poverty, but the International Monetary Fund (IMF) rejected this idea.
The plan aimed to give people living in poverty quarterly stipends. The idea to extend coverage could not be executed due to a lack of budgetary resources, even though the IMF approved an increase in the BISP funding by Rs40 billion, from Rs360 billion to Rs400 billion for the current fiscal year for 8.9 million beneficiaries.
In order to improve coverage and provide monthly stipends to almost 30% of the population living below the poverty line, the IMF reportedly declined to raise the Proxy Mean Test (PMT) level, claiming a lack of budgetary resources. There was no disagreement, according to a representative of the Finance Ministry, and 8.9 million recipients have been receiving a Rs7,000 stipend every three months from the government.
The IMF staff proposed boosting tax collections and removing un-targeted subsidies but did not initially resist the concept of extending coverage. The National Socio-Economic Registry (NSER) of the BISP should be used to give targeted subsidies for gas, electricity, and POL for motorbikes and small cars, according to IMF officials.
According to Geo, many ideas for launching a targeted subsidy scheme were examined but eventually abandoned for a number of factors. In February 2023, the monthly Consumer Price Index (CPI) crossed 31.5 percent, while the weekly Sensitive Price Index (SPI) reached 45.64 percent. In the weeks and months prior to the end of the current fiscal year, both the CPI and SPI are anticipated to increase further.
There is no other choice than to adopt a tailored subsidy scheme over the short and medium term to safeguard vulnerable segments from sliding below the poverty line. Given the prospect of a new IMF programme following the expiration of the existing one under the Extended Fund Facility in June 2023, Pakistan and the IMF will need to set up a target subsidy system.