IMF rejects BISP increase proposal

The International Monetary Fund (IMF) rejected the request to expand the Benazir Income Support Program (BISP), dealing a setback to the Pakistani government’s efforts to assist the common public.

The administration has suggested expanding the reach of the social assistance program to pay quarterly stipends to 20 to 30 percent of the poor population.

Although the IMF had approved and endorsed increasing the BISP allocation for the current fiscal year from Rs360 billion to Rs400 billion by Rs40 billion for 8,9 million beneficiaries, the proposal to increase coverage to the desired level was unable to be implemented due to a lack of budgetary resources.

According to the International Monetary Fund, the government’s proposal to increase the Proxy Mean Test (PMT) for improving coverage of delivering monthly stipends to around 30% of the population living below the poverty line was denied due to a lack of budgetary resources.

When contacted, a senior official from the Finance Ministry stated there was no controversy regarding this issue because there was a clearly defined agreement on the BISP front that the government would pay Rs 7,000 in quarterly stipends to 8.9 million beneficiaries.

According to the sources, the government negotiators had discussed raising the PMT ceiling before the IMF review mission to increase coverage. Adopting the IMF’s stringent proposals, including tax and utility price increases, would significantly increase CPI-based inflation.

The Fund’s staff originally did not protest but later demanded increased tax collections and eliminating untargeted assistance.

According to IMF officials, the National Socio-Economic Registry (NSER) of the BISP contains a comprehensive database that the government should utilize to offer various targeted subsidies on gasoline, electricity, and POL for motorbikes and small cars.

This recommendation cannot be implemented at this time. With the prospect of a new IMF program following the expiration of the existing one under the Extended Fund Facility in June 2023, Pakistan and the IMF will need to establish a target subsidy mechanism to protect the populace from rising costs.