Prime Minister Imran Khan has announced a Rs 120 billion subsidy to enable 20 million families to get a 20 percent discount on wheat flour, ghee and pulses. He has called it the biggest welfare programme in the history of the country, though there are enough question marks about it to make the benefits doubtful. Apparently, individuals or families will not get the subsidy, but will identify themselves as qualifying, and will be given the discount by participating retailers, who presumably will charge them the discounted price, and the government the difference. That seems like a bottleneck readymade: government officials charge ‘under the table’ routinely whenever there are payments to be released. There was also no clarity about the incentive for retailers to obtain digital connections.
Utility Stores showed the way to other retailers by raising the prices of the subsidised items. After all, the subsidy does not fix prices; if wholesalers raise their prices, consumers end up paying more to retailers, even if the subsidy is claimed. The programme is experimental, and runs six months. What is to happen after that, is anybody’s guess.
However, it is perhaps to be welcomed that Mr Khan conceded that food inflation had got so out of hand that the subsidy had to be given. At the same time, Mr Khan may have also indirectly admitted that Pakistan no longer was interested in an IMF programme, for it is notorious that the IMF is almost reflexively anti-subsidies, and their elimination is virtually the first demand it makes. Its plugging away at the subsidy for lifeline power consumers is Pakistan’s previous experience with this tendency. However, Mr Khan’s saying that oil prices will rise further, as will gas prices, indicates that he has not entirely given up on the IMF, for the leverage of being given a programme cannot be equalled among other multilateral lenders, or the money markets, by the recent Saudi package which has kept Pakistan afloat.
It is almost as if the subsidy has been proffered to reduce public ire ahead which will be caused by continuing inflation. The danger of the subsidy being too little too late is compounded by the slew of doubts about its feasibility. If Mr Khan thinks enough will benefit to make a difference at election time, he will have to ensure that there is not even a whiff of corruption about it.
