Policy Paper: Benazir Income Support Programe: From Social Safety Net to Political Cohesion, Stability and Peace

in Pakistan

Chairperson of BISP giving out Beneficiary Identification Form to a poor Woman.

By Riffat Sardar Child & Adolescent Protection Specialist, UNICEF Pakistan

Maastricht School of Governance June 2009

Table of Contents

Executive Summary:...........................................................................................................4 Pakistan Macro-Economic Context:..................................................................................5 Shocks Experienced by Poor People..................................................................................6 Overview of Social Protection in Pakistan.........................................................................6 The Social Protection Strategy............................................................................................8 The New Benazir Income Support Programme..................................................................8 Use of Technology to eliminate Inclusion and Exclusion Error:.......................................9 Disbursement of Cash Assistance:....................................................................................10 Institutional and Implementation Arrangements .............................................................10 Pre-Scorecard Targetting: ................................................................................................11 Score-card Targetting:.......................................................................................................12 Justifications for Proposed Policy Recommendation:......................................................14

MAP

Executive Summary:
This paper analyses the Benazir Income Support Programme, Pakistans Social Protection Programme , a cash transfer programme for families targeting poor women, and analyses how it is designed to contribute to poverty reduction and the improved well-being of women and children with particular reference to MDGs 1. The paper reviews the present macro economic context in Pakistan. Pakistans economic situation was better in the first part of this decade. However in 2007/08, with the sharp rise in international oil and food, along with a deteriorating security situation and internal political turmoil, Pakistan was faced with rapidly expanding macroeconomic imbalances. The fiscal deficit increased to 7.4%; there was a decline in investment rate, rise in unemployment and poverty, higher current account deficit, rising debt burden, a loss of foreign exchange reserves, higher inflation, and rise in interest rate. Recently the Government announced that that as per World Bank estimates, the poverty in Pakistan increased to 40% and every second citizen was living below the poverty line. The paper then reviews the Social Protection Programme which though 13% of the PRSP, is not necessarily reaching the poor. The paper explores whether the social safety net programmes that exist have the capacity to respond to shocks experienced by vulnerable poor people. Pakistan Social Protection report, the earthquake emergency and the recently IDPs situation clearly demonstrate that the Govt through the safety net programmes does not have the capacity to respond to idiosyncratic or aggregate shocks. The paper explains the design of the Benazir Income Support Programme as it is initiated. The paper finds that the pre-scorecard targeting that was employed by the Government, which entailed identification of the beneficiaries through the parliamentarians was highly criticized in the media as politicized and non-transparent. The paper then reviews the poverty scorecard targeting that has been proposed by the World Bank, and will be rolled out initially in 16 districts of the country. The paper reviews the current security situation in the country as it is poses a substantial risk to the BISP itself. Based on the evidence, it makes the policy recommendation of change the targeting methodology to categorical targeting focusing on the women IDPs and the geographic areas where the military operations were conducted. The paper analyses the justification for the inclusion of the IDPs in the targeting criteria, primarily because the IDPs are in ultra povery because the Humanitarian Response Plan thus far has only received 26% of the funding, which makes the funding situation very precarious. In the meantime the sense of helplessness among the IDPs is mounting and the dissatisfaction with the Government is increasing. The situation could become more volatile if the more than 2 million IDPs protest and attack the Government establishments, This could potentially destabilize the Government. If the Government channel the BISP support to the IDPs, it could placate them, and in the longer term may even contribute to the popularity of the PPP Government, causing stability to the Government and peace in the region.

Pakistan Macro-Economic Context:

Pakistans development record was strong during the first part of this decade. The economy grew at 7.3 percent on average per year during 2003/04 through 2006/07, driven by solid performances in the services and industrial sectors. This growth translated into rising household incomes, with per capita income growing to US$878 in 2006/07, an 18.3 percent increase from US$742 two years earlier. However in 2007/08, with the sharp (percent of population) rise in international oil and food 40 (specifically wheat) prices, along 35 with a deteriorating security 30 situation and internal political 25 turmoil, Pakistan was faced with 20 15 rapidly expanding macroeconomic 10 imbalances. Both fiscal and 5 current account balances widened 0 significantly, and the economy 1987-88 1990-91 1992-93 1993-94 1996-97 1998-99 2001-02 2004-05 Source Pakistan Economic Surveys, various years. begun to adjust through a slowdown in growth and rising inflation. The fiscal deficit increased to 7.4% as against the target of 4%1. Overall there was a decline in investment rate, rise in unemployment and poverty, higher current account deficit, rising debt burden, a loss of foreign exchange reserves, higher inflation, and rise in interest rate. Recently the Government announced that that as per World Bank estimates, the poverty in Pakistan increased to 40% and every 2 second citizen was living below the poverty line. It was in this background that
1 2

Figure 8. Poverty headcount rate in Pakistan, 1987/88-2005/06

2005-06

Fiscal Policy Statement, 2008-09, Govt of Pakistan, page 7. Poverty Swells to 40pc, The News, May 8, 2009

the Government launched the Benazir Income Support Programme, as a social safety net to protect the poor from economic shocks.

Shocks Experienced by Poor People

Do the current safety net programs that exist have the ability to respond to with shocks experienced by poor families? The Pakistan Social Protection report3 provides some insights into the specific shocks that affect households and household risk coping strategies. The report found that nearly two-thirds of safety net applicants and recipients (about 80 percent of whom were poor) surveyed suffered from one or more major shocks in three years before the survey, comprising both idiosyncratic (health, unemployment) and aggregate shocks (economic and natural disasters). While income shocks imposed major costs on all affected households, the poor were the hardest hit (cost of the shock as a share of annual household consumption for the poor was twice that for non-poor households). Nearly 33 percent of these households lowered their food intake, 10 percent put a child to work, and 8 percent pulled a child out of school in response to the shock. These results reveal that socio-economic vulnerabilities and income shocks at the household level are a reality and can both impoverish households at the time of the shock and if not timely assisted by the Government can also perpetuate poverty to the next generation. More significantly however, the recent earthquake in 2005 exposed the gap in the ability of the government to cope with natural disasters. Since no safety net structure existed that could be rolled out quickly, interventions had to be designed from scratch. The final relief package combined short-term income support (cash support) with long-term aid for reconstruction (housing). Currently there are more than 2 million Internally Displaced Persons (IDPs) in Pakistan because of the military operations that are going on in the areas bordering Afghanistan. While the Government along with the international community is trying to provide relief and early recovery assistance, there is a huge shortfall of funds amounting to 74% of the Humanitarian Response Plan. While the Government has announced a short-term income support (cash support) of $312 per family, but actual disbursement has not taken place. There are no social safety net that can respond to the present humanitarian crisis.

Overview of Social Protection in Pakistan

Pakistans social protection programs comprise safety nets, social security, employment promotion and protection. Pakistans safety net system includes three main federal cash transfer programs (Zakat, the Food Support Program
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World Bank (2007), These results presented in the report are from a representative sample of safety net recipients/applicants collected in 2005, and are therefore not nationally representative. The sample is predominantly poor. Over half of the sampled households (54 percent) are ultra poor (those with consumption below the food poverty line), about a quarter (23 percent) are poor (between the food and national poverty lines), while the remaining were non-poor.

(FSP)), and the recently established (2008) Benazir Income Support Programme (BISP). There are some other small, scattered programs that provide social welfare and care services to persons with disabilities, child laborers, and others. To address aggregate economic (price) shocks, till recently, Pakistan relied primarily on a wheat subsidy program. There are several employment promotion programs, e.g., micro credit programs and skills and training. Employment protection institutions (e.g., labor laws) cover workers in the formal sector. Pakistans social security system offers pension (old age, survivor and disability) benefits to formal sector workers. Public sector workers are provided civil service pensions, while private sector workers have access to pensions from the Employees Old Age Benefits (EOB), but also provincially based pension and non-pension programs such as the Workers Welfare Fund (WWF) and the Employees Social Security Institutions (ESSI). During the last four years, the overall social protection expenditures have fluctuated as a share of total PRSP/pro-poor expenditures. Specifically, expenditures pertaining to social protection (food subsidies, Bait-ul-Mal, Tawana school meals, social security, and low cost housing) remained between 3-4 percent of total PRSP spending between 2004/05 till 2006/07 but then sharply increased to 13.4 percent of total PRSP spending in 2007/08 (Table below). This increase in social protection expenditures were largely due to the increased spending on food subsidies and social security, both of which are likely not well targeted to the poor.
PRSP Budgetary Expenditures
Expenditures (Rs million) Sectors Social Security Low cost housing Food Support Programme Tawana Food Subsidies Total PRSP Expenditures Social Protection/Total PRSP Expenditures (%) 2004/05 2,030 318 2,703 78 5,359 327,683 3.2 2005/06 7,575 305 3,081 6,021 390,970 4.3 2006/07 4,513 299 3,458 20 5,455 445,414 3.1 2007/08 18,942 597 4,370 1,420 54,872 600,605 13.4

Source: PRSP-2, Finance Division, Government of Pakistan (2009)

The Social Protection Strategy

In order to strengthen the social protection sector, the Government of Pakistan, with support from the World Bank and other donors, started a collaborative process in 2006 to develop A Social Protection Strategy to Reach the Poor and the Vulnerable, which was approved by the Cabinet in June 20074. The Social Protection Strategy is conceived within the overall framework of Just and Balanced Development envisaged in the Medium Term Development Framework (2005-10) and Vision 2030. The Vision of the National Social Protection Strategy is to develop an integrated and comprehensive social protection system, covering all the population, but especially the poorest and the most vulnerable. The goals of the strategy are: (i) to support chronically poor households and protect them against destitution, food insecurity, exploitation, and social exclusion; (ii) to protect poor and vulnerable households from the impacts of adverse shocks to their consumption and wellbeing that, if not mitigated, would push non-poor households into poverty, and poor households into deeper poverty; and (iii) to promote investment in human and physical assets, including health, nutrition, and education, by poor households capable of ensuring their resilience in the medium run and of interrupting the intergenerational cycle of poverty. Priority areas of intervention will ensure these goals are met. These were identified as: (i) reaching the poorest; (ii) addressing the needs of vulnerable children; (iii) addressing the needs of vulnerable and poor women; (iv) providing employment and income earning opportunities; (v) protection against environmental and natural disaster; (vi) improving access to social care services and shelter; (vii) protection against health shocks; and (viii) protection for workers in the formal and informal labor markets.

The New Benazir Income Support Programme

Based on deficiencies highlighted in the National Social Protection Strategy which describes more an intent of the Govt. than a strategy or an implementation plan, and with the objective to overcome the severe food, fuel and financial crisis emerging in 2007/08, the Government decided to create a new cash transfer program, the Benazir Income Support Programme. During the second half of 2008, the Government of Pakistan launched the Benazir Income Support Programme (BISP) as its new main social safety net program to cushion the negative effects of the food crisis and inflation on the poor. The Program provides for cash transfers of Rs.1000 [$12] per month to the eligible families. The budget allocated for BISP for the current fiscal year is Rs.34 billion (about
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Social Protection Strategy to Reach the Poor and The Vulnerable, Center for Poverty Reduction and Social Policy Development, Planning Commission, Govt. of Pakistan, Islamabad, June 2007

$420 million), and It is the third largest allocation in the total budget and is 0.3% of the GDP for the year 2008-09. The Programme is aimed at covering 3.5 million families which are almost 15% of the entire population, and which constitutes 40% of the population below the poverty line. The administrative cost of the implementation of the scheme would be 1 to 2 per cent of the total cost of the scheme. The Govt. of Pakistan intends to expand the budget for the program in the coming fiscal year 2009/10 to cover around 5 million families with the ultimate goal over the medium term to expand coverage to 7 million families in 2011. In reaching 7 million families, it would roughly cover 35 million people or about 22% of the population. BISP is a national program that covers all provinces of the country, AJK and Northern Areas.

Use of Technology to eliminate Inclusion and Exclusion Error:

BISP is presently requesting the services of the National Database and Registration Authority (NADRA), for the design and management of the targeting database; verification of eligible beneficiaries selected through the targeting process, and generation of payment lists.The selection of the recipient is made on the basis of pre-determined criteria, using variables available with the NADRA to identify women from low-income families. As it is very easy to track a registered person in the NADRA, therefore the chances of inclusion error are automatically minimized, because the NADRA can easily verify whether the person has a Government job or receiving pension from the Government or the armed forces. The poor women are main target of this programme, and as majority of the rural poor women do not possess the NICs therefore there is a possibility that they may not apply and therefore not benefit from the programme. This will increase the exclusion error in the targeting. On the other hand, it may force them to get the NICs and thus be registered with the NADRA. This will also have the unintended effect of contributing to their overall empowerment, because then these women will also automatically get registered as voters, and enjoy other benefits such as open up bank accounts.

The Finance Minister, Mr. Naveed Qamar said "It is not possible to ensure 100 per cent transparency in implementing the scheme, but we have ensured that 90 to 92 per cent deserving people would be able to benefit from the scheme." 5

Disbursement of Cash Assistance:

BISP has also signed an agreement with Pakistan Post, which stipulates that BISP beneficiaries shall be paid through Pakistan Post Money Order. This arrangement was favored keeping in view the vast coverage, easy accessibility and money handling and delivery capacity of Pakistan Post . Over time, however, BISP management seeks to investigate alternative payment options using modern technology such as smartcard or others.

Institutional and Implementation Arrangements

Towards the end of 2008, the Benazir Income Support Programme was transferred from the Finance Division to the Cabinet Division and a Special Secretary was appointed along with a National Program Coordinator. Moreover, the Special Secretary was declared as the Principal Accounting Officer with all administrative and financial powers as given in the Rules of Business of Pakistan for Federal Secretary, in charge of a Division. The Special Secretary was later replaced by the Managing Director enjoying the same powers as of a Federal Secretary. Organizational Structure (Federal): BISP is governed by a Management Board headed by the Chairperson. Currently, the government is preparing a law that intends to establish BISP as an administratively autonomous safety net authority, which will specify clear roles and responsibilities of the Board and the management of BISP. To date, at the federal level, a Managing Director (MD) along with a Director General (DG) Operations and DG Administration have been appointed. Moreover, five Regional Directors for all the provinces including AJK/NA, Director Admin, Director IT, Director Finance & Accounts, Director Internal Audit and a Deputy Director, Media along with other staff have been appointed6. Organizational Structure (Regional): At provincial level, a DG will head each province including AJK/NA (a total of four DGs, 2 Directors AJK and Northern Areas). Provincial DGs shall be assisted by 28 Divisional Directors, who shall be further assisted by 125 Supervisors. So far, all of the DG and Director positions have been filled, whereas some of the other staff still has to be appointed as the BISP rolls out its operation.
5

Benazir Income Support Programme from Sep: ECC, /The NEWS,Thursday, July 31, 2008 6 Project Appraisal Document, Social Safety Net Technical Assistance Project, World Bank, April 2009. 10

Pre-Scorecard Targetting:
Available empirical evidence shows that the impact of cash transfer programs on poverty and inequality is significantly higher when effective and accurate targeting mechanisms are used. The better the cash transfers are targeted to the poor, the larger the impact on poverty and human development outcomes. Wellimplemented cash transfer programs are among the most effective programs to distribute income and benefit the poorest population.7 However In order to quickly launch the program, The PPP Govt. decided to provide beneficiary forms to all the elected members of the National and the Provincial Assemblies so that they could identify and fill out the forms for the intended beneficiaries. According to the original plan, the Parliamentarians (Members of the National Assembly and Senators) were supposed to identify 8,000 beneficiary households each on a prescribed form which collected information on names, national ID card, and household income. Upon receipt of the completed forms, the National Database Registration Authority (NADRA) applies the selection/verification filters to finalize the beneficiary lists. Payments are then made via the post offices and delivered at the doorstep through money orders to the adult female in the household. A list of the first 127,000 beneficiaries was provided to the Pakistan Postal Services in January 2009 and these payments are presently being processed. The government has now approved 1.5 million beneficiary families, using the prescorecard targeting system and expected to disburse the allocated amount. The above method of targeting was highly criticized in the media that it too politicised, centralised, complicated and non-transparent. There are already reports of inclusion and exclusion error and the Govt. has been blamed by the opposition parties for nepotism and for including political workers as the beneficiaries. While in other places, the party workers of the PPP criticized their Government of including the opposition parties in the distribution of beneficiary forms. It seems the PPP wants to expand the practice of awarding development funds to parliamentarians and keep them busy in bureaucratic tasks, rather than having them focus on legislation. Already the PPP district committee in Dera Ismail Khan has criticized the distribution of BISP forms through a PML-Q Member of National Assembly, with the office bearers complaining that the party workers have been ignored. They warned that such policies could destabilize the party.8
7

Lindert, K., E. Skoufias and J. Shapiro (2006) in Redistributing Income to the Poor and the Rich: Public Transfers in Latin America and the Caribbean.
8

A Critical Look at BISP by Riaz Khan, The News, 12th Nov. 2008.

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Score-card Targetting:
In the face of criticism over targeting, the Government in December 2008, decided to use a scorecard system to identify BISP beneficiaries. A scorecard is a targeting tool that includes a limited number of simple indicators that correlate well with poverty along with an intuitive scoring system that helps identify program eligibility. The scorecard proposed for Pakistans BISP has been developed with support by the World Bank9 and is marked by two main characteristics (i) Ease of implementation, and (ii) a Proxy Means Testing approach to improve targeting performance10. It is noteworthy that the proposed scorecard questionnaire includes only 13 questions. The Roll-out of the scorecard nationwide is an extensive task. Therefore it was decided that initially it will be rolled out in 16 districts. This test phase is considered to provide useful insights and the necessary learning for scaling up the program nationwide. The scorecard will consider the following criteria for determining the family as poor or non-poor. Beneficiary Eligibility Criteria: The following categories of families are eligible: a) Possession of CNIC by female applicant/ recipient. b) Monthly family income is less than Rs.6000/ ($77) And subject to conditions (a) and (b). c) Widowed/ divorced women, without adult male members in the family. d) Any physically or mentally retarded person(s) in the family. e) Any family member suffering from a chronic disease. Ineligibility Criteria: The following families are ineligible to receive any assistance under the Programme: a) Where any of the members of the family is in employment of government/ semi-government/ authority/ department or armed forces of Pakistan. b) Where any of the members of the family is drawing pension from government/ semi government/authority/department or armed forces of Pakistan. c) Where any of the members of the family is receiving any post-retirement benefits from any government department/ agency. d) Where any of the members of the family owns an agriculture land more than three acres or residential house/ plot of more than eighty square yards (3 marlas). e) Where any member of the family is receiving income support from any other source like Punjab Food Support Scheme etc. f) Where any member of the family possesses a Machine Readable Passport.
9

See Vishwanath, Hou and Yoshida (2009) in Poverty Scorecard for Pakistan: Approach for Targeting the Poor 10 See Grosh and Baker (1995) for more details on the Proxy Means Testing approach.

A Recommended

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g) Where any member of the family possesses a National Identity Card for Overseas Pakistanis (NICOP). h) Where any member of the family has a Bank Account (except in NBP, HBL, UBL, MCB, ABL, BOP, Bolan Bank, Khyber Bank, First Women Bank, ZTBL, Khushhali Bank, and all microfinance banks).

Evidence-based Policy Recommendation:

Though the BISP is proposed for the all the provinces of Pakistan, so far the programme has not covered the districts of Swat, Buner, Malakand, Shangla, and Dir in the NWFP province because of the military operation that was going on in these districts. There are now more than 2 million IDPs living in various parts of NWFP. While the Government of Pakistan and the international community are making efforts to provide relief and recovery support, the funding situation is very precarious. The Humanitarian Response Plan has only received $119 million thus far with a pledge of an additional $21 million. This will only cover 26% of the Humanitarian Response Plan. There is an urgent need of $543 million for relief and early recovery assistance to the internally displaced persons from the NWFP till the end of 200911. The funding situation remains very dire, and without fresh contributions, humanitarian response operations will be seriously hampered. Thus far the Government has announced a short-term income support of (cash support) of $312 per family, but actual disbursement has not taken place. As there is no social safety net that can respond to the present humanitarian crisis, there is a urgent need to re-structure the Benazir Income Support programme, so that it can quickly respond to shock created by the humanitarian crisis.

Source: Pakistan NWPF Displacement Situation Report # 4, 11th June 2009, OCHA Pakistan.

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The NEWS, 5th June, 2009

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Justifications for Proposed Policy Recommendation:

There are several justifications for the proposed recommendation: a. The main risk to the BISP itself is the volatile situation in the country including the security concerns, that could impede the nation-wide roll-out of the targeting process. At the same time the newly created implementing agency for the BISP may also receive drawbacks because of the primary concern of the Government with the security situation, resulting in delays in implementation. b. The monthly cash support of Rs1,000 to the woman of each recipient family translates into Rs167 per month per person (on the average the family size is 6 per family), which is only 0.65 percent of the requirement of a dollar a day. Therefore while it will provide some relief to the poor, it cannot help in reduction of poverty. The poor are going to remain poor despite of the cash assistance. c. The fundamental flaw is that it is a federally implemented programme and goes against the principle of devolution and provincial autonomy. For its execution it is totally dependent on provincial and local governments. The scheme has no linkages with other poverty eradication efforts, like microfinance, or the Provincial safety net programmes such as the one in the Punjab Province. Since the BISP is a federally implemented programme, and since the Federal Government engaged in military operations which caused the IDPs to flee therefore the federal Government is now well positioned to provide relief and support to the IDPs through the BISP. c. The people in the districts where military operations are going on were not targeted by the BISP because of the security situation. However now they are living in camps, and have been registered. As they have lost their homes, and all means of livelihood therefore they are now more poor than before, and more poor than the poor living in districts where military operations are not going on. Therefore the BISP should include the IDPs living in camps and with host communities as the priority group of poor people to receive cash support under the programme. While the Government is trying to provide some relief measures, but considering the magnitude of the problem and the resource constraint, it is unable to provide all the required relief in terms of food, shelter, water and sanitation and medical supplies The IDPs without any means and having suffered immense losses believe that they had to abandon their homes because of the Government military operations in their area. They are therefore holding the Government responsible for their plight. If the present sense of helplessness prolongs among the IDPs, they may become volatile and considering their huge number can easily destabilize the Government by attacking Government establishments. Therefore to preclude the chances of any such mishap from happening, it is more prudent for the Government to channel the BISP support to the IDPs by changing

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the targeting criteria to categorical targeting focusing on the IDPs and the geographic areas where the military operations were conducted. This will help in placating the disgruntled IDPs, mitigating the security risks, and even those to BISP itself; and may even contribute to the popularity of the PPP Government. This may result in more stability within Pakistan and peace in the region.

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