Tuesday, 8 September 2020

The land is eager to teach

by Haris Gazdar

image by Asif Hassan/AFP

“If consciously or otherwise you were brought up believing that Karachi in 1947 was "a land without people for a people without land" this must be a disturbing time for you.  Commiserations.

 And if in your imagination Karachi was not part of Sindh, commiserations again. Check Google Maps. What is Karachi? A settlement on the sea shore, occupying land between the Hub and Malir Rivers, to the north of the farthest reach of the Indus delta.


You assumed, without ever caring to actually know, that you were entitled to the water that flows down the Kirthar Range, and the Indus, but only if it comes in taps. Commiserations. Water flows down. Sometimes taps come in the way. Sometimes not.


Urban planners duped you into assuming that the land, its rocks, hills, riverbeds, bushes, backwaters, mangroves, the sea, its tides and currents don't matter. Omnipotence of civil engineering. Commiserations.


You need to lash out. Of course you do. From omnipotence to impotence. What else will you do? The word Sindh, forget Sindhis for a minute, the word Sindh, it strikes fear because it shatters the fiction of omnipotence. Commiserations, and compassion.


Take time out. Let things settle. A crime has been committed. Relax, you are not the criminal. But you are not the most wretched victim, certainly not the only one. Let it sink in: there is no land without people, there are no people without land.


You are not impotent, omnipotence was an illusion. The fear is understandable. Let it pass. Sindh will irk you less. Sindhis too. The land is eager to teach, through people who have given it the time, their stories stores of knowledge, wisdom even, will make you powerful again.”

This post is adapted from a Twitter thread by the author published on 2 September, 2020. Follow @CollectiveKHI and @HarisGazdar to stay up to date with analysis and insights on current news in Pakistan and South Asia.

Monday, 24 August 2020

Populist Policy not Effective Reform: Why Amending Pakistan’s Drug Pricing Policy is a Mistake

By: Kabeer Dawani 

Earlier this month, the Federal Government of Pakistan amended the Drug Pricing Policy of 2018 in a bid to reinstate the government’s control over medicine prices and end automatic, inflation-adjusted increases. This follows public outcry in January 2019 over price increases and ongoing debates around affordable healthcare in the wake of the COVID pandemic.

Medicine pricing has long been a controversial issue in Pakistan. Currently all pharmaceuticals have strict price ceilings, which, combined with a policy of price rigidity, has incentivised manufacturers to set very high initial margins. As a result, consumers face overpricing, shortages of drugs that are no longer profitable to manufacture, as well as poorer quality and less effective substitutes. While the Drug Pricing Policy was welcomed by many in the industry as a way to regulate an otherwise ad-hoc process, medicine pricing remains a populist issue and politicians face pressure to keep prices low.  

For the past two years in partnership with the SOAS Anti-Corruption Evidence research consortium, I have researched the Pakistani pharmaceutical sector, with a focus on rent-seeking related to pricing. In two papers coauthored with Asad Sayeed, I discuss the political settlement of Pakistan’s pharmaceutical sector and issues of pricing, procurement and quality.

So, why is pricing of medicines so contentious in Pakistan? Do the strict price controls have positive or negative consequences? And can the pricing regime be structured in a way that benefits both the industry and the consumer?

Populism in pricing

Pakistan has implemented strict price controls and rigidity on medicines despite not having a clearly defined price-setting policy until 2015. From 2001 to 2013 there was a virtual price freeze on medicines. And even in 2013 when the Nawaz Sharif government increased prices, the decision was reversed within a matter of days due to public pressure. Pharmaceutical firms subsequently pursued a series of court orders until price increases were granted and a pricing policy was instituted, first in 2015, and then again in 2018.

The 2018 drug pricing policy was formulated after due consultation with relevant stakeholders – nearly all of the people interviewed for our study supported it. The policy rationalises what was previously an ad-hoc process of price determination and increases, which one manufacturer termed as a ‘negotiation’ with the government. Under the new policy, increases were granted based on inflation – such as for essential medicines which could be increased by 70% of annual inflation once a year.

However, early in 2019 there was public uproar over approved price increases that I have previously argued were largely legitimate. At the time, the Imran Khan-led government came under considerable pressure by the media and the then-federal health minister, Aamir Kiani, was removed from office for alleged corruption in granting the increases. In May 2019 the new health minister, Dr Zafar Mirza, was tasked with reducing these prices within 72 hours and, by the start of 2020, the government had reduced the prices of 89 medicines by 15%.

This month the government has revoked the inflation-based price increases and has reinstated the Drug Regulatory Authority of Pakistan’s (DRAP) arbitrary powers to decide increases – which must be seen in the broader context of strict price controls. Every government, across parties and systems, has continued with the populist policy of restricting increases because any change in the price of medicine – an essential good – is perceived as a failure of government and anti-poor. But populist debates often ignore the wider ramifications of the price controls.

What do price controls mean in reality?

The strict price controls increase the production costs of drugs, which means that pharmaceutical manufacturers employ multiple mechanisms to continue to grow and profit.

Firms secure very high initial prices – sometimes with margins of 1000% – because they know that these will be squeezed over time. There are also inevitable shortages if a medicine is not profitable to produce (one study found that only about a third of essential medicines were available in the market), while higher-priced substitutes may be introduced and produced that are more economical for manufacturers. Due to lax regulation, firms routinely compromise on minimum production standards (‘Good Manufacturing Practices’ or GMPs) too that are a necessary condition for quality medicines, in an effort to secure higher profits.

Although hard to quantify, consumers will experience negative health effects from sub-standard drugs – they have to consume medicines for longer due to their lower quality and may not be able to access essential medicines at all due to their unavailability. Patients may also experience complications from the drugs shortages and slower treatment due to lower efficacy. Consumers have to spend more on medicines too – our research shows that for the poorest 10% of the population, expenditure on medicines as a share of total health expenditure nearly doubled from 45% in 2010–11 to 80% in 2015–16.

So the stated aim of price controls – to keep prices in check so medicines are affordable for low-income households – is directly contradicted because of the incentives created for firms to circumvent the restrictions. And the consequences described above are harmful for the broader population, disproportionately affecting the poorest in Pakistan.

Strategies for reform  

In the Democratic primary campaign in the United States, Bernie Sanders and Elizabeth Warren consistently highlighted exorbitantly high drug prices as an issue. Left alone to capitalist forces, prices for medicines can skyrocket. However, at the other end of the spectrum, Pakistan’s strict price controls demonstrate harmful consequences in developmental terms.

A balance needs to be struck of course, and Pakistan’s Drug Pricing Policy of 2018 as originally devised was a step in the right direction in establishing clear rules for rational pricing. As a result of the latest amendment this month, the current government may undo the beneficial aspects of the 2018 policy and they should seriously reconsider their decision.

A large body of political economy research suggests that top-down policy changes are difficult to initiate and implement. Instead, successful improvements can be achieved through horizontal changes by industry or other players in the economy – policy-makers and industry stakeholders in Pakistan should take heed.

Our study suggests that a feasible way to seek improvements in pricing and access to medicines is if pharmaceutical firms and the media can work together. The media in Pakistan has significant power in shaping public discourse and opinion. But, due to the complexity of the pharmaceutical sector and the relationship between pricing and larger public health concerns, reporting has been inadequate and often misplaced. The media, in fact, reinforces the populist pressure on governments to suppress medicine prices.

And so the onus is on the pharmaceutical sector to work with the media. One possible way to do this is through independent journalism schools who organize workshops to train journalists. The industry can finance these schools, who can then organize workshops for journalists on the impact of price controls on social welfare and the broader effects beyond populist debates. The trainings will be credible because they will be conducted independently and not the industry, who will not have any editorial input. This is crucial for the strategy to be successful, and some schools do presently organize journalists’ trainings through corporate financing, so it is not unprecedented. Thus, if the print and electronic media can report more critically and highlight the harmful impact of rigidity in medicine pricing and its ad hoc nature, it could be possible to decrease incrementally public opposition to price increases.

In turn, informed public attitudes will allow politicians to enforce consistent, rule-based price increases. Not only will this reduce drugs shortages, it will also reduce the high margins on medicines and the propensity for higher-priced substitutes. Although such efforts will take time, this is one feasible way for meaningful reform in the pharmaceutical sector and for improvement in access to medicines in Pakistan.

This article is an output of a research programme (
SOAS-ACE) funded by UK Aid from the UK government. The views presented here are those of the author and do not necessarily represent the views of the UK Government’s official policies.

This essay was first published by Naya Daur Media and is reproduced here with the author’s permission.

Monday, 6 July 2020

Lives and Livelihoods: The Inevitable Defeats of Pakistan’s Poor

A family of 7 live in a one-bedroom home in machar (mosquito) colony, a slum in Karachi during a 3-day lockdown on March 22, 2020.
Saiyna Bashir for The New York Times.

Pakistan’s first Covid-19 case was confirmed in late February. Over the next four months, and amidst varying responses to the virus, Pakistan has emerged amongst the countries most affected by the pandemic. Classified as a lower middle income country by the World Bank, it faces an exacerbated impact of the virus due to various factors, including poor infrastructure, limited resources, as well as bureaucratic inefficiencies and political instability.
In addition to a public health crisis, Covid-19 has created interrelated demand and supply shocks for the economy where various sectors are witnessing declining production and consumption, leading to negative impacts on income and employment. Coupled with disruptions in global supply chains and failures in the healthcare system, these shocks have devastating economic and social consequences. Such consequences have contributed significantly to Pakistan’s lockdown debate, where proponents argue that lockdowns reduce transmission and consequently prevent a surge in infections and possible deaths while opponents assert that the loss of livelihoods resulting from these measures starve the poor and have far worse economic outcomes.  
However, in examining the pandemic’s effects on private consumption of the Pakistani population in general, and for lower-income households in particular, this blog shows that Pakistan’s poor are likely to lose out irrespective of a lockdown as incomes and health are both  compromised. Pakistan needs to divert focus away from the incorrect dichotomy pitting lives against livelihoods and towards evidence-based policies in order to effectively combat the virus while also protecting its most vulnerable population.
Changes in Consumption
Covid-19 has caused significant changes in consumer behavior, which are both a catalyst as well as an outcome of the aforementioned market shocks. As income sources become precarious or lost, demand falls in turn putting further strains on income. In a recent article, John Mullbauer predicts that the United States’ quarterly consumption is likely to fall faster than income, by approximately 20%, due to Covid-19. A similar impact can be anticipated for Pakistan’s economy given the Federal Government’s  perplexed Covid-19 response and the continuing surge in infections. Pakistan’s poverty rate is estimated to rise up to 33.5%  and falls in private consumption are expected, particularly for more vulnerable sectors such as recreation and restaurants. Overall spending will also suffer since online shopping is unlikely to compensate the fall in demand due to lockdowns, at least in the short run. On the other hand, spending on food eaten at home and healthcare is anticipated to rise. Some analyses have reported a 66% decline in the amount spent on eating out while a 70% increase in the amount spent on groceries in Pakistan. With the shift to working from home in partial or complete lockdowns, spending on transportation and fuel is likely to go down as well while there will be potential rise in demand for better telecommunication services and online shopping.
As consumer behavior adjusts to the changing circumstances in Pakistan, the poorer households become the worst hit by the pandemic, where consumption decisions are also influenced by larger realities such as the absence of adequate social safety nets. Carolina Sánchez-Páramo, a World Bank economist, explains that the poor suffer more owing to greater vulnerability arising from factors such as location, with many of the urban poor living in close quarters where social distancing is difficult if not impossible to achieve. In Pakistan, this is evidenced by the high number of cases from such areas, particularly Karachi’s informal settlements and slums, where residents have spoken about the impossibility of social distancing owing to living arrangements. For lower-income groups, this vulnerability is further aggravated by a greater dependency on public services, where the exponential growth of the virus further encumbers the healthcare system and many poor households find themselves with limited or no access to quality healthcare. For Pakistan, the health risks magnify as a majority of the lower income population depends on public transport, where several people cram in one vehicle and following ‘standard operating procedures’ becomes impossible.
Perhaps the greatest cause of vulnerability for lower-income households arises from their sources of income. Low-income workers are often employed in informal, vulnerable and non-permanent jobs. The Labor Force Survey 2017-18 reports that 72% of non-agricultural employment is in the informal sector in Pakistan. Workers in these sectors are not covered by the state’s social and legal security and can be easily laid off. Reports claim that massive layoffs are already occurring in Pakistan and, according to the Ministry of Planning and Development, estimates suggest up to 18 million Pakistanis could lose their jobs as a result of coronavirus shocks to the economy.
These circumstances are not restricted to informal employment alone. According to the Pakistan Bureau of Statistics, 55% of the labor force across sectors is engaged in vulnerable employment. With declining demand, these workers are prone to job losses and unstable incomes. Restaurants and Hotels, a sector gravely impacted by Covid-19, has a vulnerable employment share of 48%.  The Pakistan Tourism Development Corporation has recently fired all regular employees of three of its companies due to continual losses and the ongoing pandemic’s effects. Data from the Labor Force Survey 2017-18 shows that a majority of Pakistan’s labor force is employed in Skilled Agricultural & Fishery, Services and Sales, Elementary Occupations and Craft and Related trades. The same occupational groups are also the ones with the lowest average monthly wages, with the lowest recorded for Elementary Occupations. These jobs are largely constituted of daily wage workers such as street vendors, domestic helpers, waiters, textile and garment workers, etc. who are unable to earn in case of a lockdown. Even without the lockdown, incomes continue to suffer due to the threat of contagion with most markets deserted and demand compromised. These workers also face greater health hazards due to the nature of their jobs and are more susceptible to contracting the virus.
Commanding a greater vulnerability, Pakistan’s poor adjust consumption in significantly different ways that have serious consequences. Using expenditure data from the Household Integrated Economic Survey (HIES) 2015-16, we calculated that food constituted almost half of total expenditure for households belonging to the lowest percentile groups of income in Pakistan. Other major expenditure groups included imputed rent, clothing, electricity and fuel. The expenditure groups that faced an automatic decline in spending due to the virus, such as Restaurants and Hotels, Recreation and Culture and Transportation, constitute a minor proportion of the expenditures of lower-income households (between 2 to 4%).  Thus, falls in income could mean these households adjust consumption with reductions in spending on food and other necessities, which has significant implications for their nutrition and long-term human capital development. In  Pakistan, where already 38% of the children under five are stunted and 23% of all children are underweight, these ramifications will likely be worse.
Policy Responses
The government has attempted to redress this alarming situation with cash-transfers through the Ehsaas program and income generation through paid ecosystem nourishment of the “Green Stimulus” program. At the same time, several non-governmental organizations are also providing assistance to the vulnerable during the pandemic. However, an adequate response requires concerted efforts by the state beyond short-term relief mechanisms. Some important factors to consider include the recognition of the need for substantial fiscal resources, timely delivery of support packages and cognizance of the new poor that are absent in existing programs. Moreover, an efficient and well-designed welfare system becomes crucial to mitigate the long-term impact of Covid-19. Unfortunately, such a creative effort seems missing from the recently announced Federal budget for 2020-21.
As Pakistan falters in formulating a coherent and effective response to the virus, several Pakistanis go to bed hungry and several others struggle to receive healthcare while the debate on lives or livelihoods persists. However, an examination of the situation demonstrates that Covid-19 has serious effects with and without the lockdown. A response that constructs a binary between lives and livelihoods is faulty. Life necessitates livelihoods and livelihoods sustain lives. An effective response to Covid-19 must address these in conjunction and not separately. The state needs to prepare for both short and long-term consequences of the virus and concentrate efforts on saving both lives and livelihoods, especially for its most vulnerable people that are, unfortunately, the ultimate losers in this pandemic.

Wednesday, 10 June 2020

On the Frontlines: The Strain on Healthcare Providers

By: Komal Qidwai

A Covid-19 Ward at Civil Hospital, Karachi. Photo Credit: Health and Population Welfare Department, Sindh
As Pakistan’s Covid-19 tally rises above 100,000, hospitals across the country are running out of capacity and the burden on frontline providers is growing. Through our interviews with experts and on-going tracking of news and social media content, we have identified some major areas of concern regarding the safety and rights of frontline healthcare providers.

Starting in May, a stream of violent attacks began against healthcare providers and facilities by angry relatives of patients. In two separate violent incidents in Karachi’s Jinnah Postgraduate Medical Centre (JPMC) and Civil Hospital, relatives of deceased coronavirus patients demanded the release of their dead bodies, with the mob in the latter facility denying that the deceased was Covid-19 positive. Both groups of attackers damaged the facilities, breaking the glass windows on counters and throwing around furniture. Family members of a deceased patient also stormed into the hospital’s isolation ward and hurled abuses at the staff before attacking and injuring a young doctor in JPMC. In Peshawar’s Lady Reading Hospital, relatives of a 50-year-old corona patient broke down the door to the Covid ward and brawled with the doctors when they were informed that she died.

One reason for people to attack healthcare facilities and demand the release of dead bodies is denial that the pandemic is real. Near the end of April, Gallup Pakistan reported that over 3 in 5 Pakistanis believe that the coronavirus threat is exaggerated.

As hospitals run out of beds, ventilators and other equipment, frontline healthcare providers report high levels of stress. Even providers not directly dealing with Covid-19 cases are under strain and report constant anxiety. “Patients are being very rude and aggressive these days. Before the pandemic, incidences of aggression or violence happened rarely, but now it’s become a daily occurrence”, says senior gynecologist and obstetrician Dr Azra Ahsan. Providers are at risk of contracting the virus, as well as violence from angry family members of patients.

Over 2200 healthcare providers—1240 of whom are doctors—have been infected with the coronavirus, and 24 providers have died, including 15 doctors. Frontline providers report that facilities are now short-staffed because so many doctors and staff members are falling ill.Doctors had warned that infection would spread fast in the healthcare community due to shortages of personal protective equipment as well as lack of guidelines on its use. They complained that corona wards in hospitals were not disinfected properly. Healthcare providers also reported that private facilities were not providing their staff with PPE, risking their safety and lives. Young doctors have had to turn to non-governmental organizations (NGOs) for protective equipment supplies.

Doctors in Sindh urged the government to enforce stricter lockdown measures; pleading that people should stay at home and explaining that the situation in healthcare facilities was dire.

But government response has been mixed at best. In Quetta, the authorities refused healthcare providers’ demands for the provisions of PPE, and medical staff’s protests were met with police baton-charge and arrests. In Sindh province, doctors protested to demand PPE provision for all providers as early as the end of March, but to no avail. In Peshawar, two doctors resigned from Lady Reading Hospital in protest, claiming that the facility was not adequately equipped to deal with Covid-19 cases and healthcare providers were at risk. In Lahore, doctors of the Grand Health Alliance held a sit-in despite police threatening to charge against protestors. Over two weeks later, the government finally agreed to negotiate with the protestors, who were demanding PPE, regular screening of healthcare providers, and a risk allowance.

Doctors report the increasing number of staff falling ill combined with a lack of sufficient resources will now impact the quality of care being provided in healthcare facilities. Despite the worsening situation of healthcare facilities, the rising number of cases, and pleas of healthcare providers, the federal government is not considering re-imposing the lockdown. During a recent press briefing before a meeting of the Covid-19 National Coordination Committee, the federal Minister for Planning and Development, Asad Umar, remarked that the government would only impose a lockdown when the healthcare system gets overwhelmed.

Healthcare providers believe the system is already overwhelmed when even a cannula is not available for the treatment of a doctor sick with Covid-19. Families and colleagues of doctors in Karachi, Lahore and Multan have claimed that their loved ones have died from Covid-19 due to negligence of healthcare facilities and staff. The Special Assistant to the Prime Minister on Health, Dr Zafar Mirza, still claims only 30 percent of hospital resources dedicated to Covid-19 are being used. While the government has decided to provide 1000 additional beds with oxygen facilities in light of the burden on hospitals, there is no mention of the shortage of staff to provide care.

The strain on the healthcare system is not only impacting Covid-19 wards and patients but all other departments, including maternity units. Even in early May, Peshawar’s Lady Reading Hospital and Islamabad’s Pakistan Institute of Medical Sciences (PIMS) had to close their maternity wards due to the high number of infections among staff. Dr Nusrat Shah, a senior gynecologist at Civil Hospital in Karachi, reported they regularly received pregnant patients seriously ill with Covid-19. Despite these warnings, the government started to ease the lockdown in early May.

As the situation worsens, we can expect reproductive healthcare services will become more severely affected due to the strain on healthcare providers.Pakistan’s curve shows no signs of flattening; the government and the families would do well to remember that healthcare providers are risking their lives to provide services to their patients.

Monday, 8 June 2020

Covid-19 and the Limits of Pakistan's Fractured Welfare System

By: Kabeer Dawani and Rehan Rafay Jamil

A beneficiary of the Benazir Income Support Programme receiving her quarterly disbursement. Photo Credit: Rehan Jamil

Poverty in Pakistan may more than double, from 23% to 57%, as a result of the Covid-19 shock, according to one estimate from the Pakistan Institute of Development Economics. This is a dire picture and has the potential to undo much of the progress in poverty reduction that has occurred in Pakistan, particularly over the past two decades, unless urgent action is taken by the federal government.

The lockdown versus livelihoods false binary that has been the primary focus of much public discussion in Pakistan has missed the larger and more urgent picture. The virus is here to stay, at least for a year and probably longer until a vaccine is developed, which means that neither is a prolonged lockdown sustainable and nor will the economy return to the levels it was at before. In fact, with the impending forecast for a global recession, Pakistan’s already slowing economy is likely to contract — the IMF forecasts that the economy will shrink by 1.5%.

Unfortunately, Pakistan’s poorest citizens will suffer most in the imminent downturn. This means that our government needs to take urgent measures to protect the livelihoods of the most vulnerable citizens. Daily wage earners, migrants, and informal sector workers must be at the centre of the design of more expansive social safety nets.

In this essay, we note the shortcomings of Pakistan's existing welfare system in light of the pandemic. We also highlight the need for expanding Pakistan’s social safety nets in a systemic way, while learning lessons from past experiences with various programmes and what has been done in other similar countries.

BISP and Ehsaas Emergency Cash transfers

The Benazir Income Support Programme (BISP), Pakistan’s largest federally funded social safety net, has been at the centre of the federal government’s response to Covid-19. From the programme’s existing 4 million beneficiaries, the Ehsaas Emergency Cash transfers has extended one-time cash disbursement of Rs12,000 to an additional 8 million households. These emergency cash transfers are the biggest in Pakistan’s history and were made possible because the country has developed a nationwide cash transfer delivery system under BISP including the use of digital technology. While this is a very positive first step, these one-time cash transfers must be the start of a more long-term approach to social welfare, which also reaches segments of the population that do not have mobile and internet access or national identity cards. Technology can aid public outreach, but is no substitute for investments in capacity at the local level.

The BISP cash transfer programme was a significant milestone in establishing Pakistan’s limited welfare architecture. The scale of the programme has been an important step to redefine the social contract enshrined in the Constitution which calls for the state to protect its citizens from risks. There are many lessons to be learned about how BISP became Pakistan’s largest safety net, adopted by three successive elected governments since its establishment in 2008. Perhaps one of the most important lessons was that targeting needs to be well-designed: BISP developed a poverty registry known as the National Socio-Economic Registry (NSER) from which beneficiaries were selected based on welfare indicators known as a proxy means test (PMT). BISP has also undergone rigorous third-party evaluations; there is already some evidence that shows the programme has had impact on nutrition and increasing consumption for some of Pakistan’s poorest households. The programme’s exclusive targeting of women has also been a 'paradigm shift' in addressing the social rights of Pakistan poorest female citizens, millions of whom have received social welfare for the first time in their lives.

However, the Covid-19 pandemic also exposes the limits of Pakistan’s existing welfare architecture. While the government has previously focused on excluding those who it classifies as ineligible for BISP, there is now an equal need to focus on 'errors of exclusion'. In other words, there is a need to reach out to those citizens who should be in the safety net but are excluded for some reason, such as those without mobile phones or national identity cards. The urban poor and migrant workers who come to Pakistan’s cities to seek casual employment are likely suffering the heaviest brunt of the lockdown and slower economic activity, but will largely be unable to access any welfare scheme. Already, a survey conducted in April 2020 by Dr Farah Said and her co-authors found that for small-business owners in Punjab and Sindh, household income had fallen by 90%.

While the expansion of BISP and the additional one-time emergency cash transfers under Ehsaas are an admirable step, given the grim circumstances, these measures in and of themselves will not be sufficient for the aforementioned reasons. There is an urgent need to think more ambitiously about systemic approaches to expanding social safety nets given the pervasive effects of this shock. Importantly, Pakistan must move beyond the standard announcement of ad hoc 'relief packages', which are frequently given to rent-seeking industrialists and business interests, or relying on small donor funded pilots that end when funding dries out.

Expanding Welfare Provision Beyond Cash Transfers

Ensuring food security and employment for the poorest citizens must be the federal government’s urgent priority in the coming months and years. This is no small task and requires careful planning, new and creative ways of targeting those who are outside the safety net, and an unprecedented fiscal commitment to social welfare expansion. International experiences have shown that public works programmes, where the state employs people for various projects, and food distribution programmes, such as providing meals to school children, have been immensely successful in expanding welfare nets. Out of the box thinking is needed to come up with suitable long-term programmes for Pakistan’s context.

In neighbouring India, the foundation of a rights-based welfare system was put in place after 2005, which could play a vital role in addressing the devastating impacts of Covid-19 there. Two key components of India's welfare system are the constitutional guarantees of right to food and the right to work. To make these social entitlements actionable, two programmes were established: a minimum guarantee of food through a nationwide food distribution network known as the Public Distribution System (PDS), and the National Employment Guarantee Act (NREGA), which guarantees a hundred days of employment to India’s poorest citizens. Activists and leading economists in India are now calling for their government to expand the PDS food allocations and the number of days of work provided by NREGA to give relief to India’s vulnerable daily wage and migrant workers. In Bangladesh, a similar public works programme provides employment to seasonal agricultural workers during the lean season for rice growing in October- November when there is a dearth of rural employment and concerns about poor families’ ability purchase food supplies.

In Pakistan, despite the successful implementation of a national cash transfer programme, there is no equivalent public works programme to ensure that those who have lost their livelihoods can obtain critical employment in the difficult days ahead. There was briefly an experimentation with the Peoples Work Programme (PPP) in the 1970s, however, lack of proper oversight and poor design resulted in a largely unsuccessful programme that was subsequently disbanded. Past experience with social welfare programmes, such as Zakat and Bait-ul-Maal, also shows that poorly designed programmes can divert social transfers away from their most deserving recipients.

Similarly, with regards to food distribution, Pakistan lacks a national system for food distribution, despite large government procurement of wheat and subsidies for agriculture. The public utility stores, which are also heavily subsidised by the federal government, do not benefit Pakistan's poorest citizens. The more recent Ehsaas-Langar programme simply does not have the outreach to effectively address the scale of malnutrition and hunger prevalent in many parts of Pakistan, which is likely to exacerbate by the impact of the Covid-19 outbreak. According to the Demographic and Health Survey 2017-18, nearly two in five children are stunted in Pakistan, whereas research by Haris Gazdar and Ayesha Mysorewala suggests that 30% of the population experiences hunger.

In numerous countries, public schools provide mid-day meals to students, making the public school an important component of the welfare system. A similar programme in Pakistan could ensure public-school going children receive a simple but nutritious meal. There are many examples of countries of similar income levels to Pakistan that have developed such programmes, which indicates that it is possible if the political will exists to change Pakistan’s spending priorities and expand the country's social safety nets.

Coordinating Federal and Provincial Welfare Responses

Since the passing of the landmark 18th amendment, a substantial portion of social welfare provision, including healthcare and education, has been devolved to the provinces. As a result, there has been an expansion in provincial social welfare programmes reflecting regional priorities. The government of Punjab has run a girls’ education stipend programme to improve enrollment levels for female students, Sindh has extended microcredit to poor women and is in the process of developing a social registry to address hunger and malnutrition prevalent in the province. At the same time, Khyber Pakhtunkhwa has expanded health insurance to its poorest citizens. These examples of provincial social welfare are important, but also underline the fact that the provinces simply do not have the resources or existing programmes in place to address the challenges for welfare provision that Covid-19 has created.

The concerns about insufficient federal government support to the provinces in responding to the outbreak were echoed in a recent session of the National Assembly by a cross-section of parliamentarians, and these concerns need to be taken seriously by the country's policy makers. Covid-19 provides an important opportunity for Pakistan to expand and consolidate its fractured welfare system. Numerous governments in Pakistan have expressed the desire to build a welfare state, but those rhetorical appeals seem hollow unless supported by concrete steps to expand the scope of Pakistan’s limited existing safety nets. The Covid-19 pandemic has resulted in a complex public health, economic and social crisis that requires our policymakers to act decisively and build consensus to develop well-designed programmes that complement rather than compete with the existing welfare programmes at both the federal and provincial levels.

The BISP, which was also established amidst a global financial crisis, has been an important experience for Pakistan in building a credible national social safety net. It is now time to build on the lessons of BISP and think about additional long-term programmes that will address the pressing health, employment and hunger concerns for Pakistan’s poorest citizens. Evidence from across the globe shows that well-designed social safety nets not only play a critical role in reducing poverty, but also help strengthen fractured national solidarities and citizenship in new democracies where the social contract between the state and citizens has been weak. The costs of ignoring current welfare challenges will be devastating for Pakistan’s most marginalised citizens unless new and ambitious public policy measures are taken.

This essay was first published on on 23rd May 2020 and is reproduced here with the authors' permission.

Thursday, 14 May 2020

Economic Dynamics and Resource Envelopes

Karachi amidst lockdown. Photo credit: Wasim Gazdar

Like many other countries, Pakistan continues to debate the trade-off between lives and livelihoods in the midst of the Covid-19 pandemic. Much of this debate, it appears, has had two distinguishing features in Pakistan; (i) that it is static – in the sense that it views immediate losses in comparison to immediate gains in terms of lives and livelihoods, rather than its impact over clearly defined short and medium terms; and (ii) that a muddled narrative is being put out by different stakeholders – the federal and provincial governments, other state agencies, doctors, big business and small traders. That competing interests will pull in different directions is routine but when the political leadership is unable to aggregate this diversity and put forth a coherent perspective in an emergency, it inevitably leads to confusion amongst the public at large and fragmentation at the policy level.
Part of this confusion is also reflected in determining the fiscal response to the pandemic. Granted that it is an evolving situation but some determination of size of the resource envelope that can be brought to bear for ramping up the health infrastructure, the provision of social protection and saving small businesses during the pandemic will help different tiers of government to calibrate their responses in a more focused manner. It will also reduce uncertainty in markets and the public at large. Transparency will not hurt in an emergency. It can only help.
Dynamic Thinking on the Economy
From what we know about epidemics in general and Covid-19 in particular, flattening the curve of the disease requires slowing down the economy. Bringing down the rate of spread (known as R naught in epidemiological lingo) through a lockdown at one or several points in time will impact the economy differently. Therefore, the relevant metric to assess the economic impact in this situation should not be the here and now but an annualized cycle (short-term) and the medium-term future period, say the next 2-4 years.
Historical analysis of the Spanish Flu of 1918 as well as preliminary modelling on the Covid-19 pandemic done by Yale University demonstrates that initial lockdowns reduce the spread of the disease and ease medium-term pressures on labour supply and aggregate demand through reduced rates of fatality and morbidity. By not implementing a lockdown until the R naught declines (or the curve of Covid-19 positive cases starts declining) we will be trading off livelihoods in the immediate term with more cycles of the pandemic in the future. We will thus have more cycles of shortages in labour supply – because of higher rates of death, morbidity, and caregiving for those who are sick – as well as disruptions in supply chains and aggregate demand in the short and medium future. Strict initial lockdowns can result in a V shaped recovery in terms of economic growth, whereas a more ambivalent response will mean the recovery will be U shaped and if the virus is allowed to run riot, then we are staring down an L shaped economic outcome over the next four to five years. Choices made along this spectrum now will determine economic outcomes in the short to medium term future.
It goes without saying that lockdowns hit those without a secure means of livelihood (casual and daily wage workers as well as those in small businesses) the hardest. Lockdowns will also collapse if supply chains for essentials are not kept functional. Thankfully so far, the supply chains have by and large worked relatively smoothly throughout the country. The matter of social protection, however, has left a lot to be desired. The Federal Government is in the process of disbursing Rs. 144 billion amongst 10 million plus women who have been on the BISP register through the Ehsaas Program. While there may be some overlap between those who have specifically lost livelihoods because of the lockdown, these lists are predominantly rural and the pandemic spread so far is mainly in the urban, metropolitan areas. This misspecification in targeting is being addressed now through a separate scheme, losing precious time, which in turn has impacted the legitimacy of lockdowns.
A muddled narrative on the lockdown as well as delay in rolling out appropriate social protection support has given currency to the notion of ‘smart lockdowns.’ These models are based on the observation that both the administrative capacity and legitimacy of a full lockdown is limited and the short-term cost of a full lockdown is too high in terms of livelihoods. Therefore, after widespread testing, there should be a ‘smart’ lockdown of those geographical ‘hotspots’ where there are more Covid-19 cases, while keeping other areas open. This method is premised on proactive (rather than the currently prevalent reactive) testing. This begs the question about the fiscal and administrative capacity to test proactively and to do it fast enough and its data processed swiftly so that a smart lockdown can be implemented. As a result, even after a fortnight of the mantra of smart lockdowns being peddled, it is yet to begin at any level.
The Resource Envelope
Much of the confusion regarding the policy on lockdowns is underpinned by an implicit notion that the State lack resources to provide adequate protection to the poor and simultaneously ramp up the health infrastructure. But how limited is the resource envelope? This debate has not happened yet in Pakistan. Knowledgeable commentators have put estimates in the range of 2.5 to 5% of GDP. Whether it is within this limit or can be more is essentially a function of the subjective assessment of the political leadership on their perception of the pandemic. Another way to think about the resource envelope the nation is willing to roll out is to juxtapose the situation with a war with a visible enemy.
The Covid-19 pandemic has altered the contours of Pakistan’s fiscal space on both sides of the ledger. On the one hand, fiscal space has been created because of aid from donors – the IMF, World Bank, Asian Development Bank, debt deferment from the G-20 – and from a significant reduction in international oil prices and savings on interest payments because of the decline in interest rates. On the other hand, the lockdown has reduced tax revenues (both FBR and provincial revenues). Pakistan’s exports have taken a hit because of the global nature of the pandemic and remittances from overseas Pakistanis are expected to reduce also. Whether or not both sides balance each other out is, however, just one element of fiscal space. The government has room to reallocate resources from the existing allocations, mainly from PSDP expenditures and the defence budget. The federal government also has ample room to borrow domestically and if push comes to shove, the central bank can enhance money supply, even though that will be inflationary. To put it simply, the federal government’s fiscal space has a fair degree of elasticity.
The other issue regarding the resource envelope is distribution of resources across the federal government and the federating units. Because of their constitutional mandate, the bulk of the health expenditure is being borne by the provincial governments. They are also incurring a cost in administering the lockdown and where possible providing social protection as well. They are, however, in a fiscal bind. Because of the reduction in FBR revenues, the provinces will take a hit on their share of divisible pool taxes and their ‘own source’ revenues will also decline because of the lockdown. Additionally, the borrowing capacity of provinces is close to naught.
In this situation, it is the federal government that has a two-fold responsibility. One, to determine the fiscal space that is available and second, to create mechanisms for the provinces to overcome their resource constraints. Will the federal government provide grants to provincial governments, create a special zero interest rate credit line for them through the central bank or deduct it from future shares of their divisible pool allocations? These are important questions that need discussion and resolution. Fortunately, Pakistan’s constitutional architecture allows for these matters to be resolved. The National Economic Council, the Council of Common Interests and the National Finance Commission are forums where these issues can be debated and resolved amicably. As the pandemic peaks and the annual budget season is on the anvil, these matters have to be brought on the front burner.
This article first appeared in the Jinnah Institute’s ‘Lockdown Paradox’ series on 6th May 2020 and is republished here with the author’s consent.

Saturday, 2 May 2020

Coronavirus Lockdown: Should We Prioritize Lives or Livelihoods?

By: Haris Gazdar

An empty street in Karachi during the lockdown. Photo Credit: Wasim Gazdar

Is there a trade-off between saving lives and saving livelihoods? Individuals make decisions about this more often than they might notice.  There are too many hazardous occupations to list: mining, security services, bomb disposal, firefighting, sanitation work, waste disposal, high rise construction jobs, and so many more. But also there are multiple health hazards in occupations otherwise deemed not to be hazardous – street workers’ exposure to traffic fumes, agricultural workers’ exposure to chemicals etc.
These are hard choices for the most part. We try to reduce hazard (health and safety regulations for example) but also, ultimately, leave it as a matter of individual choice.  A person, supposedly, decides for herself or himself if a risk is worth taking. There are many flaws in this construction of choice, but also enough in it for most of us to sleep easy, while people put themselves at risk doing jobs that need to be done for our safety or comfort.
What happens when some new source of risk emerges? Such as COVID-19? Our collective choice will determine whether this becomes one additional source of ill-health and death that individuals will have to face, or not. Do we accept it, as we accepted rising levels of air pollution, or traffic accidents – as a fact of life? Or do we say, as we did with respect to terrorism, that this new source of threat is not acceptable, that we will make all efforts to stop it becoming a norm? As a society we have the capacity for both fatalism and activism in good measure. Which do we choose to deploy now?
There are around 1.5 million deaths in Pakistan every year. Not all of them are what are defined as ‘premature’ deaths. COVID19 is a highly contagious disease. It has, to date, affected over 14,000 people in Pakistan, of whom 292 have died.  The rate of fatality has risen from 1.4% to over 2% in just the last two weeks. Even if just a tenth of our population gets infected, at the current rate of fatality we can expect around half a million deaths. An infection rate of a third would lead to a doubling of the total number of deaths compared to a normal year. If actual fatality rates are much lower, as some have suggested, the number of deaths might be as ‘low’ as 40,000. For context – road accidents claim around 40,000 lives while air pollution causes 135,000 deaths in a year. The total death toll in the ‘war on terror’ was estimated to be around 30,000.
For communities and countries, the analysis of a trade-off between saving lives and saving livelihoods is even more complex than it is for individuals. For individuals, we can and do take shelter behind the manufactured assumption of people being free to make their own choices. But for a community or a country, the choice involves saving Person A’s life over Person B’s livelihood or vice versa. Because there is no simple technical way of resolving this problem, it makes sense to pay attention to collective choices already made.
Why did we choose to draw a line under terrorism even though it was a smaller source of death than air pollution or road accidents? Was it because it arrived suddenly rather than slowly and incrementally? Was it because it threatened, if not stopped, to escalate exponentially? Was it because there was a global consensus that supported our effort? Was it because it threatened to overturn our existing order, and make us a global pariah? We made our collective choices on the basis of who we thought we were, on the basis, yes, of political considerations, but anchored in values. And once we had decided to combat terrorism, how did we frame the issue of its economic impact? Did we debate the ‘economic cost’ of eradicating terrorism, or did we belt up and create a narrative about the cost that terrorism was imposing on our economy?
Understanding the epidemiology of COVID-19 is science in the making.  That in itself would be reason enough to follow validated global practices to slow the disease down, so that our mental and organisational capacities gain time to catch up.  We know more now than we did two weeks ago, and will undoubtedly have learned more in the coming two weeks. The same goes for any analysis of the economic impact of the disease as well as measures for its containment. What happens to our economy depends not only on the morbidity and mortality faced by our people, but also on the measures that we as well as our trading, aiding and ‘remittance’ partners take. In uncertainty of this magnitude – with possible estimates of deaths ranging from 40,000 to over a million – it is not surprising that there are diverse perspectives on the trade-off between saving lives and saving livelihoods.
The question we have to ask ourselves is the following: how low would the probability of a million additional deaths have to be for us NOT to put almost everything we had into containing that number? This cannot be answered only through analytics. It is about who we believe we are, as individuals and as a collectivity. How we respond will then shape what we become.
This article first appeared in the Jinnah Institute’s ‘Lockdown Paradox’ series on 25th April 2020 and is republished here with the author’s consent.