Policy Paper Benazir Income Support Programe1

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Maastricht School of Governance

June 2009

Table of Contents

Executive Summary:...........................................................................................................4

Pakistan Macro-Economic Context:..................................................................................5Shocks Experienced by Poor People..................................................................................6

Overview of Social Protection in Pakistan.........................................................................6

The Social Protection Strategy............................................................................................8The New Benazir Income Support Programme..................................................................8

Use of Technology to eliminate Inclusion and Exclusion Error:.......................................9Disbursement of Cash Assistance:....................................................................................10

Institutional and Implementation Arrangements .............................................................10Pre-Scorecard Targetting: ................................................................................................11

Score-card Targetting:.......................................................................................................12

Justifications for Proposed Policy Recommendation:......................................................14

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MAP

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Executive Summary:

This paper analyses the Benazir Income Support Programme, Pakistans SocialProtection Programme , a cash transfer programme for families targeting poor

women, and analyses how it is designed to contribute to poverty reduction andthe improved well-being of women and children with particular reference toMDGs 1. The paper reviews the present macro economic context in Pakistan.Pakistans economic situation was better in the first part of this decade. Howeverin 2007/08, with the sharp rise in international oil and food, along with adeteriorating security situation and internal political turmoil, Pakistan was facedwith rapidly expanding macroeconomic imbalances. The fiscal deficit increasedto 7.4%; there was a decline in investment rate, rise in unemployment andpoverty, higher current account deficit, rising debt burden, a loss of foreignexchange reserves, higher inflation, and rise in interest rate. Recently theGovernment announced that that as per World Bank estimates, the poverty in

Pakistan increased to 40% and every second citizen was living below the povertyline. The paper then reviews the Social Protection Programme which though 13%of the PRSP, is not necessarily reaching the poor. The paper explores whetherthe social safety net programmes that exist have the capacity to respond toshocks experienced by vulnerable poor people. Pakistan Social Protectionreport, the earthquake emergency and the recently IDPs situation clearlydemonstrate that the Govt through the safety net programmes does not have thecapacity to respond to idiosyncratic or aggregate shocks. The paper explains thedesign of the Benazir Income Support Programme as it is initiated. The paperfinds 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 thenreviews the poverty scorecard targeting that has been proposed by the WorldBank, and will be rolled out initially in 16 districts of the country. The paperreviews the current security situation in the country as it is poses a substantialrisk to the BISP itself. Based on the evidence, it makes the policyrecommendation of change the targeting methodology to categorical targetingfocusing on the women IDPs and the geographic areas where the militaryoperations were conducted. The paper analyses the justification for the inclusionof the IDPs in the targeting criteria, primarily because the IDPs are in ultra poverybecause the Humanitarian Response Plan thus far has only received 26% of thefunding, which makes the funding situation very precarious. In the meantime the

sense of helplessness among the IDPs is mounting and the dissatisfaction withthe Government is increasing. The situation could become more volatile if themore than 2 million IDPs protest and attack the Government establishments, Thiscould potentially destabilize the Government. If the Government channel theBISP support to the IDPs, it could placate them, and in the longer term may evencontribute to the popularity of the PPP Government, causing stability to theGovernment and peace in the region.

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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 through2006/07, driven by solid performances in the services and industrial sectors.This growth translated into rising household incomes, with per capita incomegrowing to US$878 in 2006/07, an 18.3 percent increase from US$742 two yearsearlier.

However in 2007/08, with the sharprise in international oil and food(specifically wheat) prices, alongwith a deteriorating security

situation and internal politicalturmoil, Pakistan was faced withrapidly expanding macroeconomicimbalances. Both fiscal andcurrent account balances widenedsignificantly, and the economybegun to adjust through aslowdown in growth and risinginflation. The fiscal deficit increased to 7.4% as against the target of 4%1.

Overall there was adecline in investment

rate, rise inunemployment andpoverty, higher currentaccount deficit, risingdebt burden, a loss offoreign exchangereserves, higherinflation, and rise ininterest rate. Recentlythe Governmentannounced that that as

per World Bankestimates, the povertyin Pakistan increasedto 40% and every

second citizen was living below the poverty line.2 It was in this background that

1 Fiscal Policy Statement, 2008-09, Govt of Pakistan, page 7.2 Poverty Swells to 40pc, The News, May 8, 2009

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

(percent of population)

0

5

10

15

20

25

30

35

40

1987-88 1990-91 1992-93 1993-94 1996-97 1998-99 2001-02 2004-05 2005-06

Source Pakistan Economic Surveys , various years.


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the Government launched the Benazir Income Support Programme, as a socialsafety 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 withshocks experienced by poor families? The Pakistan Social Protection report3

provides some insights into the specific shocks that affect households andhousehold risk coping strategies. The report found that nearly two-thirds of safetynet applicants and recipients (about 80 percent of whom were poor) surveyedsuffered 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 onall affected households, the poor were the hardest hit (cost of the shock as ashare of annual household consumption for the poor was twice that for non-poorhouseholds). 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 responseto the shock. These results reveal that socio-economic vulnerabilities and incomeshocks at the household level are a reality and can both impoverish householdsat the time of the shock and if not timely assisted by the Government can alsoperpetuate poverty to the next generation.

More significantly however, the recent earthquake in 2005 exposed the gap inthe ability of the government to cope with natural disasters. Since no safety netstructure existed that could be rolled out quickly, interventions had to bedesigned from scratch. The final relief package combined short-term incomesupport (cash support) with long-term aid for reconstruction (housing).

Currently there are more than 2 million Internally Displaced Persons (IDPs) inPakistan because of the military operations that are going on in the areasbordering Afghanistan. While the Government along with the internationalcommunity is trying to provide relief and early recovery assistance, there is ahuge shortfall of funds amounting to 74% of the Humanitarian Response Plan.While the Government has announced a short-term income support (cashsupport) of $312 per family, but actual disbursement has not taken place. Thereare 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 includesthree main federal cash transfer programs (Zakat, the Food Support Program

3 World Bank (2007), These results presented in the report are from a representative sample of safety netrecipients/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.

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(FSP)), and the recently established (2008) Benazir Income Support Programme(BISP). There are some other small, scattered programs that provide socialwelfare and care services to persons with disabilities, child laborers, and others.To address aggregate economic (price) shocks, till recently, Pakistan reliedprimarily on a wheat subsidy program. There are several employment promotion

programs, e.g., micro credit programs and skills and training. Employmentprotection 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 civilservice pensions, while private sector workers have access to pensions from theEmployees Old Age Benefits (EOB), but also provincially based pension andnon-pension programs such as the Workers Welfare Fund (WWF) and theEmployees Social Security Institutions (ESSI).

During the last four years, the overall social protection expenditures havefluctuated as a share of total PRSP/pro-poor expenditures. Specifically,

expenditures pertaining to social protection (food subsidies, Bait-ul-Mal, Tawanaschool meals, social security, and low cost housing) remained between 3-4percent of total PRSP spending between 2004/05 till 2006/07 but then sharplyincreased to 13.4 percent of total PRSP spending in 2007/08 (Table below). Thisincrease in social protection expenditures were largely due to the increasedspending on food subsidies and social security, both of which are likely not welltargeted to the poor.

PRSP Budgetary Expenditures

Sectors

Expenditures (Rs million)

2004/05 2005/06 2006/07 2007/08Social Security 2,030 7,575 4,513 18,942

Low cost housing 318 305 299 597

Food Support Programme 2,703 3,081 3,458 4,370

Tawana 78 - 20 1,420

Food Subsidies 5,359 6,021 5,455 54,872

Total PRSP Expenditures 327,683 390,970 445,414 600,605

Social Protection/Total PRSP Expenditures (%) 3.2 4.3 3.1 13.4

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

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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 andthe Vulnerable, which was approved by the Cabinet in June 20074. The SocialProtection Strategy is conceived within the overall framework of Just andBalanced Development envisaged in the Medium Term DevelopmentFramework (2005-10) and Vision 2030.

The Vision of the National Social Protection Strategy is to develop an integratedand comprehensive social protection system, covering all the population, butespecially the poorest and the most vulnerable. The goals of the strategy are: (i)to support chronically poor households and protect them against destitution, foodinsecurity, exploitation, and social exclusion; (ii) to protect poor and vulnerable

households from the impacts of adverse shocks to their consumption andwellbeing that, if not mitigated, would push non-poor households into poverty,and poor households into deeper poverty; and (iii) to promote investment inhuman and physical assets, including health, nutrition, and education, by poorhouseholds capable of ensuring their resilience in the medium run and ofinterrupting the intergenerational cycle of poverty.

Priority areas of intervention will ensure these goals are met. These wereidentified as: (i) reaching the poorest; (ii) addressing the needs of vulnerablechildren; (iii) addressing the needs of vulnerable and poor women; (iv) providingemployment and income earning opportunities; (v) protection against

environmental and natural disaster; (vi) improving access to social care servicesand shelter; (vii) protection against health shocks; and (viii) protection for workersin the formal and informal labor markets.

The New Benazir Income Support Programme

Based on deficiencies highlighted in the National Social Protection Strategywhich describes more an intent of the Govt. than a strategy or an implementationplan, and with the objective to overcome the severe food, fuel and financial crisisemerging in 2007/08, the Government decided to create a new cash transfer

program, the Benazir Income Support Programme. During the second half of2008, the Government of Pakistan launched the Benazir Income SupportProgramme (BISP) as its new main social safety net program to cushion thenegative effects of the food crisis and inflation on the poor. The Programprovides 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

4 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

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$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 millionfamilies which are almost 15% of the entire population, and which constitutes40% of the population below the poverty line. The administrative cost of theimplementation 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 inthe coming fiscal year 2009/10 to cover around 5 million families with the ultimategoal over the medium term to expand coverage to 7 million families in 2011. Inreaching 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 thecountry, AJK and Northern Areas.

Use of Technology to eliminate Inclusion and Exclusion Error:

BISP is presently requesting the servicesof the National Database and Registration

Authority (NADRA), for the design andmanagement of the targeting database;verification of eligible beneficiariesselected through the targeting process,and generation of payment lists.Theselection of the recipient is made on thebasis of pre-determined criteria, usingvariables available with the NADRA toidentify women from low-income families.

As it is very easy to track a registeredperson in the NADRA, therefore the

chances of inclusion error areautomatically minimized, because theNADRA can easily verify whether theperson has a Government job orreceiving pension from the Governmentor the armed forces.

The poor women are main target of thisprogramme, and as majority of the ruralpoor women do not possess the NICstherefore there is a possibility that they

may not apply and therefore not benefitfrom the programme. This will increase the exclusion error in the targeting. Onthe other hand, it may force them to get the NICs and thus be registered with theNADRA. This will also have the unintended effect of contributing to their overallempowerment, because then these women will also automatically get registeredas voters, and enjoy other benefits such as open up bank accounts.

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The Finance Minister, Mr. Naveed Qamar said "It is not possible to ensure 100per cent transparency in implementing the scheme, but we have ensured that 90to 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 thatBISP beneficiaries shall be paid through Pakistan Post Money Order. Thisarrangement was favored keeping in view the vast coverage, easy accessibilityand money handling and delivery capacity of Pakistan Post . Over time, however,BISP management seeks to investigate alternative payment options usingmodern technology such as smartcard or others.

Institutional and Implementation Arrangements

Towards the end of 2008, the Benazir Income Support Programme wastransferred from the Finance Division to the Cabinet Division and a SpecialSecretary was appointed along with a National Program Coordinator. Moreover,the Special Secretary was declared as the Principal Accounting Officer with alladministrative and financial powers as given in the Rules of Business of Pakistanfor Federal Secretary, in charge of a Division. The Special Secretary was laterreplaced by the Managing Director enjoying the same powers as of a FederalSecretary.

Organizational Structure (Federal): BISP is governed by a Management Boardheaded 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 themanagement of BISP. To date, at the federal level, a Managing Director (MD)along with a Director General (DG) Operations and DG Administration have beenappointed. Moreover, five Regional Directors for all the provinces including

AJK/NA, Director Admin, Director IT, Director Finance & Accounts, DirectorInternal Audit and a Deputy Director, Media along with other staff have beenappointed6.

Organizational Structure (Regional): At provincial level, a DG will head eachprovince 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 befurther assisted by 125 Supervisors. So far, all of the DG and Director positionshave been filled, whereas some of the other staff still has to be appointed as theBISP rolls out its operation.

5 Benazir Income Support Programme from Sep: ECC, /The NEWS,Thursday, July 31,20086 Project Appraisal Document, Social Safety Net Technical Assistance Project, World

Bank, April 2009.

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Pre-Scorecard Targetting:

Available empirical evidence shows that the impact of cash transfer programs onpoverty and inequality is significantly higher when effective and accuratetargeting mechanisms are used. The better the cash transfers are targeted to the

poor, the larger the impact on poverty and human development outcomes. Well-implemented cash transfer programs are among the most effective programs todistribute income and benefit the poorest population.7 However In order toquickly launch the program, The PPP Govt. decided to provide beneficiary formsto all the elected members of the National and the Provincial Assemblies so thatthey could identify and fill out the forms for the intended beneficiaries. Accordingto the original plan, the Parliamentarians (Members of the National Assembly andSenators) were supposed to identify 8,000 beneficiary households each on aprescribed form which collected information on names, national ID card, andhousehold income. Upon receipt of the completed forms, the National DatabaseRegistration Authority (NADRA) applies the selection/verification filters to finalize

the beneficiary lists. Payments are then made via the post offices and deliveredat the doorstep through money orders to the adult female in the household. A listof the first 127,000 beneficiaries was provided to the Pakistan Postal Services inJanuary 2009 and these payments are presently being processed. Thegovernment has now approved 1.5 million beneficiary families, using the pre-scorecard targeting system and expected to disburse the allocated amount.

The above method of targeting was highly criticized in the media that it toopoliticised, centralised, complicated andnon-transparent. There are alreadyreports of inclusion and exclusion error

and the Govt. has been blamed by theopposition parties for nepotism and forincluding political workers as thebeneficiaries. While in other places, theparty workers of the PPP criticized theirGovernment of including the oppositionparties in the distribution of beneficiaryforms. It seems the PPP wants to expandthe practice of awarding developmentfunds to parliamentarians and keep thembusy in bureaucratic tasks, rather than having them focus on legislation. Already

the PPP district committee in Dera Ismail Khan has criticized the distribution ofBISP forms through a PML-Q Member of National Assembly, with the officebearers complaining that the party workers have been ignored. They warned thatsuch policies could destabilize the party.8

7Lindert, K., E. Skoufias and J. Shapiro (2006) inRedistributing Income to the Poor and the Rich: Public Transfers inLatin America and the Caribbean.8 A Critical Look at BISP by Riaz Khan, The News, 12 th 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 isa targeting tool that includes a limited number of simple indicators that correlate

well with poverty along with an intuitive scoring system that helps identifyprogram eligibility. The scorecard proposed for Pakistans BISP has beendeveloped with support by the World Bank9 and is marked by two maincharacteristics (i) Ease of implementation, and (ii) a Proxy Means Testingapproach to improve targeting performance10. It is noteworthy that the proposedscorecard questionnaire includes only 13 questions. The Roll-out of thescorecard nationwide is an extensive task. Therefore it was decided that initiallyit will be rolled out in 16 districts. This test phase is considered to provide usefulinsights and the necessary learning for scaling up the program nationwide. Thescorecard will consider the following criteria for determining the family as poor ornon-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 theProgramme:

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 othersource like Punjab Food Support Scheme etc.f) Where any member of the family possesses a Machine Readable Passport.

9See Vishwanath, Hou and Yoshida (2009) in Poverty Scorecard for Pakistan: A Recommended

Approach for Targeting the Poor10 See Grosh and Baker (1995) for more details on the Proxy Means Testing approach.

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g) Where any member of the family possesses a National Identity Card forOverseas 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 theprogramme has not covered the districts of Swat, Buner, Malakand, Shangla,and Dir in the NWFP province because of the military operation that was goingon in these districts. There are now more than 2 million IDPs living in variousparts of NWFP. While the Government of Pakistan and the internationalcommunity are making efforts to provide relief and recovery support, the fundingsituation 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 $543million for relief and early recovery assistance to the internally displaced personsfrom the NWFP till the end of 200911. The funding situation remains very dire,and without fresh contributions, humanitarian response operations will beseriously hampered. Thus far the Government has announced a short-termincome support of (cash support) of $312 per family, but actual disbursementhas not taken place. As there is no social safety net that can respond to thepresent humanitarian crisis, there is a urgent need to re-structure the BenazirIncome Support programme, so that it can quickly respond to shock created bythe humanitarian crisis.

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

11 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 countryincluding the security concerns, that could impede the nation-wide roll-out of the

targeting process. At the same time the newly created implementing agency forthe BISP may also receive drawbacks because of the primary concern of theGovernment with the security situation, resulting in delays in implementation.

b. The monthly cash support of Rs1,000 to the woman of each recipientfamily translates into Rs167 per month per person (on the average the familysize is 6 per family), which is only 0.65 percent of the requirement of a dollar aday. Therefore while it will provide some relief to the poor, it cannot help inreduction of poverty. The poor are going to remain poor despite of the cashassistance.

c. The fundamental flaw is that it is a federally implemented programme andgoes against the principle of devolution and provincial autonomy. For itsexecution it is totally dependent on provincial and local governments. Thescheme 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 FederalGovernment engaged in military operations which caused the IDPs to fleetherefore the federal Government is now well positioned to provide relief andsupport 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 areliving in camps, and have been registered. As they have lost their homes, and allmeans of livelihood therefore they are now more poor than before, and morepoor 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 hostcommunities as the priority group of poor people to receive cash support underthe programme.

While the Government is trying to provide some relief measures, but consideringthe magnitude of the problem and the resource constraint, it is unable to provideall the required relief in terms of food, shelter, water and sanitation and medicalsupplies The IDPs without any means and having suffered immense lossesbelieve that they had to abandon their homes because of the Governmentmilitary operations in their area. They are therefore holding the Governmentresponsible for their plight. If the present sense of helplessness prolongs amongthe IDPs, they may become volatile and considering their huge number caneasily destabilize the Government by attacking Government establishments.Therefore to preclude the chances of any such mishap from happening, it is moreprudent 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 thegeographic areas where the military operations were conducted. This will help inplacating the disgruntled IDPs, mitigating the security risks, and even those toBISP 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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Documents

Policy Paper Benazir Income Support Programe1