Charter of Economy: Social Security
Pakistan’s social security programs have been facing significant challenges for years. Pakistan has a high poverty rate, with approximately 24.3% of the population living below the poverty line. The country also has one of the highest rates of income inequality in the world, with the top 10% of the population holding 67% of the wealth.
According to the World Bank, Pakistan has one of the lowest social safety net coverages in the world. The country’s existing social security programs have been unable to provide adequate protection to the vulnerable population, including low-income households, women, and children.
Pakistan’s social security programs only cover a small proportion of the population. According to the Pakistan Economic Survey 2020-21, only 4% of the country’s population has access to social security.
The country’s social security system is fragmented, with multiple programs running simultaneously. There is a lack of coordination and integration among these programs, which leads to duplication and inefficiencies.
Pakistan’s social security programs have limited funding, which restricts their ability to reach a larger population. According to a report by the International Labour Organization, Pakistan’s social security expenditure was only 0.3% of GDP in 2017.
There are reports of corruption in the distribution of social security benefits. This has led to the exclusion of deserving beneficiaries and has increased the cost of providing social protection.
There is a lack of transparency in the administration of social security programs, which has eroded public trust in the system.
The failures of Pakistan’s social security programs have been evident in multiple instances. Here are some recent examples:
In 2019, the Supreme Court of Pakistan took notice of the exclusion of deserving beneficiaries from the BISP, which led to protests and public outcry.
In 2020, the government faced criticism for excluding transgender people from the Ehsaas Emergency Cash Programme.
In 2021, the government faced criticism for the delays in the distribution of cash grants under the Ehsaas Emergency Cash Program, which was launched to help the poor during the COVID-19 pandemic. The program was plagued by a lack of transparency, bureaucratic hurdles, and technical glitches, which resulted in delays and discrepancies in the disbursement of funds.
By merging various social protection programs and centralizing zakat collection, the government could eliminate duplication and improve coordination. PRIME (Policy Research Institute of Market Economy) has created a Pakistan Charter of Economy to address issues in public finance management.
There are three proposals (Proposals 24, 25, and 26) that specifically address long-term outcomes in the social security sector. As follows:
Proposal 24 in the Charter suggests the merger of various social protection programs to eliminate duplication and reform the zakat collection system.
The government has been running multiple social protection programs, such as the Benazir Income Support Programme (BISP) and the Ehsaas Emergency Cash Programme, among others. Merging these programs can eliminate duplication and create a more efficient and effective system. Furthermore, the reformation and centralization of zakat collection can create a more reliable funding source for social protection programs.
According to the State Bank of Pakistan, zakat collection reached PKR 87.6 billion in FY 2021. Redirecting 80% of zakat receipts to be spent on recipients can significantly increase the coverage of social protection programs. Additionally, independently auditing zakat accounts every year can increase transparency and accountability.
Proposal 25 suggests that the government should not incur any debt to fund social security programs and should only rely on taxation and private charities.
This can help create a more sustainable funding source for social protection programs. According to the Pakistan Economic Survey 2020-21, the total revenue collection of the Federal Board of Revenue was PKR 4,691 billion.
The government can allocate a portion of this revenue for social protection programs. Furthermore, private charities can also play a significant role in providing social protection. In 2021, Pakistan was ranked 26th in the World Giving Index, which indicates that the country has a strong tradition of giving.
Proposal 26 suggests the use of Negative Income Tax to target households earning below the income tax threshold.
Negative Income Tax can create a more targeted and efficient system of providing social protection. The NIT is a system where the government provides financial assistance to households whose income falls below a certain threshold. According to a report by the World Bank, Negative Income Tax has been successfully implemented in countries such as the United States and Canada.
The current social security programs in Pakistan have numerous weaknesses and have failed to adequately address poverty and inequality. The fundamental principle to a diverse and effective social security program is sustainable funding. Unfortunately, previous social security programs in Pakistan were not designed for sustainability. Social security has become a political tool, and its present usage is not conducive for saving lives, feeding hungry mouths, or providing sustainability and recovery outcomes for those struggling in hard times.