ISLAMABAD: The cash-strapped federal government has approved a $330 million (Rs92 billion) loan for Benazir Income Support Program (BISP) beneficiaries.
This approval coincides with the International Monetary Fund’s renewed emphasis on transferring responsibility for social protection to the most financially stable governorates.
The Central Development Working Party (CDWP), headed by Planning Minister Ahsan Iqbal, has approved the concept paper for the Integrated Social Protection Development Program (ISDPP), which will secure additional funding worth $330 million. The loan will serve as budget support to boost the central bank’s reserves, and the rupee cover will be used for cash disbursement to BISP beneficiaries.
This loan is being obtained from the Asian Development Bank (ADB), which has already provided $600 million to the BISP. The Asian Development Bank will charge interest of about 2% on the dollar loan. Of the $600 million, about $500 million has already been spent. BISP currently provides unconditional cash benefits to 9.3 million families, excluding single women to avoid duplication, as the program targets women with families.
Although the Constitution stipulates that social protection is a provincial responsibility, the provinces have refused to take ownership, leading to their exclusion from the recently signed National Fiscal Compact. Resistance came primarily from Punjab and Sindh, the largest beneficiaries of the programme.
The goal of cash transfers is to alleviate poverty, but critics say that obtaining foreign loans for this purpose could exacerbate debt sustainability problems, especially if the loans are not invested in income-generating sectors.
Recently, Pakistan asked China to reschedule a project debt worth $3.4 billion after it struggled to meet its obligations due between October 2024 and September 2027.
In a statement following an emergency visit, IMF Mission Head Nathan Porter stressed the importance of continuing prudent fiscal and monetary policies, as well as mobilizing revenues from untapped sources. He also reiterated the need to transfer more social and development responsibilities to the provinces.
Just hours before Porter’s statement, CDWP approved a $330 million loan. This financing will cover some of the infrastructure support program needs for the period 2025-2028, with a focus on strengthening institutional capacity for social protection and climate change resilience.
The loan will help provide primary and secondary education to children in poor families, provide health services, and provide food supplies to women, girls and children. The funding will also help children from poor families complete general secondary education up to grade 12, and provide non-formal basic education and accelerated learning programs for out-of-school children.
Additionally, the funding will strengthen BISP’s support for women, children and adolescent girls, while addressing the potential impact of climate change on nutrition. The plan also includes expanding free health services to poor pregnant and lactating women and children under the age of two in Khyber Pakhtunkhwa and Balochistan. The coverage of free nutrition services for adolescent girls will be expanded from six provinces to all districts in these provinces, as well as Azad Kashmir and Gilgit-Baltistan.
The loan will also finance efforts to raise awareness of climate change and strengthen the capacity of nutrition and health facilitation centres.