Editorial
The Punjab government’s recent announcement of two stimulus programmes, ‘Assaan Karobar Finance’ (AKF) and ‘Assaan Karobar Card’ (AKC), aimed at boosting economic activity and reducing poverty, has been met with both support and skepticism. These initiatives provide interest-free loans to active tax filers, with the AKF offering loans between Rs 1 million and Rs 30 million for any business, and the AKC targeting start-ups and small businesses with loans up to Rs 1 million. Despite the laudable goals of these programmes, there are significant concerns regarding their effectiveness in driving meaningful economic growth.
At first glance, these initiatives might seem like a step in the right direction, especially given the dire need for stimulus in the province. However, the context in which they are being implemented raises serious doubts about their success. Pakistan’s weak economic institutions, inefficient markets, and high transaction costs create an environment that is unlikely to support the long-term viability of these loans. The country’s industrialization is already limited, and most businesses rely on expensive imports for machinery and other resources. Given the depreciating value of the domestic currency against the dollar, these economic challenges could render the stimulus programmes ineffective, with many borrowers unable to repay their loans.
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Moreover, there is a glaring lack of focus on improving the underlying economic institutions and organizations that could support business activity in the province. For example, institutions like the agriculture department and various other organizations need structural improvements to reduce transaction costs and make business processes more efficient. Without addressing these institutional shortcomings, the stimulus programmes risk becoming “non-starters,” with borrowers failing to establish profitable ventures and loans turning into bad debt.
The provincial government’s failure to address critical issues such as high inflation, poor market processes, and inefficient price discovery is also concerning. Without effective management of these factors, businesses will continue to face high operational costs, making it harder to generate a return on loan investments. Additionally, the absence of innovative policy measures, such as the creation of special economic zones (SEZs) or public-private partnerships, further undermines the potential impact of the stimulus programmes.
Furthermore, the government missed an opportunity to engage bilateral and multilateral development partners, which could have provided valuable expertise and financial resources for these projects. The involvement of local investors could have also added a layer of knowledge and investment that might increase the chances of loan repayment. Unfortunately, the current approach lacks the strategic direction and collaboration needed to make these programmes successful in the long run.
In conclusion, while the Punjab government’s stimulus programmes may appear promising, they are ultimately undermined by a lack of policy innovation, insufficient support for business institutions, and an overall failure to address the underlying economic challenges. Unless the government takes a more comprehensive approach, these programmes may follow the same fate as previous welfare initiatives—well-meaning but short-lived in their impact.
