ISLAMABAD: Pakistan is moving forward with a wide-ranging subsidy reform that will link future electricity and gas subsidies with the Benazir Income Support Program to improve targeting, reduce inefficiencies and help address circular debt, according to the World Bank.
In its latest report titled South Asia’s Development Issues, From Vulnerability to Resilience, the World Bank said Pakistan’s subsidy reforms are expected to reshape social protection spending and change its composition as a share of GDP, and will direct support to households that need it most.
The bank noted that fossil fuel subsidies in South Asia are distorted, amounting to about 1 percent of GDP in India and even higher in countries like Pakistan, Bangladesh and the Maldives. It said these resources could be redirected towards social protection programmes that strengthen the capacity of vulnerable populations to cope with economic and climate shocks.
According to the report, Pakistan is implementing a comprehensive subsidy reform aimed at reducing inefficiencies in the power sector and tackling the long-standing problem of circular debt. Under the proposed approach, any future electricity and gas subsidies would be linked to the Benazir Income Support Programme, the country’s main social safety net.
The World Bank described BISP as a programme that reduces poverty and improves human capital outcomes by using proxy means to identify poor households and combining cash transfers with behavioural interventions focused on health and education. It said BISP has improved programme design and invested in digital delivery systems to increase access and responsiveness.
The report highlighted that dynamic inclusion mechanisms in social protection systems are rare in South Asia. However, Pakistan and Maldives were identified as exceptions, with Pakistan having developed a well-established social registry and offering self-registration options for beneficiaries.
