Cabinet ECC approves expansion of KPP to all over country

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved the expansion of politically-motivated Kamyab Pakistan Program (KPP) to all over the country for doling out Rs1.4 trillion loans among three million borrowers.

The government had approved Rs1,053.409 billion towards payment of mark-up subsidy and expected losses on account of default for the period from 2022 to 2028. "This approved allocation shall be reviewed at the end of each fiscal year against actual utilisation to assess the need for any additional allocation, if needed, and to remain within the guarantee limits agreed with the International Monetary Fund (IMF)," the ECC decided in a meeting held under chairmanship of Minister for Finance Shaukat Tarin on Thursday.

When contacted, Federal Minister for Finance and Revenues Shaukat Tarin replied that the government would disburse Rs1.4 trillion loans in seven years. Total cumulative loss for seven years from 2021 to 2028 has been estimated at Rs1.053 trillion, he added.

However, top Ministry of Finance officials opposed this KPP scheme arguing that contradictory policies were being pursued as on the one side "contractionary monetary stance" was taken by the SBP to curtail demand, while, on the other hand, the government was doling out money for creating stimulus, which might further fuel already hiked inflationary pressures.

The CPI-based inflation has already touched 13 percent and this doling out of money will create more demands, thus inflation might cross unprecedented levels after the creation of unbridled demand with such a massive amount doled out.

"The timing of the KPP scheme is very awkward and is bound to create distortions in the economic policymaking," said one top official. The government decided to launch the Kamyab Kissan, Kamyab Karobar, Kamyab Hunarmand and Housing Finance through this KPP. Under the Kamyab Kissan programme, the government has decided to disburse agriculture loans with landholding up to 12.5 acres at zero percent mark up through microfinance partners (MFPs). The loan size for Tier-Zero borrowers can be up to Rs150,000 for crop inputs and up to Rs200,000 for machinery and equipment. Initially, the government had made a plan to disburse Rs1.4 trillion loans with the provision of mark-up subsidy estimated to the tune of Rs800 billion and another Rs261 billion on account of 10.6 percent loan default accounted from microcredit loans.

Many technocrats who worked in the Ministry of Finance had termed this scheme as an attempt to "throw away" resources towards borrowers. The government’s decision for allowing increased losses up to 10 percent through microfinance institutions had resulted in creating a heated debate among the bureaucrats and technocrats at the Ministry of Finance a few months back but the government showed the door to those who were resisting this scheme with full force. The IMF had opposed this KPP scheme and argued about fiscal sustainablity.

The official sources said that the Kamyab Pakistan Program (KPP) was approved by the ECC and ratified by the federal cabinet, which was initially launched by the prime minister on 04.10.2021 for Balochistan, Khyber Pakhtunkhwa, Gilgit Baltistan, and Azad Kashmir and the poorest districts of Punjab (Rajanpur, DG Khan, Muzaffargarh & Rahim Yar Khan) and Sindh (Tharpkhar & Umerkot).

The disbursements target for the first quarter for disbursement of KPP loan was fixed at Rs30 billion with a quarterly guarantee of Rs15 billion. The National Rural Support Program (NRSP) and Akhuwat Foundation, the Executing Agencies (EAs) of the program, have disbursed loans amounting to Rs1.4 billion in the first quarter under the wholesale lending model.

The ECC also approved Rs142 million for repair and maintenance of Islamabad High Court building and judges' residences, Rs23.33 million as Technical Supplementary Grant for construction of Election Commission of Pakistan Building at H-11/4 Islamabad, and Rs250 million as a technical grant for the Aviation Division.

According to the official statement issued after the ECC meeting, Federal Minister for Finance and Revenue Shaukat Tarin presided over the Economic Coordination Committee (ECC) of the Cabinet. The ECC discussed in detail a summary presented by the Ministry of Industries and Production regarding uninterrupted supply of oxygen gas in the country for medical purposes and approved duty and tax exemption to products/goods i.e oxygen gas, oxygen gas cylinder and cryogenic oxygen tanks for health sector up to June 2022 to cope with the fifth wave of Covid in the country.