Tuesday, August 16, 2022

Govt decides to scale back Kamyab Pakistan Programme initiative

The administration has chosen to reduce the size and scope of the Kamyab Pakistan Programme (KPP), which is aimed at resolving “legitimate” bureaucratic and IMF concerns (IMF).


According to sources, the administration has now opted to launch the program as a pilot project initially, rather than rolling it out across the country.


In order to put commercial banks’ skin in the game, it has also been agreed to restrict the cover of sovereign guarantees against potential losses incurred by banks to 50%, they said. Previously, the federal cabinet had agreed to take up all losses.

The government had originally intended to offer interest-free-to-subsidised loans to 30 million individuals across the nation and distribute Rs1.6 trillion loans in three years, as a brainchild of Finance Minister Shaukat Tarin to financially empower the lowest income groups.

Under the KPP, the government intends to make microloans available to entrepreneurs, company owners, and farmers at a 0% interest rate and with no collateral.

The primary goal is to give loans at the lowest possible level. The number of beneficiaries, as well as their size, will be reduced. According to the sources, the move would also lower the subsidies needed, which were previously anticipated at Rs256 billion.

The initiative’s internal steering committee has agreed that the government should initially begin the KPP pilot project, the Ministry of Finance revealed to on Wednesday.

According to an official, the trial initiative will begin in a few impoverished areas of Khyber-Pakhtunkhwa and Balochistan at first. Only after its success will a full-fledged programme be deployed.

According to the sources, the pilot project would likely last a year in order to gauge borrower interest and manage risks. They stated that it may take a few more weeks to finalise the modalities of the redesigned programme before launching a pilot experiment.

According to sources, the IMF also objected to making large-scale loans without the pilot project, and, more crucially, it rejected offering 100 percent coverage for bank losses.

The Fund believes that the government should not exceed the limit of guarantees and should also address its rising debt, since these indications do not justify a large-scale Rs1.6 trillion initiative.

The finance ministry and other government ministries had also recommended the political leadership to proceed with prudence and due diligence on the cost, service costs paid to partner banks and microfinance organisations that would issue these loans, and the recipients.

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