The Punjab government has recently announced two stimulus programmes for the people of the province in an overall effort to enhance economic activity, increase exports, and reduce poverty.

Details here being, firstly, the launch of ‘Assaan Karobar Finance’ (AKF) or ‘easy business finance’ programme, in which interest-free loan to the tune of Rs 1 million to Rs. 30 million is being provided to active tax filers for any kind of business, with a budgetary allocation of Rs 36 billion.

Secondly, budgetary allocation to the tune of Rs 48 billion is being provided as interest-free loans for start-ups, and small businesses through ‘Assaan Karobar Card’ (AKC) or ‘easy business card’ programme, where Rs 1 million is the maximum loan amount for an individual. Moreover, loan amount to be returned within five years in the case of AKF programme, and within three years under the AKC programme.

No doubt, there is a strong need for stimulus provision for not just the province but also for the entire country, yet given weak economic institutions, sub-optimal underlying organizations, and highly inefficient markets, and overall resulting in high transaction costs, and poor price discovery, it is difficult to see much success rate of the loans in terms of creating any meaningful level of business activity.

Moreover, a highly difficult situation with regard to ‘ease of doing businesses’ and very costly imports – which are generally needed in running a business, since mostly machinery for a business has to be either purchased directly by the business owner from abroad, or has to buy imported machinery locally, given the overall weak level of industrialization in the country – due to weak domestic currency against the dollar for instance, all not only make the two programmes a........

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