Hailey College of Banking and Finance Lahore

Aug 20 - 26, 2007

Poverty is a result of many factors. Some of these factors are generic in nature and effect many social and economic groups whilst some factors are so specific that they affect only a small portion of population. There are still factors contributing to the increased poverty levels that can be categorized based upon their functions or the sources of their origination. Whatever might be the kinds or types of factors contributing to the poverty levels, the poverty in a particular economy is always the result of a group of factors that belong to different kinds or types of it. In Pakistan the study of poverty should be analyzed be bifurcating it into rural and urban poverty.


One fifth of the people living in urban areas are poor that makes about 10 Million poor masses in urban areas. The figure is not conclusive. If one third of the total population is considered to be poor and one-six to one third of the poor population is considered to be living in the urban areas, the urban poor population comes out within the range of 9 Million to 17.5 Million. Based upon these figures Pakistan ranks fourth in South Asia on the basis of urban poverty.

Pakistan experienced one of the highest growth rates of population; the number of people increased eight times within a century, it became four times only in 50 years over 130 million. The population living in urban had a growth rate accelerated from 4.3 per cent per annum in the last three decades (1960-1992) to 4.6 percent at present (1992-2000).34 per cent of Pakistan's population presently live in towns; with around 45 million urban population Pakistan ranks 5th in Asia (after China, India, Japan and Indonesia).

There are few indicators to determine the extent and structure of urban poverty. In the absence of reliable and up-to-date figures, indirect measures may be used. They can, however, be tricky: The World Bank, for example, states, that 44 per cent of total housing is "squatter housing", i.e. housing stock occupying land illegally. But in Pakistan, squatter houses can be fairly well built, they most probably have electricity (officially or unofficially), maybe access to piped drinking water, although proper latrines and drainage are less likely. Furthermore the fact, that 100 per cent of the urban population "have access to health services" (1985-91) as compared to 85 per cent of the rural population, that 80 per cent vs. 45 per cent have access to water (1988-91), that 55 per cent vs. 10 per cent have access to sanitation (1988-91), and that child nutrition (1980-92) is better by one fifth, is to indicate the distance between urban and rural areas.

Unemployment would be a good proxy variable for poverty if available on a household and not on a personal basis. Official figures for unemployment became much higher after the statistical concept was changed; urban unemployment now (1993-94) is 7.0 per cent, slightly higher than the rural one (5.4 per cent). An official of the Ministry of Manpower and Overseas Pakistanis in 1989 estimated, "that a large fraction of the labour force is engaged in the informal and non-wage sector and low-product activities indicates the existence of about 10 per cent of the employed labour force as presently under-employed. Taking together the unemployed [then officially 3 per cent] and the under-employed, under-utilization of the labour force is about 13.13 percent or approximately 4 million." [Hashmi 1989: 15].

The current (eighth) five year plan (1993-1998) has a short chapter on "Poverty alleviation", in which the history of such policies is summarized in a very general way:

"In Pakistan the strategies for poverty alleviation have been varying over time. In the early years some ad-hoc approaches were adopted to provide temporary relief to the poor. In subsequent period when systematic planning was started, high growth was chiefly considered a panacea for various economic problems including poverty. Towards the end of the sixties, it was realized that the trickle-down effect of growth process could not be expected to relieve the burden of poverty. The problem of income disparity especially at regional level assumed alarming proportions which was also used by some politicians as one of the justifications for the separation of the eastern wing of the country."

Without going much into detail, the Planning Commission state in the same document: "Poor mostly live in rural areas and are dependent on agriculture. [...] Labour intensive process of industrialization based on use of technology will be encouraged." What follows is an optimistic outlook on the implementation of the Social Action Programme.

For alleviating the worst cases of need, a number of NGOs are working in the country, often supported by foreign agencies/funds. The term of NGO is, however, often a misnomen, since much of the funds originally come from government sources or from tax exempted income, as would be the case for most of the German contributions.


Rural poverty in Pakistan, remained stubbornly high in the 1990s. In spite of even faster growth in agricultural real GDP in the 1990s (4.6 percent) compared with 1980's, however, rural poverty did not decline further. Rather, the percentage of people living in poverty remained essentially unchanged between 1990-91 (36.9 percent) and 1998-99 (35.9 percent). Several factors help explain rural poverty's stasis in the 1990s, among these overestimates of livestock income growth, a rise in the real consumer price of major staples, unequal distribution of returns to land and the fact that the crop sector contributed a declining share of overall GDP.

Since 1998-99, real household incomes, income-based poverty indicators and agricultural output in Pakistan have fluctuated sharply, with only gradual improvement over the medium term. Recent household survey results indicate sharp reductions in rural poverty in Pakistan over the 2001-02 to 2004-05 periods. Longer-term trends are less encouraging though, as these suggest no major changes in real expenditures of the poorest 40 percent of households between 1998-99 and 2004-05. Changes in agricultural output, due in large part to weather, mirror the changes in rural real incomes over the periods in question, but like real expenditures of the poor, agricultural output and incomes have increased only modestly over the entire six-year period (1998-99 to 2004-05). Non-agricultural factors, especially increases in workers' remittances have also contributed to increased rural (and national) incomes since 2001-02. In the medium term, however, econometric evidence suggests that investments in human capital and physical infrastructure have been among the most important determinants of increased real incomes in rural Pakistan.

Pakistan's agricultural sector accounts for about 70 percent of rural household income and nearly one-quarter of national GDP. Raising agricultural productivity is thus crucial for rapid rural growth. Annual agricultural growth in Pakistan averaged 3.7 percent over the roughly four decades from 1959-60 to 2001-2002, although there were wide year-to-year variations. Apart from a period of slow growth in the first half of the 1970s, average agricultural growth exceeded 3.2 percent annually in each quinquennium from 1960 to 2000, due in large part to high growth in the crop sector in the 1970s and 1980s as a result of Green Revolution technology (improved seeds, increased fertilizer use, and irrigation). However, the performance of agriculture (particularly the crop sub-sector), has suffered in recent years because of severe droughts in the country, as well as environmental factors (increased salinity and deteriorating groundwater quality). Pakistan's agricultural sector grew at a modest rate of 2.6 percent per year from 1999-2000 to 2005-06. Real value added of major crops (wheat, basmati and other rice, cotton, sugar cane and maize), which accounted for about two-thirds of agricultural crop GDP, grew by 2.6 percent per year over the period. There have been substantial fluctuations in real crop GDP in recent years due largely to variations in water availability. For example, real crop income fell by 3.6 percent in 2005-06, after it rose by 17.8 percent the previous year due to a record cotton crop (production increased by 42 percent). Total crop GDP grew by 2.3 percent annually, almost entirely due to a 2.1 percent yearly increase in crop GDP/hectare, while the cropped area increased by only 0.2 percent per year. Livestock (which accounts for half of agricultural GDP) grew by an average of 3.5 percent per year.


Preliminary analysis of the 2004-05 Pakistan Social and Living Standards Measurement Survey (PSLM) data indicates that both rural and urban poverty have declined since 2001-02. Planning Commission estimates based on a poverty line of Rs 723.4 in 2001-02 suggest that national poverty fell by 10.6 percent, from 34.5 to 23.9 percent between 2001-02 and 2004-05. Their estimates of rural poverty show a decline of 11.2 percent in the same period, from 39.3 percent to 28.1 percent. World Bank estimates for the same period show smaller declines in poverty: from 34.4 to 29.2 percent (5.2 percentage points) at the national level and from 39.1 to 34.0 (5.1 percentage points) for rural households. Disparities in these estimates of changes in poverty levels are mainly due to the differing inflation factors used to determine poverty lines.