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Main obstacle in the way of economic development

By Syed Asad Hussain,
Research Consultant and
Senior Faculty Member, SZABIST
Sep 04 - 10, 2000

Pakistan a country of 135 million people, with per capita income of $ 470, estimated purchasing power parity of $ 2500, is still ranked as one of the poorest countries in the world. Where, according to the Economic Survey of Pakistan, there are now 44 million people living below the poverty line an increase of 41 per cent from 1987-88.

According to World Bank, about 55 million people in Pakistan, have no access to safe drinking water or primary health facilities, 95 million are deprived of sanitation services, 35 million are below the absolute poverty line, with limited access even the very basic needs for human survival. It is further suggested that in two in seven Pakistanis are deprived of income, two in seven of basic health facilities, three in five of education.

Economists sitting in Islamabad, suggest that incidence of poverty is a result of declining economic growth, persistence of sever macro-economic imbalances, reduction in the flow of remittances from overseas Pakistani workers, lack of social nets, and poor governance.

Poverty is a multidimensional issue, it is therefore extremely important to understand the nature, causes, and extent of poverty. Indeed, poverty brings with it sickness, ill health, hunger, starvation, increasing debt, and other emergencies. It is reckoned as one of the main obstacles in the way of economic development.

What is poverty?

As suggested by Microcredit Summit 1999, poverty can be described in broad macro-economic terms, no objective definition exists at the micro level. It further suggests that the term " poor" often refers to a feeling or perception, a subjective approach that is difficult to communicate to others and one that cannot be used either to identify those who can be called "poor " or to measure the impact of actions developed to counter poverty.

A poor may describe, poverty as:

when, he can't properly feed his family, or have only one meal a day,

when, he can't see a doctor because he can't afford to pay doctor's fee,

when, he can't send his children to schools, because he can't afford,

when, he lives in one room house along with his 10 family members, where there is no electricity, no water, no sanitation,

when he has no permanent job,

when he can't properly clothed his children

when he sleeps on footpaths

Trends in inequality and poverty:

Income inequality, as measured by the Gini coefficient suggests that in Pakistan, the gap between the poor and rich has widen over the years. See Figure I.

The percentage of people living below the poverty line (in Pakistan, it is defined as, income, which can provided daily intake of 2250 calories per adult equivalent in rural areas and 2150 in urban areas) has increased at an alarming rate of 32.6 per cent from 1996-97 to 1998-99. See Figure II, below.

Consequences of poverty:

Poverty is a killer. It destroys both social and economic structure of a society. When poor is denied of access to his basic rights, such as, justice, education, employment, health, shelter, etc., he turns into a burning flame. To meet his emergencies, he commits crime. When the degree of poverty rises, together with illiteracy rate, propensity of crime also increases resulting in socio-economic unrest in the country.

In its 10th annual report, released recently, the Commission of Human Rights of Pakistan finds that unemployment has doubled during 1990s. There are now 3.3 million people unemployed. One thousand people have committed suicide during 1999. In Karachi alone, during 1999, 546 murder cases were registered. In January 1999, 777 cars and motor cycles were stolen.

During 1999, in Punjab, 4715 murder cases were registered, there were more than 6,000 cases of kidnapping, 1931 of rape, 6,000 cars were stolen, and 5,000 cases of robbery were also recorded.

Child labour is rampant in the country and the survey revealed a mind-boggling figure touching 150 million children.

Reasons for growing poverty:

Increasing Population Growth Rate: In 1951, Pakistan's total population was 33.8 million, it increased to 65.3 million by 1972-73, a growth rate of 3.0 per cent. Growth rate went down to 2.4 in 1981 and further 2.2 per cent by March 2000. Yet it is high as compared to other developing countries. The growth rate has put a drain on our resources, resulting in shortages.

High Dependency Ratio: Ironically, with an average family size of 7, one person feeds his family. With low disposable income, no permanent job and large family size, his family remains poor.

Low Disposable Income and Rising Inflation: Wages of workers have not risen sharply as inflation has increased over the years, resulting in falling purchasing power. The falling purchasing power limits the buying of spenders. Hence, more poverty and falling standards of living. See table below.

Income Group





Upto 1500















7001 -10,000





Above 10,000





Source: Economic Survey of Pakistan 1999-2000

Though the last year has been good for lowest income group in terms of inflation (3%) and high income group faced 5 per cent inflation yet all this claim goes in thin air when we look at the incidence of poverty and suicide rate in Pakistan.

Recent press reports suggest that both CPI and SPI (prices for kitchen items with incomes below Rs 1500 per month) rose to 4.98 percent and 3.80 per cent respectively, showing further deteriorating plight of poor people.

Unbalanced macro-economic policies and corruption: Another reason for rising poverty is, programmes, like Zakat, SAP, Pakistan Poverty Alleviation Fund (PPAF), usher, Pakistan Bait-ul-Mal (PBM), did not work due to high level of corruption in the government. Add to the injury, macro-economic policies also failed to put a dent on poverty, because " poverty alleviation " was given least priority in the government.

Different government

Notwithstanding the lax excuses discussed earlier about incidence of poverty, one thing which clearly emerges from the above discussion is — different governments who ruled this country since 1990s have miserably failed to raise the standards of living of poor Pakistanis. Their slogan of Rooti, Ka'pra, and Makan remains a slogan. Their efforts to reducing poverty achieved only skin dip success.

Though it is too early to comment on the performance of Present government in this regard, but the steps taken by the government to correct the situation leaves much smog in the air. Why? Here are the reasons. Though these steps are not likely to impact the poor direct ( middle income group is likely to be affected direct) but nevertheless, their spillover affect will be realized soon.

Hum! a poor raise his eyebrow, when he sees price of wheat (despite of having a bumper crop) goes up from 890 to 950 rupees. Why? He also rolls his eyeballs, when he pays two to three more rupees to buy 1 kg sugar. Why? Oh no! Furnace oil price has decreased. But no relief to consumers? Why? Gas charges have also increased by 15 per cent. Why?

Add to the injury, poor urban dwellers have now become a victim of PTCL. Line rent has increased, without sitting any reason, from Rs 204 to 282, and local charges have increased from 1.80 to Rs 2.31 per call. How many people make out of town call? PTCL knows, not many. Hence price reduction on out of town calls. ? Isn't it funny?

More layoffs are in the pipeline, which will result in growing open unemployment (10 per cent, unofficial figure. Researchers suggest 15 to 40 per cent underemployment) in the country. Growing unemployment will be translated into rising poverty and crime rate.

Reducing poverty is not an easy task for the government. Microfinancing is an effort in the right direction to fight poverty, but bank alone can't achieve what government looks at. It is the transparent macroeconomic policies targeted to shake the roots of poverty are likely to produce results.