Social indicators were not only worst placed in the South Asia region, but also compared poorly with other countries



Nov 18 - 24, 2002


The World Bank, in its latest report on Pakistan released in Islamabad last week has warned the economic planner and managers of the country that if they did not make serious efforts for shrinking the social gap, country's ability to grow economically and sustain debt liability may be seriously jeoperdised as the Pakistan fiscal policies did not reflect the imperatives of improving indicators.

A comprehensive report on "Pakistan Poverty Assessment " covering a period of 1990-99 maintained that high debt and defence spending and cut in development budgets had exasperated the poverty situation in the country, coupled with low growth rates and poor governance. The report criticised the lack of commitment of the elected representatives on provisions on education and health care that resulted in growing social gap. The report has also pointed out the rising gap in income level, growth and human development in Pakistan.

According to the World Bank report, Pakistan's social indicators were not only worst placed in the South Asia region, but also compared poorly with other countries at the similar stage of development. In comparison with other countries of similar income. Pakistan had a 23 per cent lower share of the population with access to sanitation, gender gap in literacy had not decreased since 1970, school enrollment is lower, adult illiteracy is greater and child mortality is much higher. It observed that Pakistan's fiscal crisis had captured most of the attention of economic policy makers. "Clearly, its high debt, low growth and high real interest rate payments are a volatile mix that could lead to explosive debt increase in the near future," the report maintained. It stated that the emerging debt and growth crisis was disguised in 1980s and early 1990s by substantial external flows.

During the decade surveyed, Pakistan's economy saw large fluctuations in growth but poverty rates have remained stagnant. While urban poverty fell, unchanged rural poverty led to a widening of the gap between urban and rural population. In addition, the report suggests an increasing gap between rich and poor inhabitants. For example, primary enrollment rates among the richest 30 per cent of the population are around 90 per cent, whereas among the poorest 30 per cent, one out of two children of primary school age do not go to school.

"These outcomes reflect a deficiency in the delivery of public services, which open constitute the only affordable choice for the poor," said John W. Wall, the World Bank's Country Director for Pakistan who released the report "Reducing poverty and improving social indicators will require continued efforts and good governance. Despite fiscal constraints, there is plenty of room to enhance the effectiveness of service delivery and social spending, particularly in education and health ".

According to the report Pakistan received $58 billion between 1960 and 1999, and country was the third largest recipient of official development assistance in the world, only behind Egypt and India. The report reckons that if this money had been invested during this time to yield a moderate real return of six per cent , it would have grown into assets equal to $239 billion in 1998. With these assets, Pakistan's GDP would have been much higher than its present level. Instead this debt now stands at almost 100 per cent of GDP, creating severe fiscal constraints.

As a result, social spending had suffered in the competition for the allocation of public resources. The bank maintained that a rising debt service burden along with continued substantial defence expenditure, during last two decades, in the face of stagnant revenues had left little fiscal capacity to meet the rising needs of basic social services. During the 1990's overall government revenue fall from 17 per cent of GDP in 1991 to around 16 per cent in 1998-99. Even though defence spending fell from 6 per cent of GDP in 1991 to below 5 per cent in 1999, the interest expense rose from 5 per cent to 7.3 per cent over the same period.

In fact, from 1987 to 1999, the non-interest component of the budget fell from 22 per cent of GDP to 15 per cent . "Indeed, devising fiscal remedies and securing new financing to enable the government to service its external and domestic debt and to cover its projected deficits has preoccupied recent administrations," the report maintained.

As a result, Pakistan's social and development spending declined substantially throughout the 1990s in turn, growth performance also dropped off. "Cutting spending on the social sector is not the solution, as it will only ensure that poverty remains well entrenched in the country", the report emphasised. The Bank estimated 32.6 per cent poverty in Pakistan, with almost 43 per cent population clustered within a small range of 75 to 125 per cent of the poverty line. The report observed that 40-50 million people, almost one-third of the population was poor in Pakistan.

The bank discussed various causes of poverty, including its main theme of social gap. The report observed that under-provisioning of public facilities, along with poor quality of existing facilities, were important factors, constraining human development.

Talking about political patronage, governance, political economy and service delivery, the report observed that the skewed incentives set by the non-formal parameters of political competition in rural areas, reduce the willingness of elected politicians to provide quality universal public goods. Elected officials had more incentives to provide targeted benefits to specific individuals or groups rather than public goods to a wider and more anonymous set of beneficiaries.

Political representatives focused attention on good and services that could be targeted as patronage to supporters such as infrastructures rather than true public goods, like universal access to public education or the rule of law and bureaucratic quality.

So, deterioration in service delivery was an obvious outcome. The Bank quoted a survey of 125 primary schools in selected rural areas. In surprise visits, survey found that a quarter of the schools were not open, there were no teachers present at all in 19 per cent of them and only one teacher present in 35 per cent. Only 38 per cent of the schools were classified as functional, according to the least demanding of criteria, only a quarter of the schools had electricity and only half had a latrine.

The report noted that success of legislators or other politicians was dependent on their personal reputation. The second characteristic of electrol politics in Pakistan, the report says, that undermines the provision of the public services to the poor was the impermanence of elected governments.

"This shortens the political horizons of decision makers, and reduces the penalty to them of reneging on any electoral promises that they do make," the report observed. Notably, in other countries, where political parties were well developed and constitutional government had been observed over several electoral generations, the costs to political parties of reneging on policy promises were much higher.

Hence, the report maintains policy promises of parties were much more important electorally, than they were in Pakistan, and the role of individual relationships in politics was much less.

The report also reckoned that rural poverty was much higher in Pakistan. It observed that the educated and well off urban population lives not so very differently from their counterparts in other countries of similar income range, or even of their counterparts in western countries. However, the poor and rural inhabitants of Pakistan were left behind. The bank stressed that Pakistan needs to close its social gap to enhance the country's long-term ability to grow economically, alleviate poverty and sustain its debt.