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
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
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
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.