Sending Mixed Signals

Mar 29 - Apr 04, 2003





Pakistan is a developing country, and also a country plagued by poverty, unemployment and low literacy rate. In these circumstances it is paramount for us that poverty alleviation be one of our primary concerns. Along with debt repayment, poverty alleviation should be one of the key objectives of the government and an essential part of it's economic policies.

Under its poverty reduction strategy the Government stresses that it is working to achieve this aim but more needs to be done and it needs to show increased commitment to increasing poverty reducing public expenditure as a percentage of GDP. To assess the impact of poverty reducing public expenditures and policies, the Government monitors a number of intermediate human development indicators related to education, health and population planning. The ADB also released a report analyzing poverty reducing public expenditures, and intermediate human development indicators related to health based on data released since the last Economic Update.

So for the indicators are sending out a mixed signal, with some areas receiving increased attention at the cost of others. This has in certain instances served to reduce the overall positive impact of the program as a whole, as well as in specific areas.

The pro-poor expenditures incurred in FY2003, at Rs 158.0 billion, were 18.3 percent higher than FY2002, although they fell marginally short of the budget target of Rs 161.0 billion. As a percentage of the GDP, the pro-poor expenditures increased from 3.7 percent in FY2002 to 3.9 percent in FY2003. Their share in total public expenditure also increased from 16.2 percent to 17.6 percent

There are basically 12 sectors identified for pro-poor expenditure, and of these education, health, population planning, social security and social welfare, water supply and sanitation (WSS), and rural development are considered to be the core areas. Expenditure in these sectors taken together registered an increase of only 10.0 percent in FY2003 compared with the previous year. Of individual sectors, expenditure on rural development and family planning showed substantial increases, while increases in expenditure on education and health were much smaller than the increase in total poverty reducing expenditure. Expenditure on water supply and sanitation (WSS) declined by 29.7 percent. Under devolution the responsibility for WSS is with the tehsil governments, and the decline may be because of inadequate implementation capacity at tehsil level, and lack of clarity in relation between district and tehsil governments, as well as between concerned provincial departments and tehsil governments.

Within the education sector, in FY2003 there was a discernable shift in expenditure from primary and secondary education to university and professional education.

Expenditure on primary education declined by 4.4 percent and that on secondary education increased by only 4.1 percent. On the other hand, expenditure on general college and university education increased by 51.2 percent and that on professional education by 15.4 percent. While large increase in expenditure on higher education is a positive development, it should not come at the expense of spending on primary and secondary education, as basic education indicators for the poor, who benefit the most from primary and secondary education provided by the public sector, are extremely low and need considerable improvement.

In the health sector, there was a much larger increase in expenditure on basic health facilities and preventive measures (21.8 percent) than on general hospitals and clinics (8.1 percent). Expenditure on family planning more than doubled to Rs 3.1 billion.

Among non-budgetary income transfer programs, disbursement of Zakat, at Rs 8.0 billion, in FY2003 was 52.4 percent higher compared with FY2002. Priority was given to rehabilitating the poor on a permanent basis through one-time rehabilitation grants to help them set up their own small-scale businesses. There was a more than three-fold increase in disbursement under this head, and its share in total Zakat disbursement increased to 60.7 percent from 29.3 percent last year. On the other hand, disbursement of subsistence grants declined by 10.1 percent and its share decreased from 49.5 percent to 35.3 percent.



Disbursement of micro credit through Khushali Bank (KB), Pakistan Poverty Alleviation Fund (PPAF), and Zari Taraqqiati (Agricultural Development) Bank (ZTB), taken together, increased by 140.0 percent to Rs 2,518 million in FY2003. The largest increase was seen in disbursements by KB, which increased by 149.4 percent to Rs 980 million. However, PPAF remained the biggest source of microcredit, accounting for almost three-fifths of the total disbursement.

Besides the Zakat Fund and micro credit, the Government finances small public works under the Khushal Pakistan Program (KPP). Public works, administered by local governments, provide gainful employment to the poor, besides creating essential infrastructure (farm-to-market roads, water supply schemes, repair of schools, etc.) in rural and low-income urban areas. Under KPP, the Government provided temporary employment to 80,758 persons a sharp decline from 347,384 temporary jobs generated in FY2002.

Total number of beneficiaries of Zakat Fund, food support program, and micro credit increased from 2.9 million in FY2002 to 3.1 million in FY2003. Assuming that each beneficiary represents one poor family consisting of 6-7 members, about 19.7 million persons, or about 41.2 percent of those below poverty line were helped through the Government supported social safety net. But this is still a very small number and hopefully will continue to grow at an increasingly faster rate.


Changes in intermediate health indicators in FY2003 present a mixed picture, with improvement in some and deterioration in others. There was an increase in the proportion of population covered by lady health workers (LHWs) and in utilization rate of hospitals.

Similarly, first level health care facilities (FLCFs) not experiencing stock-outs of any of five essential supplies (ORS, cotrimoxazole, foalte tablets, chloroquine, and syringes), and their percentage with supplies of contraceptives also increased.

On the other hand, immunization coverage of children and pregnant mothers declined sharply and so did the percentage of FLCFs meeting staffing norms. This deterioration in some intermediate health indicators, despite increases in expenditure, reflects poorly on the effectiveness of expenditure and highlights the need for improving governance of the health sector.


The Government's poverty related expenditure increased by 0.2 percentage points of GDP in FY2003, as agreed with the IMF under the Poverty Reduction and Growth Facility (PRGF). If this upward trend in the pro-poor expenditure is maintained, the target of 4.0 percent of GDP in FY2004 agreed with the IMF under PRGF is likely to be exceeded. However, within the overall I-PRSP expenditure, expenditure in some core sectors like primary and secondary education and WSS has either stagnated or declined substantially, which is of concern from the perspective of poverty reduction.