POVERTY IN PAKISTAN

S.KAMAL HAYDER KAZMI,
Research Analyst
, PAGE
Aug
 17 - 23, 2009

The inadequacy of income to meet basic needs, low quality of life, denial of opportunities and choices basic to human development are different facets of poverty. The main objectives of government policies are to raise the standard of living and improve the socio-economic conditions of the people and thus reduce the incidence of poverty in the country. The government of Pakistan has subscribed strongly to the belief that economic development if it is to be really meaningful and sustained, must involve and accrue to all citizens, especially the poor, unemployed, marginalized communities and generally, the disadvantaged groups.

GDP AND SECTORAL GROWTH

GDP has grown at the rate of 2.0% during 2008-09 against the projected growth rate of 5.5% and in the backdrop of 4.10% during 2007-08. Agriculture, the major source of employment and income to the rural population with 21.8% share in GDP and 44.6% share in employment, has grown at 4.7% compared with 1.08% during 2007-08. Services sector, constituting 53.8% of GDP and employing 36.1% of labour force has grown at 3.6% during 2008-09 as compared with 6.66% during 2007-08.

PRICE TREND OF ESSENTIAL COMMODITIES
(RS)

ITEMS WEIGHTS UNITS JULY 2008 4TH JUNE 2009
Wheat 0.62 Kg 21.22 23.75
Wheat Flour 11.91 Kg 23.92 26.79
Beef 3.99 Kg 133.13 155.30
Mutton 2.81 Kg 248.67 281.03
Chicken (Farm) 2.39 Kg 93.64 102.02
Milk Fresh 15.73 Ltr 34.58 40.12
Cooking Oil 1.90 2.5 Ltr 398.00 359.06
Onion 1.38 Kg 17.49 20.78
Sugar 4.46 Kg 31.44 45.42
Mash Pulse 0.49 Kg 73.48 85.48

INFLATIONARY PRESSURE

High imported inflation particularly in case of food and fuel, coupled with rupee depreciation of 17.7% during July 2008 to April 2009 triggered inflation in Pakistan with adverse implications for poverty reduction. The price trends of essential items during 2007-08 indicates that hike in the prices of household items such as wheat, flour, rice, edible oil, vegetables and pulses stirred the major portion of food inflation during the period.

POVERTY TRENDS

The Centre for Poverty Reduction and Social Policy Development (CPRSPD), Planning and Development Division estimated a sharp decline in the headcount poverty ratio for 2007-08. However, these findings appear to contradict other assessments conducted subsequently and which had better reflected global and domestic price developments after June 2008.

The Report of a UN Inter Agency Assessment Mission fielded during June-July 2008 found that food security in Pakistan in 2007-08 had significantly worsened as a result of food price hike. The total number of households falling into this category was estimated to be 7 million households or about 45 million people in 2008.

TREND IN POVERTY INDICATORS (%)

YEAR URBAN RURAL PAKISTAN
1998-99 20.9 34.7 30.6
2000-01 22.7 39.3 34.5
2004-05 14.9 28.1 23.9
2005-06 13.1 27.0 22.3

In relative terms, the increase is more pronounced in rural areas, where food expenditure rose by 10% and total expenditure by 4%. In absolute terms, the increase has been higher in urban areas. It further indicates that more than 40% of households reported no change in income in 2008 since last year. 45% of the population working as employees witnessed decrease in their real wages.

INITIATIVES FOR POVERTY

The sharp rise in international oil and food prices and the global financial crisis not only adversely affected the macroeconomic indicators in Pakistan but also imposed social costs. Recognizing the urgent need to protect the poor and the vulnerable, the GoP launched the Benazir Income Support Programme (BISP) in 2008 as its main social safety net programme. BISP intends to cover 3.4 mn families or 22.75 mn people in the current year. In the next two years, the government intends to at least double the allocation for BISP to cover seven million families. The government would require additional resources of US$3.05 billion over the next two years to sustain the above programme.

The BISP will also serve as a platform for complementary programmes the main being health insurance for the poor and the vulnerable. This insurance policy will also provide accident compensation for earning members of the family. The premium for this health insurance policy will cost Rs.800 per family per year and is proposed to be picked up by the government as a part of the BISP benefits.

POVERTY ALLEVIATION FUND

Pakistan Poverty Alleviation Fund (PPAF) has been established to enhance the availability of resources and services to the poor. Since commencement of operations in April 2000 to date, PPAF has disbursed approximately Rs55.5 to 75 bn to partnering organizations across the country. It is estimated that 15 mn and 11 mn individuals have been affected directly or indirectly by PPAF financial and non-financial services respectively. Rupees 4.2 bn have been disbursed up to end Dec 2008 during 2008-09. Rs 5.74 bn from Zakat Fund are likely to be disbursed during 2008-09 with an estimated 2186 thousand beneficiaries.

There are approximately 3.2 million business enterprises in Pakistan and SMEs constitute almost 99% of them. The contribution of SMEs towards GDP is over 30%; export earnings share 25% besides contributing 35% in the manufacturing value addition. It also generates 78% of non-agricultural employment. Punjab government initiated to eradicate poverty through Tractor Subsidy Scheme and Sasti Roti programme.

CONCLUSION

No doubt, Pakistan Bait-ul-Mal (PBM) is making a significant contribution towards poverty reduction. The GoP should create a productive and experienced labour force and develop necessary skills to meet the challenges in industrial development through a culture of merit and excellence.