Poverty has been a central challenge of development for the Government of Pakistan. While incidence of poverty declined during the 1970s and 1980s, the absolute number of poor has increased substantially since the 1960s. In addition, it must be noted that the declining trend in poverty incidence that was a feature of the 1970s and 1980s, this trend was reversed in the 1990s, especially after 1997 when the economic growth in Pakistan started to slow down. With approximately a quarter of the population living under the official poverty line, poverty reduction imposes a repressive weight on the country’s development agenda. Several factors, including slow economic growth, unequal distribution of income and poor governance, have contributed to the dismal situation in Pakistan with regard to poverty.
In order to address this issue and achieve its Millennium Development Goal of reducing the incidence of poverty to 18% by 2015, the Government of Pakistan prioritized poverty reduction as a policy agenda and launched a comprehensive national Poverty Reduction Strategy in 1999. The launch of this Strategy was marked by the preparation of an Interim Poverty Reduction Paper which lays down the framework for a poverty reduction strategy that ensures “pro-poor growth”. (Asian Development Bank, 2002, 8) Several initiatives and programs were launched in order to achieve pro-poor growth, focusing mainly on the reduction of poverty, provision of essential social and economic services and infrastructure to the poor, macroeconomic and governance reforms and targeted interventions to ensure job creation. While noticeable progress has been made since the launch of this strategy, poverty reduction remains a major challenge. Macroeconomic factors accompanied by political and/or governance issues have contributed considerably to the slow progress made in terms of poverty alleviation.
Thus, the aim of this paper will be to understand the main challenges that Pakistan faces in its path towards poverty reduction. The objectives of this research are to develop a clear understanding of the poverty problem in Pakistan, its dimensions and causes and the factors which hamper the country’s poverty alleviation efforts. In doing this, the paper will be structured as follows. Chapter 2 will provide a literature review of the situation in Pakistan with regard to poverty. The following chapter (Chapter 3) will discuss the causes of poverty in Pakistan, outlining the main historical and contemporary factors that contribute to the high incidence of poverty in the country. Chapter 4 will attempt to examine the poverty reduction strategy adopted by Pakistan and the existing social safety programs in the country, analyzing their strengths and weaknesses. Finally, Chapter 5 will conclude the paper by consolidating the findings of the research and providing brief policy recommendations for poverty reduction in Pakistan.
Chapter 2: Understanding Poverty in Pakistan
Poverty has been defined and understood in several different ways. While some authors approach poverty from a purely income perspective, others recognize that poverty is a multi-dimensional phenomenon, which is characterized on the one hand by the lack of income and non-fulfillment of basic needs, and “vulnerability” and “limited accessibility to social infrastructure” on the other. (Asian Development Bank, 2002, 8) Given this diversity in different approaches, the World Bank concludes that there is no universal explanation for the term ‘poverty’. (World Bank, 1990) While it is usually viewed through a material lens, this perception is rather incomplete as it fails to recognize the social dynamics or aspects of poverty. This approach ignores the spatial dimensions of poverty, which are a major source of concern in most developing countries where the rural-urban divide with regard to poverty is a stark economic reality. Secondly, the emphasis on economic growth stems from “supply-side economics”- the slogan of free-market economies in the 1980s- which advocates that indefinite economic growth will eradicate poverty through the “trickle down effect.” (Todaro, 1997, 155) By means of this effect, the benefits of economic growth will eventually raise the poor out of poverty as wealth will trickle down to the poor through greater employment and income generation.
However, the issue of trickle down remains controversial as several scholars observe that the supply side approach emphasizing economic growth as the sole means of poverty alleviation is an incomplete one, as it does not take into account income inequality that is a defining feature of the architecture of most developing economies. According to Todaro (1997), trickle down does not occur in a less than perfect market set up (which is usually the case in the real world) due to distributional inequalities, thus implying that economic progress does not “improve the levels of the very poor”. (Todaro, 1997, 155) In addition, Dreze and Sen (1990) also conclude that economic growth does not generate benefits in terms of numerous non-pecuniary measures of well-being, which are essential for reducing poverty. (Dreze and Sen, 1990) Thus, it is clear that poverty has to be understood through several perspectives. Various scholars have developed different approaches to understand poverty. These include Sen’s capability approach, which views poverty as the deprivation of basic capabilities, and Oppenheim’s human rights perspective, which places discrimination and income inequalities at the heart of the problem of poverty. (Oppenheim, 1993) Thus, this paper will use a definition of poverty that extends beyond economic growth and employs a more multidimensional view of the poverty problem.
With regard to the analysis of Pakistan’s poverty reduction efforts, this paper will employ the recently-developed concept of pro-poor growth, which is defined as growth which significantly reduces poverty or favours the poor. (OECD, 2007) As poverty not only encompasses income but other basic needs such as education and health care services, safe drinking water and nutrition, any concept of pro poor development must consider these non-income dimensions of poverty.
Moving on to the definition and measurement of poverty in Pakistan, there are several ways to measure and define poverty. In Pakistan, most estimates categorize poverty as a state of material deprivation, whereby the poor are those who are deficient in money or means of subsistence (Barker: 1995). However, as outlined earlier, defining poverty solely in terms of income or money is not sufficient. Social factors and indicators of risk and vulnerability must also be considered and understood to obtain a holistic picture of poverty. According to Malik (1988), the poverty line can be defined with reference to calorie requirement (2550 calories for adults), and the revealed expenditure pattern of the poor between food and the non-food expenditures. (Malik, 1988) Over the years, this poverty line can be adjusted by changes in the Consumer Price Index to ensure a realistic measurement of poverty. The Federal Bureau of Statistics (FBS) in Pakistan uses a similar measurement of poverty in the country. (FBS, 1995) Poverty estimates presented by Qureshi and Arif (1999) are based on the food energy intake and the cost of basic needs. (Qureshi and Arif, 1999) Ahmed (1993) uses the basic needs approach to measure poverty, whereby the basic needs of the poor are estimated on the basis of educated guesses of knowledgeable persons. (Ahmed, 1993) Ali (1995) also adopts the basic needs approach, but bases his methodology on the Extended Linear Expenditure System (ELES) to reach an accurate estimate of the poverty line. (Ali, 1995)
Finally, the Islamic perspective of poverty is also important to understand, given Pakistan is an Islamic republic and that the laws of the country have been constructed in accordance with the Shariah or Islamic religious law. The concept of poverty in Islamic sources of law (including the Quran, i.e. the holy book of the Muslims, and the Hadith, sayings of Prophet Mohammad) occurs in the context of Zakat or alms for the poor. Zakat is one of the main pillars of Islam and is a means of social protection. (DFID, 2006) Islam clearly specifies that Zakat is payable to the needy and destitute and is to be paid by all sahib-e-nisab (i.e. able and income-earning Muslims). (Robinson, 1999)
Thus, it is clear that poverty can be measured and defined in several ways. Having understood these different measurements and definitions, this paper will define poverty as the inability to provide decent housing, clothing, health care, nutrition and education for one’s self and one’s family. This approach draws extensively from Sen’s capabilities approach, as it will view poverty as the inability of a person (related to the lack of opportunities in terms of education and/or employment) to provide the basic needs listed above.
Poverty and Poverty Reduction in Pakistan
Poverty has been a core development challenge for Pakistan since the country’s inception. Considerable progress was made in terms of poverty reduction in the 1960s, 1970s and 1980s. Up until 1970, poverty declined in urban areas, but increased in rural areas, leading to an overall increase in poverty in the country. However, between 1970 and 1988, poverty declined in both rural and urban areas. A number of factors including the green revolution, an increase in employment due to a boom in the housing and construction sectors, rapid expansion of the public sector and the inflow of foreign remittances from Pakistani workers living in the Middle East contributed to poverty reduction during this time period. However, the 1990s witnessed a reversal of this declining trend, as the incidence of poverty increased considerably from 26.6 percent in 1993 to 32.2 percent in 1999 and the number of poor increased by over 12 million people during this period (See Table 1 in Appendix for more details). Most of this increase took place between 1997 and 1999, which was a period of slow growth and macroeconomic instability in Pakistan. (Asian Development Bank, 2002, 9) Since 1999, growth has decelerated, the “fiscal squeeze has intensified” thus leading to a decline in development spending and the country has experienced a severe drought. (Asian Development Bank, 2002, 9) This worsening trend has continued after 1999. The official method adopted by the Government of Pakistan to determine a poverty line assumes a calorie-based approach. According to the data calculated using this approach, incidence of poverty in Pakistan has increased from 30.6 percent in 1998-99 to 32.1 percent in 2000-01. (Asian Development Bank, 2002; Asian Development Bank, 2004) While some improvements were made in the subsequent years, it is likely that poverty incidence has increased in Pakistan as a result of the food crisis and spiraling food inflation witnessed around the world in 2008.
As mentioned earlier, the concept of poverty is multi-faceted. Going by the definition of poverty used by this paper, it would be useful to explore the different dimensions of poverty in Pakistan. According to the Economic Survey of 2003-04, the poor not only have low or no incomes, but also have limited access to basic needs such as education, health, clean drinking water and proper sanitation. (Government of Pakistan, 2004)
Human development is one of the main dimensions of poverty in Pakistan. Compared to countries with similar levels of income, Pakistan performs worse in terms of human development. With a Human Development Index ranking of 139 out of 179, Pakistan lags behind countries like Congo, India and Bhutan and performs only marginally better than Ghana, Sudan and Nepal. (United Nations Development Program, 2008) Thus, it is clear that growth in Pakistan has not translated into better poverty outcomes, as human development continues to remain low. The concept of human development is an important one to understand, as it emphasizes that poverty is not just lack of income, but also the lack of opportunities (such as health and education) to earn that income. Following this line of thought, the Mahboob-ul-Haq Centre for Human Development (MHCHD) developed a broad index of poverty in Pakistan that takes into account deprivation in education and health. This index is composed of 3 indices, namely poverty of opportunity of health, education and income. Table 2 (see Appendix) shows that while poverty of opportunity has been declining in Pakistan on all three counts, the poverty of education index has lagged behind the other indices. Thus, advances in education which are essential for poverty reduction (income poverty reduction, in particular), which are crucial in determining employability and future income, have been sluggish.
Another dimension of poverty that is closely linked to human development in Pakistan is related to the demographic make-up of the country. One of the main attributes that characterize the poor in Pakistan is a large family and/or a high fertility rate (Hardee and Leahy, 2008). According to an ADB report (2002), poor households in Pakistan on average had 75 percent more children that the non-poor households. (ADB, 2002) As identified earlier, given the low level of human development, most of these children do not receive any education, thus perpetuating the cycle of poverty.
Income distribution is also a critical aspect of poverty in Pakistan, especially with regard to relative deprivation. Data on income inequality in the country shows that inequality increased after 1997 in Pakistan. (See Table 2 in Appendix)Inequality in the country is characterized by a spatial element, as poverty in Pakistan has historically been higher in rural areas compared to urban areas. According to an ADB report (2002), approximately 35 million out of the 47 million people estimated to fall below the poverty line in 2000 lived in rural areas. The sharp increase in the incidence of poverty which took place in the 1990s was also heavily skewed towards rural areas. (ADB, 2002) This increase in rural poverty, however, cannot be attributed to slow growth within the agricultural sector, as agriculture averaged over 4% growth per year during 1993 and 1999, while incidence of poverty in rural areas increased by 7% during this period. Thus, growth in the agricultural sector did not result in increased rural incomes. Several reasons have been identified for this, the primary ones being the volatility within the agricultural sector and the pattern of distribution of assets, particularly land, where inequality in land tenure leads to severe depletion of assets of the rural poor and a consequent decline in consumption. However, urban poverty must not be ignored, as those employed in the informal sector in urban areas form a major proportion of the total number of poor people in Pakistan. (ADB, 2002) In addition to the rural-urban divide, poverty in Pakistan is also characterized by a inter and intra-regional/provincial differences, as South Punjab and North West Frontier province have the highest incidence of rural income poverty in the country, while Balochistan performs poorest in terms of human development indicators (Easterly, 2001). (See Figure 1 for link between poverty and inequality)
Another dimension of poverty in Pakistan revolves around gender. Traditional gender role ideologies in the country restrict women to the home, emphasizing their roles as mothers and wives. Men, on the other hand, are viewed as the bread-earners of the family. As a result of this, society is reluctant about investing in women, as the return on this investment is likely to be low due to their reproductive role. Literacy rate for females was 40.2% in Pakistan, while the rate for Pakistani males was 68.7% in 2007. (UNESCO, 2008) Women also comprise a very small proportion of the student body in higher education, and the rural-urban divide is highly pronounced in this area. Hence poverty of educational opportunities amongst is women is high which consequently leads to income poverty, as women’s employability, their participation in the labor force and their access to employment opportunities becomes severely restricted. (Mohiuddin, 1989) These factors make them more vulnerable to poverty – a phenomenon known as the “feminization” of income poverty. (Pearce, 1978)
Realizing the importance of poverty reduction for the furtherance of the development agenda, the Government of Pakistan with the help of Asian Development Bank launched a Poverty Reduction Strategy in 1999. Several initiatives and programs are part of this poverty reduction strategy. However, advances in poverty alleviation have been slow. The government has faced several challenges, and has failed to address the root causes of poverty in Pakistan. The next chapter will aim to explore these root causes of poverty and identify the key challenges that the government has faced.
Chapter 3: Causes of Poverty in Pakistan
There are several causes explaining why poverty is high and increasing in Pakistan. One of the primary reasons explaining the existence of poverty in the country is related to poor governance. The link between poor governance and poverty in Pakistan highlights five issues of concern, namely (1) poor fiscal management, (2) political and social exclusion of the poor from access to basic services and rights, (3) constant failure to address accountability, corruption and poor public sector performance, (4) ineffective and inefficient intergovernmental relations between federal and provincial levels and marginalization of local governments, and (5) lack of public confidence in state institutions, including the law making and enforcing institutions, thus eroding their legitimacy and contributing to the worsening conditions of public security and law. (ADB, 2001; ADB, 2002; SPDC, 1999) With particular regard to public confidence in law-making and enforcing institutions, Anwar (2006) and Asian Foundation (1999) state that the influence of powerful interest groups has resulted in unfair policies and programs and has directed public resources to areas other than poverty reduction. (Anwar, 2006; Asian Foundation, 1999) Lack of property rights, police protection and legal services disadvantage the poor and do not allow them to secure assets and operate businesses. (Anwar, 2006)
More specifically, the main feature of poor governance in Pakistan is the low accessibility of the poor to institutions. According to the World Bank, service delivery in Pakistan is inadequate, hence leading to low levels of human development. This deficiency in service delivery is a result of the poor having little or no influence on decision-making, as the poor (A) are uninformed about decision-making, or (B) are intimidated against seeking hearings, or (C) vote only if persuaded to do so by the local elite. (World Bank, 2000). In addition, resource allocation is highly politicized, thus leading to an inequitable distribution of resources for poverty reduction. (DFID, 2005) As a result of these factors, service delivery and human development remain inadequate. This in turn leads to greater vulnerability, which can be defined as the “ex-ante risk of falling below the poverty line”. (ADB, 2002, 15)
Pakistan’s track record in terms of social indicators has also been poor and contributed significantly to the vicious cycle of poverty in Pakistan. According to Sen (2001), social indicators such as health and education shape human capabilities, which in turn determine the wellbeing of individuals and families. (Sen, 2001) As mentioned earlier, education in Pakistan is not accessible to a majority of the population and literacy and enrolment continue to remain lower than the average world standards. Health, which contributes significantly to the income-generation ability of individuals, is in a dismal state in Pakistan. Infant mortality rates in Pakistan over the between 2000 and 2005 have approximated to 87, while the world average has been 55. (World Resources Institute, 2007) In addition, Thaver and Bhutta find that in 1999/2000 the number of malnourished children in Pakistan was as high as 8 million, and that one-third of pregnant women in Pakistan were malnourished, thus giving birth to low birth weight babies (25% of all live births). (Thaver and Bhutta, 2004) Fertility rates have also remained considerably higher in Pakistan (approximately 5.1 over the period 2000-2005) relative to the world average of 2.7. (World Resources Institute, 2007) With regard to education, both demand and supply factors have traditionally played a role in contributing to poverty in Pakistan. On the demand side, poverty and illiteracy have adversely affected household decisions to send children to school. On the other hand, supply side factors pertain to the high population growth rates and a lack of financial commitment to education. (SPDC, 2003) Limited access to education, health and nutrition undermines human capabilities in Pakistan and limits the population’s ability to secure productive employment, hence resulting in income poverty and social exclusion. What is more alarming is that poor education, high fertility rates, ill-health and poverty are linked in a vicious cycle. A child who grows up in a poor family does not receive the education or healthcare/nutrition that is necessary for the development of his/her capabilities, mostly because he/she is drawn into the labor force to be an earning member of the family. (Udry, 2006) As a consequence, these children grow up to be poor adults, and the cycle continues.
Moving on, economic factors have also played a major role in worsening the situation in Pakistan vis-à-vis poverty. Economic growth in the country declined from over 6% per annum in the 1980s to around 4% during the late 1990s. This decline was closely linked to the poor state of governance in the country, as well as the low level of human capital which had a negative impact on Pakistan’s competitiveness in an increasingly skill-based global economy. (ADB, 2002)While the period between 2000 and 2005 saw a sharp increase from 4.3% to 7.7%, poverty incidence did not decline as sharply, and inequality grew. The rural-urban divide became more pronounced as most of the growth in the Gross Domestic Product was concentrated in the services sector, which is primarily based in the urban centers. (World Bank, 2008) Debt burden and debt service requirements increased drastically, especially during the late 1990s, which implied a sharp rise in interest payments on public debt. International borrowing, especially from organizations like World Bank and IMF, was accompanied by Structural Adjustment Programs (SAPs), which refer to a set of measures that countries need to implement in order to quality for loans from these agencies. Therefore, Pakistan’s borrowing from IMF in particular was subject to these conditions during the 1990s, as a result of which government spending on health and education diminished. In addition, unemployment increased to approximately 10% in 2000 (with the highest increase in 1996-97) due to the economic downturn, as public sector employment froze and privatization resulted in restructuring and downsizing. (Ali, 2003) This, combined with rapidly increasing food prices and insufficient safety nets, worsened the poverty situation in Pakistan. This trend continued, albeit not to its previous extent into the new millennium, and Pakistan’s cash deficits forced the government to borrow once again from the IMF in 2008. While the impact of this borrowing is yet to be seen on poverty in the country, it is likely that the strings attached to the debt package will heighten poverty incidence. (Daily Times, 2008)
Finally, political instability is also a key reason explaining the high incidence of poverty in Pakistan. Political instability in the country comprises rapidly changing governments, a weak and discontinuous democratic process and the heavy involvement of the Army in Pakistani politics. Weak institutional development has led to an erosion of public faith in these institutions. Moreover, discontinuity in the democratic process as a result of constant political intervention of the Pakistan Army (through the imposition of Marshall laws) has reduced the scope of accountability and transparency, thus having an adverse impact on service delivery. (Anwar, 2006; Talbot, 2004) In addition, political instability and the resulting lack of institutional development have frustrated foreign investment in Pakistan, thus causing a slowdown in economic development. (Talbot, 2004) All these factors have served as impediments in the institutional development of Pakistan, hence contributing to governance gaps and worsening the situation with regard to poverty.
The next chapter will elaborate on the measures that the Pakistan government has take in order to alleviate poverty in the country, and the challenges it has faced in implementing this policy to achieve the desired results.
Chapter 4: Poverty Reduction in Pakistan
Poverty Reduction Strategy of Pakistan
To halt and reverse the rising poverty trend, the Pakistani government adopted a Poverty Reduction Strategy in conjunction with Asian Development Bank in 1999. This strategy aimed to provide an integrated focus on a diverse set of factors that are the main causes of poverty, and as such extended its scope beyond the purely income or economic aspect of poverty to include social and human development as crucial factors. Therefore, the strategy attempted to provide remedial measures to “engender growth, improve human development and governance and reduce the vulnerability of the poor to shocks”. (Poverty Reduction Strategy Paper Secretariat, 2003, 13) The core elements of this strategy recognized the importance of employment generation and the need for targeted interventions in terms of social development (health, education etc). Moreover, the unique feature of this strategy was the adoption of a bottom-up approach, as the poor were involved in the formulation of pro-poor policies. Rapid growth in agriculture, small and medium enterprises, housing and construction, information technology and telecommunication sectors was emphasized as a means of job creation and self-employment opportunities. Improved access to social services, access to justice, improved governance and the attainment of Millennium Development Goals were also emphasized. (Poverty Reduction Strategy Paper Secretariat, 2003) Targeted expenditure on pro-poor sectors to cater to needs of the poor and vulnerable sections of society increased as a result of the adoption of the strategy. Between 2000 and 2005, social sector and poverty related expenditures grew at an average rate of more than 20% per annum. Human development was prioritized as the main focus of the expenditure, and rural areas, which host the majority of the poor, were given increasing importance in terms of greater rural development expenditure. (Jamali and Chang, 2007)
However, improvements in poverty incidence have not kept pace with the increasing expenditure on poverty alleviation. Social indicators continue to remain poor and Pakistan’s ranking on the Human Development Index is 139 on a scale of 179 countries. (UNDP, 2008) Thus, it is obvious that the Poverty Reduction Strategy in Pakistan has faced challenges in implementation and the attainment of the desired results. These challenges are both, socio-political and economic in nature, and pinpoint the gaps in the strategy. One of the main challenges Pakistan has faced in implementing pr-poor policies pertains to governance. As mentioned earlier, the exaggerated role of the military in the country’s politics have hindered accountability and transparency in social service delivery and justice. Even when the democratic process has been allowed to move forward, the population has voted on the basis of traditional and institutional arrangements of power relationships instead of the government’s ability to deliver. This is particularly true for rural areas, where votes are cast according to community affiliations. As a result, politicians are inherently less responsive to the demands of the electorate. (Markey, 2007) The implementation of the Poverty Reduction Strategy in Pakistan has coincided with the rule of a military government (which came into power through a military coup in 1999). While this government initiated a democracy and devolution plan to improve social service delivery, the political parties involved came into power through the support of the military government, resulting in the establishment of a weak, distorted and corrupt democracy. Consequently, accountability and transparency of institutions were compromised, thus hindering the poverty alleviation agenda.
Moreover, economic factors also had a role to play in hampering poverty alleviation. Internal political instability contributed to the slow growth of foreign direct investment, which decelerated economic development. In addition, the period starting in 2001 – the year that the United States waged its war on terror – also witnessed the deterioration of Pakistan’s international image, as a result of which investment declined and growth slowed down. On the other hand, the international competitiveness of the Pakistani economy declined due to its low level of human capital. Post-2005, the textile industry, which was one of the primary exporters from Pakistan, saw the end of the era of protectionism (tariffs, quotas, etc) with the WTO implementation in the country. Consequently, the unprepared textile industry lost its competitiveness against other countries (like India, China and Bangladesh) (Amjad, 2005). With regard to fiscal policy, Pakistan was required to reduce the size of its budget deficit to less than 5% between 2000 and 2005 under the IMF’s structural adjustment program. As a result, the government’s budget allocation priorities were constrained and due to the need to meet debt obligations and maintain defense expenditure. (Jamali and Chang, 2007) Unemployment increased in the same period, as the economy’s capacity to absorb labor diminished with the slow growth in GDP. (Jamali and Chang, 2007) Moreover, government revenues have remained constrained throughout this period due to extensive tax evasion, which is a result of (A) the lack of trust in public institutions to deliver services against tax payments made, and (B) poor monitoring and evaluation mechanism. Finally, the internal food crisis which began in 2007/2008 in Pakistan led to high food inflation, thus causing more people to fall under the poverty line.
Social Protection/Safety Programs
In addition to the Poverty Reduction Strategy, the government has also attempted to put into place other social protection program such as Zakat, Bait-ul-Maal and Tawana Pakistan. The Zakat program refers to the welfare contribution that every able-bodied and income-earning Muslim is required to make to help the poor and needy Muslims in the country. In Pakistan, the Zakat program refers to a cash benefit, with the target group defined as “Destitute”. (DFID, 2006, 12) This program collects this welfare contribution through the banking system through special levies on bank balances. The two principal programs under the Zakat program are Guzara Allowance and Permanent Rehabilitation Grant. Moreover, Bait-ul-Maal and Tawana Pakistan refer to the Food Support program, whereby cash and/or meals are given to the destitute and school children in rural primary schools. (DFID, 2006)
While these programs employ efficient tools, the success and the scope of the programs have been limited. A number of reasons can be identified for the failure of these programs to address the poverty problem. On the macro plane, one of the main problems with these programs is the absence of an overall social protection strategy, in that there is no sense of medium to long-term policy framework to address vulnerability. As a result, individual programs remain “ad hoc, reactionary and fragmented”. (DFID, 2006, 10) On the micro level, the absence of monitoring and evaluation is a major issue in the proper implementation of these programs. Furthermore, there is no organizational or institutional structure responsible for shaping, directing, and coordinating government policies on social protection. Lack of coordination, information sharing and cooperation between government agencies lead to fragmented programs and sub-optimal impact. As a result, overlap and wastage is common. (DFID, 2006) Budgetary allocation for these programs remains low compared to the number of poor people in the country. Finally, at the implementation level, governance issues come into play. For example, the Zakat program fails to achieve the desired result due to (A) the lack of transparency about the criteria that the government uses for identifying eligible beneficiaries/recipients and (B) lack of trust in banks to transfer the alms to the truly needy/ poor people. As a result, people withdraw their bank balances before Ramadan and/or declare themselves as belonging to sects which do not have to pay the Zakat levy, as they prefer to give the Zakat to those about whose destitution they are sure of.
Chapter 5: Conclusion
Poverty, which can be defined and measured in several ways, presents a major developmental challenge for Pakistan. Poverty incidence is high and approximately a quarter of the country’s population lives under the official poverty line. The poverty issue in Pakistan is multi-dimensional, in that it extends beyond pure income poverty. Inequality remains high, especially in terms of the rural-urban divide. Population growth rates continue to remain high, thus reducing the scope for economic gains to increase per capita income. Moreover, feminization of poverty and low social indicators are crucial dimensions of poverty in Pakistan.
Several factors contribute to high poverty incidence in Pakistan. One of the primary causes of poverty is poor governance, which distorts resource allocation away from poverty alleviation and has an adverse impact on social indicators. In turn, poor social indicators (especially health and education) generate a vicious cycle of poverty, as they reduce the scope for human development which has the potential to reduce income poverty. Economic factors have also played a role in worsening the situation, especially with regard to income poverty. Slow economic growth, combined with an ever increasing debt burden compelled Pakistan to borrow excessively from the IMF and World Bank. While this provided short-term solutions for the economic problems facing the country, it has been accompanied by Structural Adjustment Programs, which have emphasized privatization and tightened Pakistan’s fiscal budget. These conditions have resulted in diminished government spending on social development and a slowdown in employment generation, thus contributing further to poverty in the country. Food inflation has also played an active role in pushing a section of the population under the poverty line.
In order to address these causes, the government of Pakistan adopted a Poverty Reduction Strategy in 1999. This Strategy was comprehensive in that it extended its scope beyond income poverty and also recognized social indicators and governance as factors that need to be addressed when dealing with poverty reduction. However, this Strategy has not had the kind of impact that was expected of it. Governance gaps and a weak democracy have been major hindrances in the proper implementation of this strategy, as corruption and lack of accountability and transparency have resulted in sub-optimal resource allocation and service delivery. On the economic plane, internal political instability and Pakistan’s international image in the context of the war on terror have reduced foreign investment and economic growth, contributing to income poverty.
Pakistan has a long way to go in terms of poverty reduction. In order to alleviate poverty, Pakistan must seek to maximize the gains from globalization by investing in human capital to develop a skilled labor force which can enhance Pakistan’s international competitiveness. Trade liberalization and openness must be encouraged to allow more exposure to the export sector in Pakistan – a measure which can potentially promote economic growth. (Kemal, 2001) In addition, small and medium enterprises should be encouraged, especially in rural areas, as they have the ability to generate employment and enhance export earnings. Important services such as venture capital credit, technology and shift up gradation, marketing and management training should be provided for these SMEs to flourish in the country. Entrepreneurship must be encouraged through accessibility of micro-finance. (Jamali and Chang, 2007) Governance issues need to be addressed at the earliest to optimize resource efficiency, improve service delivery and reduce vulnerability. Participation of the poor must be further encouraged, not only in policy formulation but also in implementation and accountability efforts. Social safety nets must be developed to reduce vulnerability to exogenous shocks. (Sadik, 1997) In addition, tax policies should be revamped to minimize tax evasion. Finally, the existing mechanisms of social safety such as the Zakat program need to be upgraded, especially in terms of internal and external monitoring and evaluation, to ensure the efficient implementation of these programs. Finally, a holistic strategy and an institutional framework are essential to understand vulnerabilities and risks faced by the poor in the country, prioritize needs and policy responses, determine the types of assistance that would affectively address these vulnerabilities, ensure proper coordination and delivery of the needed assistance to avoid wastage and duplication.