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ISSUES IN PUBLIC ADMINISTRATION

MPA 509

“Poverty and Inequality Issues in Pakistan”

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AGENDA

Preview of last lecture Poverty, inequality and unemployment in Pakistan

Overview of poverty and income inequality situation (from year 2000 till 2010)

Poverty across the provinces Trends in inequality A comparison of poverty and inequality in Pakistan

with selected Asian countries Comparison in inequality Status of achieving poverty-related MDG targets in

Pakistan Relationship between inequality, poverty and growth Government policies/initiatives for reducing poverty

and inequality Benazir income support program (BISP) Punjab food support scheme (PFSS) Pakistan Bait-ul-Maal (PBM)

 

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AGENDA

Zakat Microfinance Diagnostic Analysis of Binding Constraints to Reducing

Poverty and Inequality Law & Order and Governance Education, Technology and Health Landlessness, Farm Assets and Tenure Patterns Power Structures in Rural Areas Doing Business in Pakistan

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WHAT IS GOVERNANCE?

Governance consists of the traditions and institutions by which authority in a country is exercised.  This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them.

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GROWTH, POVERTY AND INEQUALITY The concept of inclusive growth demands for

widespread expansion of opportunities so that all segments of the society can benefit from economic expansion (Osmani, 2008). The idea of inclusive growth has been commonly explained through the employment, poverty and inequality nexus.

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GROWTH, POVERTY AND INEQUALITY

The relationship between growth, poverty and inequality is complex in Pakistan. During the high growth decades (1960s) and low growth decades (1970s), both poverty and inequality moved in opposite direction. The high economic growth during the 1980s contributed to a sharp decline in poverty, but accompanied by a mild increase in inequality. The fall in economic growth during the 1990s resulted in a rise in poverty while inequality decreased modestly.

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GROWTH, POVERTY AND INEQUALITY

During the first half of the last decade, the economy witnessed a high growth and poverty declined from 34.5 percent in 2000/01 to 22.3 percent in 2005/06, while inequality increased sharply. Unemployment rate, despite high growth, did not drop sharply. Although, after 2006, no official statistics on poverty are available; however, according to unofficial sources, poverty has gone back to the early 2000s level with rising unemployment.

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Lets focus on the last decade (2000-2010). During this period, the Government of Pakistan

has developed Poverty Reduction Strategy Paper (PRSP) and the Medium-Term Development Framework.

In these policy documents, high sustained economic growth is considered necessary condition for poverty reduction.

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However, in view of the possibility that benefits of growth do not transfer equally to all segments of the society, the poverty reduction strategy has given importance to transfer income programs including Zakat, microfinance and more recently Benazir Income Support Programme (BISP).

This study has reviewed these policies in particular to see the possible role of Islamic microfinance in employment generation and poverty reduction.

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The last such survey, known as the Pakistan Socio-economic Living Standard Measurement Survey (PSLM), was carried out in 2007/08. However, its poverty related data could not be made public.

Thus, the latest available data for poverty and inequality is for the 2005-06 period. However, because of both the high inflation and slow economic growth since 2008, several sources have attempted to estimate poverty for the more recent years 2008 and beyond.

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It is worth noting that in 2003, the Planning Commission announced the official poverty line based on the threshold level of 2,350 calories per adult per day plus a minimum expenditure required for non-food needs.

A number of developing countries follow the consumption and calories intakes where the poverty line ranges between 1,970 and 2,350 calories

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OVERVIEW OF POVERTY IN PAKISTAN

For the situation analysis of poverty and inequality from 2000 to 2010 however, the decade of 1990s has also been included in the analysis to put the current poverty and inequality trends in a longer perspective

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PAKISTAN: TRENDS IN POVERTY: HEADCOUNT RATIOS

 Urban Rural Overall

1992-93 24.6 28.3 26.8

1996-97 22.6 33.1 29.8

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

2007-08 - - 29.9

2008-09 - - 33.8

2008-09 - - 36.1

2008-09 - - 30-35

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POVERTY ACROSS THE PROVINCES 

Although, the Household Income Expenditure Surveys are claimed to be representative at the province level, the official agencies have generally avoided the estimation of poverty at the province level probably because of political reasons.

The poor provinces or regions may demand more resources to arrest poverty in their regions

Moreover, explanation of large variations in poverty levels across provinces over a short period remains a challenge

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STATUS OF ACHIEVING POVERTY-RELATED MDG TARGETS IN PAKISTAN

The Government of Pakistan has endorsed the Millennium Development Goals (MDGs) and has set the target of halving poverty from its 1990/91 level of 26.1 percent to 13 percent by 2015. This commitment of government has been fully reflected in its Vision 2030.

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STATUS OF ACHIEVING POVERTY-RELATED MDG TARGETS IN PAKISTAN

The poverty related goal has been measured in Pakistan by three indicators: reduction in headcount ratio, reduction in the proportion of underweight children of age 5 and reduction in the proportion of population below minimum level of dietary energy consumption

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PAKISTAN: MILLENNIUM DEVELOPMENT GOAL RELATED TO POVERTY

Source: GoP, 2010.

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 SOURCE: NASCHOLD (2002).

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GOVERNMENT POLICIES/INITIATIVES FOR REDUCING POVERTY AND INEQUALITY 

Government Past Policies Pakistan has a long history of poverty

reduction policies including the Social Action Program of the 1990s, which did not bring about the desired change in social indicators. The government took a serious view of the rise in poverty during the 1990s, and launched the Interim Poverty Reduction Strategy Paper (IPRSP) in November 2001 focusing attention on the primary objective of reducing poverty and restoring economic stability.

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BENAZIR INCOME SUPPORT PROGRAMME (BISP)

With a view to cushion the sharp rise in oil and food prices, the BISP was launched in 2008 to provide cash assistance to the identified vulnerable and enabling them to exit the vicious cycle of poverty in the shape of the cash grant of Rs. 1,000 per month.

This strategy also includes imparting training to one member of each vulnerable family to sustain it. This programme has aimed to cover almost 15 percent of the total population or 40 percent of the poor (GoP, 2010).

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PUNJAB FOOD SUPPORT SCHEME (PFSS)

Like BISP, PFSS was initiated by the Government of Punjab in 2008 to provide food stamps for the poorest households with a cash grant of Rs. 1,000 per month per household.

This programme aims to target those households that do not have a bread earner such as widows, orphans and destitute, chronically sick and disabled persons, elderly persons who have been abandoned by their family and the poorest of the poor segment of the society.

So far, about Rs. 21.6 billion have been disbursed among the 1.8 million families residing in Punjab province (GoP, 2010).

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PAKISTAN BAIT-UL-MAL (PBM)

Pakistan Bait‐ul‐Mal (PBM) disburses more to the destitute, needy, widows, orphans, invalids and infirm irrespective of their gender, caste, creed or race.

PBM provides assistance under different programmes and schemes such as Food Support Programme (FSP), Individual Financial Assistance (IFA), Institutional Rehabilitation through Civil Society Wing (CSW), National Center for Rehabilitation of Child Labor (NCRCL), Vocational Training Institutes/ Dastkari Schools (VTIs) and many others. PBM disbursed relatively less amount in 2009/10 as compared to 2008/09 with a decline in number of beneficiaries by 22.8 percent

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ZAKAT

Zakat provides financial assistance such as Guzara Allowance, Educational Stipends, Health Care, Social Welfare/ Rehabilitation, Eid Grants, and Marriage Assistance through Regular Zakat Programme and other Zakat Programmes and National Level Schemes.

A slight decrease in Zakat disbursements and a significant increase in beneficiaries were noticed in 2009/10 compared to 2008/09

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MICROFINANCE

Microfinance is one of the major targeted interventions to address poverty by enabling the poor to become self-employed.

Microfinance comprises microcredit, micro‐savings and micro‐insurance. Loan portfolios of the institutions like National Bank of Pakistan, first Microfinance Bank, Khushhali Bank, First Women Bank, Pakistan Poverty Alleviation Fund, NRSP and Provincial RSPs play an important role in augmenting government‘s strive for poverty alleviation (GoP,2010a).

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LAW & ORDER AND GOVERNANCE

The rising militancy during the last few years has adversely affected every Pakistani by creating an overall uncertainly which led to lower investment, and decline in Foreign Direct Investment.

It has also limited the government capacity to spend on pro-poor expenditures due to a massive spending on anti-terrorism campaign during the last four years.

The institutional dimensions of governance uncover a negative and significant association between rule of law and poverty (Haq et al., 2007).

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PAKISTAN GOVERNANCE INDICATORS, 2010

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QUOTE OF THE DAY

“The good we secure for ourselves is precarious and uncertain until it is secured for all of us and incorporated into our common life.” 

 Jane Addams