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POVERTY IN PAKISTAN
ISSUES, CAUSES AND INSTITUTIONAL RESPONSES
JULY 2002
C
Asian Development Bank
All rights reserved
Poverty reduction has always been an important objective for the ADB and the Bank's Poverty
Reduction Strategy, approved in November 1999, articulated poverty reduction as ADB's
overarching goal. In 2000, work on the poverty analysis for Pakistan was initiated as part of the
process of developing the new Country Strategy and Program. This report describes the trends and
key features of poverty in Pakistan, discusses its main causes, outlines existing programs and
initiatives to reduce poverty, and gives a set of strategic options for ADB.
The report benefited from comments from the Government and other stake holders in
Pakistan, and various ADB departments. The report was prepared by Safiya Aftab, Naved Hamid
and Safdar Parvez. Roshan Ara, G. M. Arif, Muhammad Irfan, A.R. Kemal, Martin Rimmer,
and Rehana Siddiqui also made important contributions to the report. M. Ali Shah guided the
preparation of the report and advised on important issues. Lynette Mallery provided photographs
for the cover page and Shaista Hussain edited the report.
Yoshihiro Iwasaki
Director General
South Asia Department
ABBREVIATIONS
FOREWORD
ABBREVIATIONS
EXECUTIVE SUMMARY 1
I. INTRODUCTION 7
V. CONCLUSIONS
A. Governance 76
B. Pro-poor Growth 77
C. Inclusive Social Development 78
D. Cross Cutting Concerns 78
BIBLIOGRAPHY
TABLES
2.1 Poverty Trends in Pakistan in the 1990s 9
2.2 Poverty Trends in Rural and Urban Areas 11
2.3 Poverty Trends by Province 12
2.4 Trends in Poverty of Opportunity Indices 17
2.5 Human Development in South Asia 18
2.6 Gross Primary Enrollment Rate 1991 and 1999 21
2.7 Household Annual Expenditure Per Student on Education, 1998-99 24
2.8 Infant Mortality Rate 1991 and 1999 25
2.9 Immunization Trends in the 1990s 26
2.10 Percentage of Poor and Non-Poor Literate Household Heads, 1998-99 31
2.11 Demographic Characteristics of Poverty, 1998-99 32
3.1 Trends in Investment 1988 to 2001 39
3.2 Pattern of Investment in the 1990s 39
3.3 Revenue and Expenditure Trends 1988 to 2001 41
3.4 Farm Classification by Size of Farm 46
3.5 Tenure Classification of Farms 46
4.1 SAP-I Sectoral Allocation 59
4.2 SAP-II Sectoral Expenditure 60
4.3 SAP Achievements, 1991-99 61
4.4 Estimates of Philanthropic Contributions by Individuals in 1998 70
FIGURES
2.1 Income Distribution in Pakistan in the 1990s 10
2.2 Income Distribution Trends by Province 10
2.3 Literacy-Age Profile in Urban Areas 19
2.4 Literacy-Age Profile in Rural Areas 20
3.1 Sectoral Growth Rates in the 1990s 37
3.2 Inflation Rate in the 1990s 44
3.3 Trend in Worker Remittances 45
4.1 SAP Expenditure Trends 60
BOXES
2.1 Regional Pattern of Poverty in Punjab 13
2.2 Chronic and Transient Poverty 15
2.3 Learning Deficiencies and Low Achievement in Education 23
2.4 Ladder of Poverty Reduction 31
3.1 Women in the Labour Force 43
3.2 Power Patronage in Rural Pakistan 47
3.3 Trends in Growth and Human Development in Pakistan 50
4.1 Access to Justice Program 54
4.2 The Khushali Bank 56
4.3 SAP’s Mixed Outcomes 61
4.4 SPDC Study on Pakistan’s Non-Profit Sector 64
4.5 Orangi Pilot Project (OPP) 67
4.6 Kashaf Foundation 67
EXECUTIVE SUMMARY
More than 12 million people were added to the poor in Pakistan been affected by sample selection
issues) also registered an increase
between 1993 and 1999. The rising poverty was the result of poor
between FY1993 and FY1999. In
governance and slow economic growth. The government has this period, the incidence of poverty
adopted a comprehensive poverty reduction strategy to address in the Punjab increased from 25.2
percent to 33.0 percent; in Sindh
this issue and ADB’s operational strategy for Pakistan will
from 24.1 percent to 26.6 percent;
complement the Government’s efforts in this regard. and in North West Frontier Province
(NWFP) from 35.5 percent to 42.6
percent.
There is very limited
documentation on the gender
POVERTY PROFILE of rural poverty (36.3 percent) was dimensions of poverty; however, it is
significantly higher than urban clear that the gender discriminatory
I t is generally accepted that the poverty (22.6 percent). Inequality practices prevalent in Pakistani
declining trend in poverty in also increased in Pakistan during the society shape men's and women's
Pakistan during the 1970s and 1990s, in both urban and rural areas, choices and life opportunities
1980s was reversed in the 1990s. The which enhanced the negative impact differently. Women suffer from
incidence of poverty increased from on poverty of the slowdown in poverty of opportunities throughout
26.6 percent in FY1993 to 32.2 growth during this period. While their life cycle. In particular,
percent in FY1999 and the number of agriculture is the predominant women's access in the labor market
poor increased by over 12 million activity in rural society, a substantial in Pakistan is determined by rigid
people during this period. Since proportion of the rural labor force, gender role ideologies, social and
FY1999, economic growth has estimated at more than 40 percent, cultural restriction on women's
slowed further, development depends entirely on non-farm mobility and integration in the work
spending has continued to decline, activities. The growth of non-farm place, segmented labor market and
and the country has experienced a activities appears to have been employers gender biases that attach a
severe drought. It is therefore highly severely affected by low economic lower value to female labor due to
likely that the incidence of poverty in growth, decline in public sector their family responsibilities. Female
Pakistan today is significantly higher development spending, and lower labor force participation rates in
than in FY1999. worker remittances during the Pakistan are exceptionally low at just
1990s. 13.7 percent, compared to 70.4
Poverty in Pakistan has percent for men. In addition, the
historically been higher in rural than In line with the national picture, majority of women in the formal
urban areas. Poverty rose more poverty in the provinces (apart from sector of the economy are
sharply in the rural areas in the Balochistan for which the poverty concentrated in the secondary sector
1990s, and in FY1999 the incidence estimates were considered to have of the segmented labor market,
2 POVERTY IN PAKISTAN
where jobs are low paid and there are transport sectors. Incidence of poverty is
limited opportunities for upward mobility. also high among self-employed, which
includes street vendors in urban areas, and
The identification of vulnerable
sharecroppers in rural areas.
elements within the poor has also received
Poor governance is little attention in earlier poverty assessments Gender discrimination is another key
the key underlying in Pakistan. Vulnerability may be economic attribute that characterizes the poor.
cause of poverty in or social with the former being defined as Incidence of poverty among women in
Pakistan. the ex-ante risk of falling below the poverty Pakistan is higher compared with men, and
line and the latter being understood as the is characterized by low endowment of land
constraints that the poor face in managing and productive assets, unemployment,
their assets, whether human, material, discrimination in the labor market, and
social or political. While estimating income limited access to economic options and
or consumption related vulnerability is a political processes. The poor are also
complex task, in general vulnerability is characterized by their vulnerability to
likely to be high in households clustered environmental degradation and
around the poverty line. Similarly, with deterioration of the natural resource base,
regard to social vulnerability, the capacity given that they tend to be strongly dependent
of the poor in Pakistan to access public on the exploitation of such resources.
entitlements like political processes or
goods and services which determine human CAUSES OF POVERTY
development contrasts strikingly with that
A number of factors explain the
of the rich.
existence of and increase in poverty in the
There are a number of attributes, last decade. However, poor governance is
besides location, which characterize the the key underlying cause of poverty in
poor in Pakistan. Education is the most Pakistan. Poor governance has not only
important factor that distinguishes the poor enhanced vulnerability, but is the prime
from the non-poor, for example the cause of low business confidence, which in
proportion of literate household heads in turn translates into lower investment levels
poor households was almost half that in non- and growth. Governance problems have
poor households. Second, poor households also resulted in inefficiency in provision of
on average had 75 percent more children social services, which has had serious
that the non-poor households. Most of these implications for human development in the
children are not receiving any education, country. The lack of public confidence in
and thus the cycle of poverty is perpetuated. state institutions, including the police and
Third, more than one third of the poor judiciary, have eroded their legitimacy and
households were headed by aged persons directly contributed to worsening conditions
who were dependent on transfer incomes, of public security and law and order during
such as pensions and other forms of social the 1990s.
support. Fourth, the poor had few physical
assets, and according to one study, if a rural With regard to economic factors,
household possesses physical assets decline in the Gross Domestic Product
(land/livestock) the probability of it being (GDP) growth rate is the immediate cause of
poor declines by 55 percent. Fifth, the poor the increase in poverty over the last decade.
rely disproportionately on informal sector In the 1990s, growth declined in all sectors
employment. The incidence of poverty is and was slower than average in labor-
the highest among household heads with intensive sectors. However, the causes of
occupations such as day labour in the slowdown in growth may be divided into
agriculture, construction, trade and two categories, i.e. structural and others,
EXECUTIVE SUMMARY 3
with the former being more long-term to land, which is the basic factor of
pervasive issues, which have persisted production, is crucial to reduce poverty in
because of deteriorating governance. rural areas. Pervasive inequality in land
Among the structural causes, the ownership intensifies the degree of
burgeoning debt burden and declining vulnerability of the poorest sections of rural
competitiveness of the Pakistan economy in society, because the effects of an unequal
the increasingly skill-based global economy land distribution are not limited to control
are the most important. While the former over assets. The structure of rural society,
occurred due to economic mismanagement, in areas where land ownership is highly
the latter was because of Pakistan's low unequal, tends to be strongly hierarchical,
level of human development. with large landowners or tribal chiefs
exercising considerable control over the
With regard to the debt burden,
decisions, personal and otherwise, of people
increasing debt service requirements
living in the area under their influence, as
resulted in a growing fiscal squeeze, which
well as over their access to social
in turn led to a declining proportion of GDP
infrastructure facilities.
being spent on development and social
sectors in the 1990s. Falling public Environmental degradation is also a
Under the
investment, together with unsuccessful cause of poverty in Pakistan. The
Devolution Plan,
attempts at macroeconomic stabilization environment-poverty nexus manifests itself
the delivery of
also adversely affected private investment. most particularly in health effects. For
services in the
At the same time, reduction in tariffs, example, waterborne diseases are
social and other
exhaustion of simple import substitution widespread because 17 percent of the urban
poverty-focused
opportunities, and elimination of export and 47 percent of the rural population does
sectors has been
subsidies in the 1990s meant that not have access to clean drinking water. The
decentralized, with
international competitiveness became an poor also tend to be more vulnerable to the
the elected local
increasingly important determinant of effects of air and water pollution, both in
investment opportunities in Pakistan. rural and urban areas, given their limited governments given
Because of the low level of human access to quality health care. The the mandate and
development, excessive government prevalence of disease exacerbates poverty responsibility to
intervention and poor state of physical firstly by compelling the poor to devote ever manage and run
infrastructure, areas of the economy where increasing proportions of their limited these services.
Pakistan was competitive were not many. income to health costs, and secondly by
As a result, total fixed investment declined reducing productivity.
significantly, bringing about a fall in the
economic growth rate. The effects of poor RESPONSES TO POVERTY
governance, furthermore, served to
There is no general or universal social
reinforce the adverse impact of structural
protection system in Pakistan. However, a
factors.
number of initiatives aimed at helping the
The existence of pervasive poverty, poor by improving governance and
wherein a significant proportion of the functioning of public sector institutions;
population remains poor over an extended creating assets, employment, and income-
period of time is strongly linked with the generation opportunities; revamping social
structure of society. Cultivated land is safety net systems; and improving access to
highly unequally distributed in Pakistan. basic services are being implemented by the
About 47 percent of the farms are smaller Government, and also by Non
than 2 hectares, accounting for only 12 Governmental Organizations (NGOs) and
percent of the total cultivated area. Access the private sector.
4 POVERTY IN PAKISTAN
Foremost among the Government's ADB support. The Khushhali Bank provides
governance related reforms is the individual and group loans to poor
introduction of the Devolution Plan under communities in the range of Rs 3,000 to Rs
which local governments were elected at the 30,000 without any collateral.
district, tehsil, and union levels in all the
Among the social safety net systems run
four provinces in August 2001. Under the
by the Government, Zakat a donation to
Devolution Plan, the delivery of services in
charity obligatory for Muslims is the main
the social and other poverty-focused sectors
one. In FY2001, Zakat collection was
has been decentralized, with the elected
estimated to be Rs 5 billion, with the number
local governments given the mandate and
of total Zakat beneficiaries estimated at 2.5
responsibility to manage and run these
million. In 2001, the Zakat system was
services. It is expected that this would result
revamped to focus on rehabilitation rather
in significant improvement in the system of
than relief, with Zakat funds assisting in the
delivery of public services by making it
establishment of small scale commercial
more responsive and accountable to the
activities, or trades. The Zakat fund
local people. The Government is also in the
comprising of savings from Zakat proceeds,
process of introducing important reforms to
which is used primarily to disburse grants
improve the functioning of judicial institu-
for rehabilitation, has risen to Rs 24 billion
tions to enhance equitable access of the
in 2001. The public sector also runs other
citizenry to justice. Civil service reforms in
pension and social security schemes. These
several key areas are also underway.
include the Employees Social Security
The Government has, over the years, Scheme, Workers Welfare Fund Scheme,
undertaken several public works programs and schemes run by the Employees Old Age
to create assets and employment Benefits Institution (EOBI). In addition,
opportunities for poor people. The most permanently employed government
recent such program, Khushhal Pakistan servants of the federal or the provincial
Program (KPP), is an integrated small governments receive pensions and other
The impact of the public works program. The program benefits under the laws of their respective
first phase of SAP finances public works whose cost ranges governments.
was mixed, with from Rs 0.05 million to Rs 5.00 million per
A comprehensive program to improve
some improvement scheme in rural areas and Rs 0.05
and strengthen delivery of basic social
in health indicators million to Rs 8.00 million per scheme in
services was initiated by the government in
but no appreciable urban areas. Rs. 8.50 billion was spent
1992 in the form of the Social Action
development in under the Program in the first eight months 1
Program (SAP) . SAP focused on four
primary education.
of FY2002.
major areas: elementary education (primary
The second phase Although microfinance in the country and middle schooling), primary health care,
of the project also has historically been provided by NGOs, the drinking water supply and rural sanitation
had disappointing government has, more recently, started and population welfare. The impact of the
results. playing a direct role in providing first phase of SAP was mixed, with some
microfinance services, through institutions improvement in health indicators but no
like the Pakistan Poverty Alleviation Fund appreciable development in primary
(PPAF) and the Khushhali Bank, a education. The second phase of the project
microcredit bank established in 2000 with also had disappointing results and it became
1. SAP was the name given to the larger program of the Government of Pakistan whereas the Social
Action Program Project (SAPP) is a subset of SAP, which is funded by donors.
EXECUTIVE SUMMARY 5
clear that the project would have to be involved in skill development, while others
redesigned to ensure consistency with the are more concerned with advocacy and are
proposed Devolution Plan. The SAP issues-based. Most NGOs are engaged in
experience highlighted the need to have a direct service delivery as well as facilitating
strong system of governance, including service delivery through linkages with
improved financial controls, decentralizing Government line agencies. In November 2001,
control of services to district and the Government
community level and improved incentive for Amongst the more prominent NGOs are finalized its Interim
service providers. The Devolution Plan the ones implementing microfinance Poverty Reduction
announced in March 2000 aims to replace programs, either as the main activity or as Strategy Paper
the existing highly centralized and control components of integrated rural development (IPRSP) which
oriented government with a three tiered programs. A number of NGOs are also covers the period
local government system that institutes implementing integrated rural development from FY2002 to
"people-centered, rights and responsibility- programs in different parts of the country. FY2004 and
based, and service oriented" government Most of these have adopted a participatory identifies five
structures. The bulk of basic 'poverty approach and work closely with rural major areas of
focused' services, like health and education, communities. interventions for
have been devolved to district and lower poverty reduction
The private sector has also started to
local governments under the Plan. in the country.
play an increasing role in the delivery of
In November 2001, the Government social sector services, particularly health
finalized its Interim Poverty Reduction and education. Based on 1998-99 Pakistan
Strategy Paper (IPRSP) which covers the Integrated Household Survey (PIHS) data,
period from FY2002 to FY2004 and 25 percent of Pakistani children attending
identifies five major areas of interventions primary level schools are attending private
for poverty reduction in the country. These for-profit schools, the proportion is 47
include the revival of economic growth, percent for urban areas, and 14 percent for
creation of income and employment rural areas. Similarly, the private sector
opportunities, improvement of human accounts for almost two-thirds of all health
development, the introduction of a relief expenditure, although it provides curative
program to reduce vulnerability, and services mainly in urban areas.
improvements in governance. The Strategy
is a comprehensive one, but its This growing role of the civil society
implementation will depend on the and private sector offers opportunities for
provision of adequate financial resources public-private partnerships in several areas
for public sector interventions in the key that could facilitate and enhance the quality
areas identified. and outreach of development services in the
country, and at the same time, allow the
In addition to the public sector, NGOs public sector to focus its attention and
and Community Based Organizations resources more narrowly to selected priority
(CBOs) are working throughout Pakistan in sectors. To this end, civil society and the
a wide range of poverty reduction activities. private sector could be encouraged and
Some NGOs are purely welfare oriented, assisted to provide services on a larger scale
and were formed primarily as charitable in the areas of social capital creation, small-
organizations. Many are involved in scale infrastructure development,
broader poverty reduction efforts including microfinance provision, and delivery of
strategies to improve income-generation social sector services. Civil society could
opportunities, savings and credit initiatives also play an important role in the devolution
and social development. Some NGOs are process through linking communities to the
6 POVERTY IN PAKISTAN
district, tehsil, and union council level the Small and Medium Enterprise (SME)
government tiers to enable them to better sector development by assisting in carrying
access locally provided public services. out policy reforms in this sector and the
The public sector could help strengthen the development of supporting institutions.
role of civil society organizations through Finally, to assist in removal of
fostering an enabling policy framework infrastructure constraints impeding
and giving them more space to grow economic development in the country, ADB
and contribute to the development will focus on supporting policy reforms and
mainstream. investments in the energy and transport
sectors, and will help address issues such as
Improving governance is the central
corporate governance, institutional
theme and the major focus of ADB's
capacity, and adequate operations and
poverty reduction strategy for Pakistan. To
maintenance in these sectors.
this end, ADB will assist the Government to
establish the legal and policy basis for The poverty assessment also shows that
governance reforms, build the capacity of a key factor in Pakistan’s poor growth
governance institutions with special focus at performance in the 1990s was its low level
province and local government levels, and of human development. Experience in
promote efficient, equitable and Pakistan shows that accelerating human
accountable use of available resources. development is as much an issue of
increasing expenditure on social sectors as
In addition, the poverty assessment
of improving the effectiveness of spending
shows that sustained economic growth is
through better governance. ADB’s strategy
critical for poverty reduction, and there are
will thus be focused on making the
strong linkages between pro-poor growth on
Government’s devolution plan a success,
the one hand, and human development,
and the Bank will work towards capacity
good governance, and cross-cutting
building at the local level to strengthen
concerns such as private sector development
social service delivery mechanisms, in
and regional cooperation on the other. In
addition to financing incremental services
this regard, under its pro-poor economic
and small-scale civil works targeted at
growth strategy, ADB will firstly support
making existing facilities operational, or
structural reforms in key sectors through
improving their utilization. Furthermore,
promoting deregulation, privatization, and
ADB’s development strategy shall target the
the creation of an enabling environment for
most vulnerable groups, particularly
private sector foreign investments.
women, children and the indigent.
Secondly, recognizing that 75 percent of the
poor in Pakistan live in rural areas, ADB ADB endorses the government’s
will continue to support rural development poverty reduction strategy, and ADB’s
initiatives through focusing on improving development strategy for Pakistan
the institutional framework for rural complements the Government’s efforts in
development, increasing agricultural this regard. The road ahead remains
productivity, promoting non-farm challenging, but success requires that the
employment opportunities, improving Government stay the course of reforms, and
communications and rural infrastructure, ADB support the Government in this
and promoting rural financial endeavor by continuing to provide
intermediation. Thirdly, ADB will focus on assistance for implementation of Pakistan’s
promoting employment generation through poverty reduction strategy.
INTRODUCTION
The Poverty Assessment provides an overview of the poverty gender and regional dimensions of
poverty are also discussed. Chapter
situation in Pakistan as well as an analysis of its causes and
III provides an analysis of causes of
measures to alleviate it. The Assessment forms the basis of the poverty, including the governance-
Country Strategy and Program for Pakistan. related macroeconomic develop-
ments that have underpinned the
evolution of poverty in Pakistan.
Chapter IV deals with responses to
poverty, including both public and
private sector programs aimed at
T he Asian Development Bank preceded and driven by the findings poverty reduction, for example,
(ADB) has, in the past, of a poverty assessment for the social security schemes for workers,
funded projects on the basis country. This study is a poverty microfinance, and Zakat. Finally,
that they contribute to one or more of assessment for Pakistan. The Chapter V highlights the key lessons
the following objectives: economic assessment provides an overview of that emerge from the preceding
growth, poverty reduction, the poverty situation prevailing in analysis.
improving the status of women, Pakistan, and analyzes the poverty
environmental protection, and impact of various policies and
supporting human development. programs undertaken to reduce
Poverty reduction was always an poverty. The draft assessment was
important objective for ADB but in discussed with representatives of the
1999 ADB rededicated itself to this Government, private sector, civil
goal. ADB's Poverty Reduction society, and international funding
Strategy, approved in November agencies at a High Level Forum in
1999, articulated poverty reduction April 2001. The draft assessment
as ADB's overarching goal, and was then extensively revised,
stressed the need to assess all ADB reviewed, and amended in light of
operations against this goal. these discussions and comments
received from the stakeholders.
To implement ADB's Poverty
Reduction Strategy it is necessary Chapter II of this assessment
that the Country Strategy and deals with the nature and trends of
Program (CSP) for each Developing poverty in Pakistan. The discussion
Member Country must be oriented adopts a broad view of poverty in
towards the overarching goal of addition to the standard measures of
poverty reduction. To ensure this, income and consumption, and also
the preparation of the CSP must be considers human development. The
II. POVERTY PROFILE
1. The Planning Commission has decided that the official poverty line for Pakistan will be estimated on 2350 calories per adult equivalent
per day. This is based on an adult equivalent intake of 2150 calories in the urban areas and 2450 calories in the rural areas. The poverty
line for Pakistan for FY1999 on this basis has been defined at Rs. 670 per capita per month.
2. In 1991, FBS started the Pakistan Integrated Household Survey (PIHS) incorporating a broader range of variables including education,
health, fertility and family planning, and water supply and sanitation. From FY1999 the PIHS and the HIES surveys have been
combined.
POVERTY PROFILE 9
gives different estimates of the incidence of expansion of the public sector, and the
poverty.3 Nevertheless, while there is no inflow of workers' remittances from the
consensus on the precise level of poverty in Middle East contributed to poverty
the country at any given time, there is reduction during this period.
general agreement with regard to the trends
During the second period, data from
in poverty since the 1960s. Most of the
various studies indicates that the incidence
The last four decades can be grouped of poverty increased from 22 - 26 percent in increase in poverty
into two broad periods with respect to FY1991 to 32 - 35 percent in FY1999 as in this period
poverty trends. The first period is from
4
shown in Table 2.1. As mentioned earlier, seems to have
FY1964 to FY1988, while the second most of the increase in poverty in this period taken place
covers the years from FY1988 to FY1999 seems to have taken place between FY1997 between FY1997
(the last year for which data is available). and FY1999, a period of slow growth and and FY1999, a
During the first period, poverty declined in macroeconomic instability in Pakistan. period of slow
the urban areas until FY1970, but increased Since FY1999, growth has slowed even growth and
in the rural areas leading to an increase in further, the fiscal squeeze has intensified, macroeconomic
overall poverty in the country. development spending has declined, and the instability in
Subsequently, between FY1970 and country has experienced a severe drought. It Pakistan.
FY1988, poverty declined in both rural and is highly likely, therefore, that the incidence
urban areas. A number of factors, including of poverty in Pakistan now is higher than in
the green revolution, increase in FY1999.
employment due to a boom in the housing
and construction sectors, as well as rapid
Year Amjad and Kemal Ali and Tahir Jafri FBS Arif et al
Source: Amjad and Kemal (1997) Ali and Tahir (1999) Jafri (1999) Arif et.al (2000) FBS (2001)
3. The HIES data for FY1991 was based on a very small sample size, and may not provide a good
comparison with data for subsequent years.
4. All of the studies reported in Table 2.1 are predicated on a minimum caloric intake based
definition of the poverty line. To this end, the expenditure needed to meet the cost of the food bundle that
would ensure the minimum caloric intake level is calculated; but to which is also added the average estimated
non-food expenditure of households whose caloric intake is exactly at the defined minimum level. Food and
non-food expenditures are then added up to arrive at the poverty line. The FBS study uses a variant to this
methodology and regresses per equivalent adult total consumption expenditure against the estimated daily
per-capita caloric intake to come up with the poverty line with the assumption that households that consume
the minimum caloric requirement also meet their necessary non-food consumption needs. In practice,
however, both methodologies measure poverty on the same definition. Most studies in the table (Amjad and
Kemal; Ali and Tahir; FBS, and Arif et. al) define the minimum caloric intake level per adult equivalent at
2550 calories. Jafri's study, however, assumes this level at 2354 calories. The observed differences in
poverty estimates even among the various studies that use the same minimum caloric level to define the
poverty line are attributable to estimation variations.
10 POVERTY IN PAKISTAN
Gini Index
40
35
30
25
20
15
10
5. The difference between the two studies {Federal Bureau of Statistics (2001). Pakistan Integrated Household
Survey-Poverty in the 1990s, Second draft. Islamabad. and Arif, G.M., Hina Nazli and Rashida Haq
(2000). Rural Non-agriculture Employment and Poverty in Pakistan, PDR, Islamabad.} In the estimated
level of urban poverty in FY1993 is not very large, but the implied trends are very different.
12 POVERTY IN PAKISTAN
6 Agricultural production was particularly adversely affected in FY1993, a year characterized by the
incidence of widespread devastating floods; and FY1997, characterized by widespread pest attacks on the
cotton crop.
7 The poverty estimates for certain years (for example, urban Balochistan FY1993, rural Sindh FY1997, and
rural Balochistan FY1999 among the provinces, and rural Northern Punjab FY1993 and urban Central
Punjab FY1997 among the regions) are ignored in the discussion because they seem to be obviously affected
by sample selection.
8 Social Policy Development Center (2001) [Social Development in Pakistan Towards Poverty Reduction.
Annual Review, 2000. Oxford University Press] estimated 53 percent poverty in rural Sindh in FY1997,
compared to 24 percent and 29 percent in NWFP and Punjab respectively, using a poverty line for Sindh
which was 45 percent and 16 percent higher than those used for NWFP and Punjab respectively.
POVERTY PROFILE 13
(Box 2.2) indicates significant variations in and women's choices and life opportunities
poverty levels among the various regions of differently. Prevalent gender role Prevalent gender
the province. ideologies in Pakistan define women's roles role ideologies in
primarily within the arena of the home as Pakistan define
C. GENDER DIMENSIONS OF mothers and wives, and men's as bread- women's roles
POVERTY earners. The dichotomy between these roles primarily within
has material implications for women as the the arena of the
The gender discriminatory practices family and the society invests far less in home as mothers
prevalent in Pakistani society shape men's women than men, due to their perception of and wives, and
men's as bread-
earners.
Box 2.1 Regional Pattern of Poverty in Punjab
There is considerable diversity in the level of poverty in the rural and urban areas within provinces as well,
but only the sample for Punjab is large enough to generate poverty estimates for regions within the province.
Punjab has been divided into three regions: Northern Punjab (including Islamabad, Rawalpindi division, and
the district of Mianwali), Central Punjab (including Sargodha, Faisalabad, Gujaranwala, and Lahore
divisions), and Southern Punjab (including Multan, Dera Ghazi Khan, and Bahawalpur divisions). There are
substantial differences in poverty levels in the three regions. The incidence of poverty is consistently the
lowest in Northern Punjab and the highest in Southern Punjab, both in the rural and urban areas. In FY1999,
urban poverty was the highest in the country in Southern Punjab (35 percent), and almost three times more
than in Northern Punjab. Urban areas in Northern Punjab had the lowest level of poverty in the entire
country, while rural Northern Punjab had the lowest level of poverty (29 percent) among the rural areas of
the country. Poverty in rural Southern Punjab (39 percent) was not significantly lower than NWFP, while
rural Central Punjab had the same level of poverty (35 percent) as rural Sindh.
Important lessons can be drawn from this pattern. Northern Punjab, which has the lowest level of poverty in
the country, is agriculturally a poor region with the lowest cultivated area per capita, and no irrigation. On
the other hand, Southern Punjab, despite its highest cultivated area per capita and 100 percent irrigation, is
one of the poorest regions in the country. One reason for this seemingly contradictory outcome is that rural
areas in Northern Punjab on the other hand, are closely integrated with their urban centers, and have strong
linkages with the services sector. Also the people of the region have a long tradition of employment in the
public sector, particularly in the armed forces, as well as in-country and overseas migration. In contrast,
Southern Punjab is the least urbanized region in the province, and mobility of local people in search of jobs
outside the region or overseas has traditionally also been limited. It appears that, even more than agriculture
production, non-farm employment opportunities, urban-rural linkages, agrarian structure, and labor
mobility, in which literacy can play an important role, are amongst the key determinants of rural poverty in
the country.
women's future roles primarily in the percent, compared to 70.4 percent for men.10
reproductive sphere. Women suffer from
poverty of opportunities throughout their In general, the experience of poverty by
life cycle. This is evident from gender men and women is different and unequal. In
disaggregated statistics whereby female the absence of gender-disaggregated,
literacy is only 29 percent in Pakistan as poverty-related data, a systematic gender
compared to a literacy rate of 55 percent for analysis of poverty processes remains
men. In higher education women form only elusive in Pakistan. However, it is
28.9 of the student body in the 26 public increasingly evident from the studies on
sector universities. There are only 10 feminization of poverty that women bear a
vocational colleges for women out of a total disproportionately high share of the burden
of 172 in the country. Only 47 percent of of poverty within the family and the society.
girl children are fully immunized compared Women become impoverished through two
to 52 of boys. Forty percent of adult women distinct processes (a) when the family based
in Pakistan suffer from anemia. Pakistan is household becomes poor through
also one of the few countries in the world deterioration in its collective entitlements
11
where the sex ratio is biased in favor of men and (b) when the family unit breaks down.
and there are 108 men to every 100 women. In the former situation women and girl
In legislative bodies, women have never children experience intra-household
constituted more than 3 percent of the discrimination in food distribution, health
strength of the legislature elected on general care and education. In the latter situation
seats.9 when the family unit breaks down, female
headed households tend to regress into
Gender inequalities in education, skill poverty due to low earning capacity of
attainment, and in the legal, economic and women resulting from the economic and
Women suffer from political sphere tend to shape women's cultural constraints on their labor.
12
9 The 1973 Constitution allowed reserved seats for women in both houses of parliament for a period of 20
years, thus ensuring that women would be represented in parliament regardless of whether or not they are
elected on general seats. This provision lapsed in 1993, so parliaments elected ubsequently did not
have reserved seats for women. Reserved seats for women have been restored in the elections
scheduled for October 2002, and will constitute 17 percent of the strength of Parliament.
10 Federal Bureau of Statistics, 2001: Labour Force Survey 1999-2000.
11 Kabeer, Naila (1994), Reversed Realities, Verso, London, p.141.
12 The universalization of the association between female headship and poverty has been contested by some
researchers. Nevertheless, the tendency of female headed households to be poor does exist in Pakistan.
POVERTY PROFILE 15
1 McCulloch, Neil., and Bob Baulch: Distinguishing the Chronically from the Transitorily Poor:
Evidence from Rural Pakistan, IDS Working Paper 97, University of Sussex.
16 POVERTY IN PAKISTAN
material, social or political. In addition, contributions from the public to meet these
highlighted in the poor's perceptions of expenditures.
vulnerability is increasing insecurity arising
from sectarian violence, communal clashes Third, and well known, the
and deteriorating law and order. vulnerability of the poor is continually
Vulnerability, in this broad sense, reaffirmed by the corruption of local
therefore, may be defined as the lack of cadre/officials that hampers access to public
capacity in the poor to access public goods/services such as health, education
entitlements, particularly political processes and land management. For example, it is
or goods and services which determine common in Pakistan to find the poor turning
human development, where human to private sources of health care because
development is defined as enlarging they fear that a visit to a public facility
people's choices in a way that enables them would be unproductive. In this regard, the
to lead longer, healthier and fuller lives. perception of the poor is that although
private care is considered expensive, public
Vulnerability in Pakistan manifests sources may be no less expensive when
itself in at least four ways. First, it is there is a possibility of having to pay illegal
exacerbated by the everyday harassment, fees, being serviced with expired drugs and
Highlighted in the
under-performance, exclusion and denial of dangerous diagnoses, and undergoing long
poor's perceptions
basic rights by public officials of people delays in obtaining medical consultation due
of vulnerability is
who are disadvantaged by virtue of gender, to frequent absenteeism of the concerned
increasing ethnicity, and economic and political staff. Access to public services is also
insecurity arising powerlessness. That citizens have started hampered by the need to provide documents
from sectarian reacting to such treatment is evidenced by such as national identity cards or domicile
violence, the number of complaints filed against key certificates, which are difficult to obtain.
communal clashes government departments in Pakistan, which
and deteriorating more than tripled between 1985 and 1998.13 Finally, the failure of state institutions
law and order. These complaints could be placed in five to provide law and order and security is a
categories: delay, inattention, neglect, function of the inefficiency in existing
arbitrary decisions and corruption. While police, legal, and judicial structures.
alarming, these trends say nothing of those Studies suggest that the poor more
who cannot or do not file formal complaints frequently remark on the impact of a
but silently suffer nevertheless on account of brutalizing police force and a corrupt
the dysfunctionality and non-responsiveness judiciary than is apparent from official
of public institutions. accounts of indicators and causes of
poverty.
Second, vulnerability is much increased
by local officials responsible to license and The poor recognize that the state has a
regulate economic activities who typically responsibility to provide affordable,
extract rent from informal sector workers, equitable and effective public goods and
by imposing or manipulating regulatory services, but feel that the state has failed to
controls over their livelihood activities. deliver. Dysfunctional institutions do not
This is particularly marked with law and just fail to deliver services - they
order entitlements: budgetary allocations to disempower, and even silence the poor
meet recurrent costs of police stations are so through humiliation, exclusion and
meager that it is accepted practice to solicit corruption. The persistent inability of the
13 Asia Foundation 1999: Pakistan Legal and Judicial Reform Project, ADB, Integrated Report, September,
p. 145. Islamabad.
POVERTY PROFILE 17
Government to rectify these conditions is Table 2.4. Poverty, according to all indices,
arguably the most important constraint on declined throughout the period, (with the
long term growth prospects and inequality. exception of income related poverty in the
1990s which has been on the increase), but
E. HUMAN DEVELOPMENT the poverty of education opportunity index
14
has always lagged behind the other indices.
ADB's Poverty Reduction Strategy In 1990, at 62 percent, poverty of education
describes poverty as a deprivation of opportunities was almost three times the
essential assets and opportunities to which poverty of income opportunities. The data
every human being is entitled. In this also shows that, while poverty of
respect, the importance of building up opportunity declined for both men and
human capital assets and enjoying access to women during this period, the decline for The poverty of
basic education and primary health services the latter has been slower than for the education
is a given. The Mahbub-ul-Haq Centre for former. As a result the gender gap has opportunity index
Human Development (MHCHD) has increased consistently since 1980. has always lagged
developed a broad index of poverty in
Pakistan that takes into account deprivation Another measure to evaluate the behind the other
in education and health, in addition to progress made by a country in achieving poverty of
income.15 Trends in this index (poverty of human development, as well as to make opportunity indices
opportunity) for the period 1970 to 1995, as cross country comparisons, is the United for Pakistan.
well as the three indices on which it is based, Nations Development Program’s (UNDP)
i.e., poverty of opportunity of health, human development index (HDI). To
education, and income, are presented in provide a context for past achievements and
1970 55 77 40 61 56 67 100
1975 49 74 35 58 52 64 102
1980 46 73 38 56 51 62 101
1985 42 67 25 51 46 59 107
1990 36 62 20 46 41 56 114
1995 30 58 30 44 37 52 116
Reduction 35 21 21 21 27 16
1980 to
1995 (%)
14 ADB, 1999: Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy p.5.
15 Education deprivation is a composite of the percentage of illiterate adults and percentage of
primary school age children out of school. Health deprivation is percentage of people not expected to survive
to 40, percentage without access to safe water, and percentage of malnourished children under 5.
MHCHD / UNDP 1999. A Profile of Poverty in Pakistan, Islamabad.
18 POVERTY IN PAKISTAN
the current state of human development in Pakistan is a clear indicator of the low
Pakistan, it is useful to compare changes in priority accorded to education in Pakistan's
Pakistan's level of HDI in the 1990s for the South Asian development policies.
human
countries. It is clear from Table 2.5 that the
HDI improved in all South Asian countries Trends in the key components of human
development is low 16 development, such as literacy, education,
for its level of
in the 1990s. In 1999, the HDI for Pakistan
basic health, and population welfare in the
income.
was marginally above Bangladesh and
1990s are discussed below.
Nepal, but substantially below India. Also,
it is evident that Pakistan's level of human
1. Literacy
development is low for its level of income as
indicated by the fact that its GDP per capita Literacy rates increased for both men
rank is higher than its HDI rank. In and women in the 1990s, and according to
comparison with other South Asian the 1998 census, the adult (15 years and
countries, Pakistan did not appear to be above) literacy rate was 42.7 percent (55.3
worse off in terms of the health (life percent for men and 29 percent for women).
expectancy) index relative to most During the period from FY1991 to FY1999
countries, but the education index for the gap in literacy rates between men and
Pakistan was the lowest in South Asia. The women was reduced somewhat according to
fact that the education index in Nepal and the PIHS data, although it remains
Bangladesh, two countries with significant, especially in the rural areas.
significantly lower per capita incomes than
Pakistan, was 10 to 20 percent higher than An analysis of the current literacy age
* A negative figure indicates that the human development rank is lower than the GDP per capita
rank, a positive figure indicates the opposite.
16 Sri Lanka, which has a level of human development comparable to a middle income country, is not
included in these comparisons.
POVERTY PROFILE 19
profile for Pakistan can provide very useful for males, such that the gender disparity is In urban areas, the
insights into the progress that has been made almost eliminated for the 15 to 19 age female literacy rate
17 18
in improving literacy in the last 50 years. group. However, the male literacy rate increases at a
The trends for urban and rural areas for both seems to have leveled off at just over 80 much faster rate
men and women are shown in the following percent, which may have important than that for
two figures (Figures 2.3 and 2.4 implications for future improvement in the males, such that
respectively). In urban areas, literacy overall literacy rate.19 the gender
decreases with age (higher literacy in In the rural areas as well, the long-term disparity is almost
younger age groups). The female literacy trend is for literacy to increase inversely eliminated for the
rate increases at a much faster rate than that with age for men and women, but the rate of 15 to 19 age
group.
80
70
60
50
40
30
20
10
60 + 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14
Years
17 This unusual but effective method is used in ADB's Program Performance Audit Report on the
Social Action Program (SAP).
18 There is no significant difference between males and females in literacy among 10 to 14 years olds.
19 It is difficult to interpret the fact that the literacy rate for 10 to 14 years is significantly lower than
that for the 15 to 19 age group across all categories (rural, urban, male and female) in all three rounds of
PIHS, except for rural females in 1998-99. However, this finding probably indicates the inefficiency of the
school system. In 1998-99, 69 percent of 10 to 14 year olds in Pakistan had been to school, but only 56
percent were literate. On the other hand, literacy skills may be acquired by a substantial proportion of the 15
to 19 age group outside the formal school system.
20 POVERTY IN PAKISTAN
70
60
50
40
30
20
10
60 + 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14
Years
Male Female Both
increase for women only accelerates in the percentage points for the 15 to 19 age group,
last few age groups. The gender gap, which the urban-rural gap in the case of women
is the largest for the 20 to 24 age group (40 first widened from the highest age group
percentage points) remains substantial, but downwards before narrowing from 47
declines to 33 percent for 15 to 19 year olds percentage points for the 20 to 24 age group
and further to 22 percentage points for 10 to to 34 percentage points for the 10 to 14 age
14 year olds. It is increasingly clear that the group.
gender gap in education exists not only
Gender gap in Pakistan today has 41 million adult
because of parent's reluctance to send girls
education exists illiterates and more are being added every
to school but also because of the non-
not only because of year. Less than 50 percent of the girls in the
availability of appropriate facilities for
parent's reluctance 10 to 14 year age group in the rural areas are
girls. Making educational facilities more
to send girls to in school, and over 30 percent of all children
easily accessible to girls and women may
school but also will never go to school. Unless the issue of
therefore result in significant gains in
because of the non- adult illiteracy is addressed through
reducing the gender gap.
availability of informal education programs, particularly
appropriate A similar pattern is observed for the for women, a target of 90 percent literacy
facilities for girls urban-rural gap in literacy rates. While this will not be reached even in fifty years.
gap for men declined from 27 percentage Similarly, unless the number of children not
points for the 55 to 59 age group to 11 attending school is reduced drastically, it
POVERTY PROFILE 21
will be almost impossible to increase the widened marginally over this period, and in
literacy rate beyond 70 to 80 percent. FY1999 girls' GER was 50 percent in rural
areas compared to 92 percent in urban
2. Education areas. At the same time, the gap in the case Little progress was
of boys widened significantly, because the made in expanding
Despite the Social Action Program decline in boys' GER in the rural areas primary education
(SAP), primary enrolment in Pakistan has (from 83 percent in 1991 to 75 percent in coverage,
tended to stagnate, if not decline, during the FY1999) was much greater than the decline particularly in
1990s. In FY1999, the primary school gross (from 97 percent to 95 percent) in the urban rural areas, during
enrolment rate (GER) was 71 percent, as areas. The inescapable conclusion is that, the 1990s.
against 73 percent FY1991 (Table 2.6), apart from a welcome increase in girls'
while the net enrolment rate declined from GER, little progress was made in expanding
46 to 42 percent. However, some progress primary education coverage, particularly in
was made in reducing gender disparities in rural areas, during the 1990s.
education over the period. The female GER
increased from 59 percent to 61 percent, Mirroring trends observed at the overall
while the male GER declined from 87 national level, GERs in the two big
percent to 80 percent. Thus the decline in provinces also witnessed a decline between
the gender gap (from 28 percentage points to FY 1991 and FY 1999. As is evident from
19 percentage points) was largely because of Table 2.6, GER in Punjab fell from 80
declining boys' enrolment. Also, no percent to 75 percent; and in Sindh from 65
progress was made in reducing rural-urban percent to 64 percent. GERs, in NWFP and
disparities. The gap in the case of girls Balochistan, however, increased during the
FY91 FY99
Pakistan 73 87 59 71 80 61
Urban 92 97 87 94 95 92
Rural 66 83 47 63 75 50
Punjab 80 91 69 75 82 68
Urban 98 100 95 94 91 97
Rural 74 88 57 69 79 58
Sindh 65 77 53 64 75 54
Urban 87 90 84 94 100 88
Rural 50 68 31 47 59 33
NWFP 67 92 44 70 84 54
Urban 82 109 58 90 97 83
Rural 64 89 41 66 82 49
Balochistan 46 69 27 64 77 43
Urban 62 81 42 88 99 76
Rural 44 67 25 61 77 42
Source: FBS, 2000 (PIHS Round 3, 1998-99) and Oxford Policy Management, 2001.
22 POVERTY IN PAKISTAN
same period from 67 percent to 70 percent, between FY1991 and FY1999, the dropout
and from 46 percent to 64 percent rate also decreased in the other three
respectively. The main source of this provinces. Nationally, the male - female gap
increase in both provinces was the in the dropout rate narrowed from 5 to 1
significant increase in GERs of girls, which percentage points, while the urban/rural gap
increased from 44 percent to 54 percent in widened from 7 to 9 percentage points. The
NWFP, and from 27 percent to 43 percent in gender gap in dropout rates of all provinces
Balochistan. GER of girls in Sindh declined as well, with the exception of
marginally increased as well. The disparity NWFP where it increased as a result of a
in GERs between urban and rural areas also significant increase in the dropout rate for
increased in all four provinces, but most girls. The urban-rural gap in all the
notably so in Sindh, where urban enrollment provinces increased in accordance with the
rates increased but rural enrollment national trend.
decreased during the FY1991-FY1999
The education system is beset with
period.
learning deficiencies and low achievements
Enrolment statistics have to be (Box 2.4). Detailed statistics from one
considered together with the dropout rate to province, Punjab, reported in a World Bank
20
Increasingly, get a true picture of the magnitude of the document, further illustrate problems in
parents prefer to problem of indequate education coverage. educational standards. From 1989 to 1998,
enroll their
The dropout rate is determined primarily by the proportion of children passing from the
children in private
the quality of education imparted, and by first to the second grade in the province
schools, even in
parent's estimation of the stream of future remained constant at 59 percent. Only 20
benefits likely to accrue from time spent in percent of children in the age cohort of
rural areas.
school. For low income households, the 10-12 years were enrolled in middle
opportunity cost of having a child in school schools, and of those who entered grade 6,
are fairly high, and parents cannot be only 56 percent went on to complete grade
persuaded to bear this cost if they perceive 8. Of every thousand children enrolled in
that the quality of education is low, or that primary school, only 264 completed middle
no significant benefits are likely to accrue school. In 1999, only 41 percent of public
from keeping children in school. A strong school students in Punjab who took the
relationship exists, therefore between matriculation (or grade 10) examination got
household income and the dropout rate. a passing grade. Since only 16 percent of
th
According to the PIHS 1998-99 data, 47 the age cohort 15 to 19 reached the 10
percent of children from the poorest quintile grade, such a low pass percentage has
dropped out before completing primary disquieting implications.
education as compared to 23 percent from
Notwithstanding the generally
the richest quintile.
disapointing situation noted above,
The percentage of children aged 10 to significant changes are taking place in the
18 years who left school before completing education sector in Pakistan. Increasingly,
primary education declined slightly from parents prefer to enroll their children in
FY1991 to FY1999, from 17 percent to 15 private schools, even in rural areas.
percent. Except for Balochistan where the Consequently, the share of primary school
percentage of children leaving school before enrolment in government schools
completing primary education perceptibly (excluding kindergarten) fell between
increased from 2 percent to 12 percent FY1991 and FY1999 from 86 percent to 75
20 World Bank (2001): Pakistan: Reforming Punjab's Public Finances and Institutions. Poverty
Reduction and Economic Management Unit, South Asia Region.
POVERTY PROFILE 23
percent. Even in rural areas, government compared results from private and
primary school enrolment share fell from 95 government schools in rural areas. The
percent to 86 percent; in this period. During survey showed better performance by
the same period, in urban areas, the share of private school pupils: boys in private
government primary schools in enrollment schools scored 13 percentage points more
fell from 70 percent to 53 percent; that is, by than boys in government schools while for
FY1999, almost half of all primary girls the improved performance was even
education in urban areas was being greater at 18 percentage points. The report
delivered by private schools. It is also clear notes the better performance of private
that both male and female students have schools is not due only to the presence of
been shifting from public to private more competent teachers but also because
schools.21 better learning conditions and better
These are major shifts of great management.
importance but the reasons why these are The fact that the shift towards private
occurring are poorly documented. It is schools is occurring is especially
possible to speculate, however, that parents' noteworthy in light of the fact that the gap
decisions of educating their children in between average household expenditure per
private schools are influenced by a child for private and Government schools is Better performance
combination of factors. These include the significant, as shown in Table 2.7. For of private schools
generally poor standard of government example, for primary education, the mean is not due only to
primary education (including high level of annual expenditure in private schools was the presence of
teacher absenteeism), problems of access about four times higher than that in more competent
and security (for girls), preference for Government schools in FY1999. For middle teachers but also
English as a medium of instruction education, average annual expenditure in because of better
(generally offered by private schools), and private schools is three times higher than in learning conditions
lack of accountability in public schools (or a Government schools. The demand for and better
perception that private schools will be more private education indicates that there is a management.
accountable because services are paid for). willingness to pay for education, provided
A Multi-Donor Support Unit (MSU) that the quality of education is considered to
survey on grade 5 student attainment be adequate.
1 Multi Donor Support Unit (1995). Social Action Program: Determinants of Primary Students' Achievement:
National Survey Result. The survey sample included 782 teachers and 9901 students from 462 schools. Survey
results had to be discarded for Sindh because of survey irregularities.
21 An estimated 3 percent of enrolled students (mainly boys) are also studying in madrassas or
religious schools. However, it is not clear from the PIHS survey if these are included in private
schools or not. Some madrassas also receive public funding.
24 POVERTY IN PAKISTAN
FY91 FY99
Source: FBS, 2000 (PIHS Round 3, 1998-99) and Oxford Policy Management, 2001.
that infants born to the least educated of expectant mothers typically undergo pre-
mothers have twice the risk of dying within natal checks, while only one in ten mothers
the first year after birth compared to those have post natal checks and consultation.
22
born to more educated women. A similar
The PIHS for 1996-97 reports some
relationship exists for the incidence of There is 60 percent
improvement in the Total Fertility Rate
malnutrition, for which PIHS data shows more chance of
(TFR), which had declined from 6.8 births
that there is 60 percent more chance of finding
per woman in the mid 1980s to about 4.5
finding malnutritioned children in
births per woman by 1997. In this regard, malnutritioned
households where the mother is illiterate
fertility rates were estimated to have children in
compared to households where the mother
declined in all provinces except households where
has at least had high school education.
Balochistan. However, the PIHS study the mother is
Overall, there has reportedly been little
cautions that this data is prone to reporting illiterate.
improvement in the average nutritional
error and the TFR is likely to be higher.
status of children over the last twenty years.
Nevertheless, information from multiple
Maternal mortality rates are also very sources does indicate that fertility is on the
high at about 300-400 per 100,000 births, decline. Once again, the bulk of the
largely because over 80 percent of total reduction appeared to have taken place in
births take place at home, under the care of urban areas, and has been largely attributed
traditional birth attendants. Less than a third to an increase in the average marriage age,
22 Naqvi, Zareen F. (2000). Poverty in Pakistan: Review of Recent Literature. South Asia Poverty
Reduction and Economic Management Unit, The World Bank, Islamabad.
26 POVERTY IN PAKISTAN
although the PIHS also reports an increase, was reported to have appreciably increased
between FY1991 and FY1997, in the in all the four provinces. This percentage
percentage of households that use increased from 44 percent to 55 percent in
Although the
contraceptives. Punjab; from 16 percent to 38 percent in
percentage of
Sindh; from 41 percent to 54 percent in
children between There has also been significant NWFP; and from 1 percent to 34 percent in
12 and 23 months improvement in the rate of immunization Balochistan. The PIHS data also showed a
who were fully between FY1991 and FY1999. As shown in strong correlation between income and
immunized Table 2.9, the percentage of children immunization as approximately three-
increased to 49 between 12 and 23 months who were fully quarters of children in the upper income
percent in FY1999, immunized increased from 37 to 49 percent quintile were fully immunized against only
this was based on recall and record measures; one quarter in the bottom quintile.
considerably short however, this still fell considerably short of
of the 90 percent the 90 percent coverage target that had been Three factors, communicable infectious
coverage target set set by the Government for achievement by diseases, reproductive health problems, and
by the government. 1998. Nevertheless, immunization rates in nutritional deficiencies are purported to
children significantly improved across both account for almost 60 percent of the burden
genders and in both urban as well as rural of disease in Pakistan, when measured in
23
areas during this period. terms of life-years lost. All of these are
preventable or easily treatable problems,
The percentage of immunized children but because of the low quality of health
Overall 37 40 33 49 52 47
Urban 43 47 39 64 64 36
Rural 34 37 30 45 47 42
Punjab 44 44 45 55 57 52
Urban 50 47 54 64 62 68
Rural 42 43 41 52 56 47
Sindh 16 20 12 38 42 35
Urban 33 51 20 60 66 54
Rural 5 3 6 27 31 24
NWFP 41 50 31 54 52 56
Urban 63 49 24 77 82 74
Rural 42 50 32 51 49 54
Balochistan 1 3 0 34 36 32
Urban 10 20 0 51 51 52
Rural 0 0 0 32 35 29
Source: FBS, 2000 (PIHS Round 3, 1998-99) and Oxford Policy Management, 2001.
23 World Bank, 2001. Pakistan: Reforming Punjab's Public Finances and Institutions. Poverty Reduction
and Economic Management Unit. South Asia Region.
POVERTY PROFILE 27
The private sector is playing a major such as soda ash, sulfuric acid, and caustic
role in family planning practice. About 50 soda. Most of the chemical waste is
percent of family planning users received disposed off either into the nearby drains
their contraceptives from a non-government and/or other outlets, with obvious adverse
supplier during the SAP - I period. The environmental impacts. In this context, it is
current program of family planning seeks important to note that while adequate
the support of independent media and control measures exist for production,
advocacy campaigns through NGO processing and import of fertilizers,
involvement to make it more effective. pesticides and other chemicals, no legal
instruments are available for their disposal,
F. ENVIRONMENT registration or de-registration, or their
quality control. The 1997 Pakistan
As in the case of many developing Environmental Protection Act excludes
countries, the environment-development 'pesticides' in its definition of hazardous
nexus and consequently the environment- substances. Similarly, no legal instrument
poverty nexus is strong in Pakistan. Growth exists to manage the industrial or consumer
in the agriculture sector, which contributes chemicals except that by the use of
about 25 percent to GDP, is strongly reliant Explosives Act 1884, and/or Factories Act
There are no
on the state of the environment, particularly 1934.26 Moreover, there are no ambient air
ambient air quality
on the country's land and water resources. quality standards, air quality indices,
standards, air
The industrial sector, which contributes standards for various uses of water, or water
about 17 percent of GDP, is dominated by quality indices in Pakistan, an absolute must
quality indices,
agro-industries, for which the agricultural for monitoring air and water quality.
standards for
sector provides the bulk of the raw material.
various uses of
However, there is general agreement that It has been variously reported that
water, or water
the environmental situation in the country between the years 1980 and 1996, carbon
quality indices in dioxide emissions have more than doubled
has been deteriorating. To this end,
Pakistan. in Pakistan from 31.6 metric tons to 94.3
environmental issues and concerns across
all sectors need to be addressed as a matter metric tons, doubling from 0.4 to 0.8 metric
of priority which, in turn, requires urgent tons in terms of per capita emissions.
attention and action on the part of all During the same period, the discharge of
stakeholders including Government, the organic water pollutants increased from
private sector, and NGOs and other civil 75,125 kg/day to 114,726 kg/day.
society organizations. Moreover, it has been noted that, only 39
percent of the population has access to
Current environmental problems in sanitation facilities.
27
28 Federal EPA/JICA/OECC (2001). Investigation on Actual Contaminated Conditions by the Industrial Toxic
Substances in Karachi.
29 JICA (2000). Investigation of Air and Water Quality (Lahore, Rawalpindi, Islamabad).
30 Asian Development Bank. 2001. Country Strategy Program (CSP) Update, Table A.2.2 (Environmental
Indicators).
31 ADB. 2001. Country Environmental Policy Integration Study for Pakistan.
30 POVERTY IN PAKISTAN
Household size
1-4 26.8 15.9
5-6 27.5 31.1
7-8 24.0 47.5
9+ 21.6 57.4
Age of household head
<40 28.6 36.1
40-49 24.5 43.9
50-59 23.9 33.7
60+ 23.0 32.7
Gender of household head
Male 91.8 36.9
Female 8.2 34.1
Migration
Non-migrant 64.6 40.5
Migrant 35.4 29.6
Poor governance is the key underlying cause of poverty in economic growth, declining public
expenditure on basic entitlements,
Pakistan. However, economic and social factors such as the
low efficiency in delivery of public
slowdown in GDP growth in the last decade, and the persistence services as discussed in the earlier
of a regressive social structure, stemming from the highly unequal section on human development, and
a serious undermining of state
distribution of land, have also contributed to the increase in
institutions and the rule of law. The
poverty witnessed in the 1990s. lack of public confidence in state
institutions, including the police and
judiciary, eroded their legitimacy
and directly contributed to
worsening conditions of public
security and law and order. The
P overty is impacted by a
number of factors. Some of
these may be general in that
they may serve to create or intensify
privation across all sectors of the
poverty in Pakistan are detailed in present Government has committed
this chapter.
A. POOR GOVERNANCE
to thorough reforms to restore the
legitimacy and performance of all
institutions, political, adminis-
trative, and judicial.
economy, and across different Governance is defined as the
population groups. Other causes of manner in which power is exercised
poverty may be more specific or in the management of a country's 1. Governance, Political
social and economic resources for Instability and Poverty
localized, and their effects may be 1
more apparent in particular development . Good governance Political stability is fundamental
population groups, or in populations implies a capacity to turn public to the creation of an enabling
associated with specific sectors of the income into human development environment for growth and
economy. The factors or causes of outcomes. Good governance is an development. Economic agents,
poverty can, furthermore, be essential pre-condition for pro-poor particularly investors, must be
grouped into categories based on the growth as it establishes the enabling reassured with regard to the
channels through which they affect regulatory and legal framework continuation of policies, should have
poverty levels. Thus, for example, essential for the sound functioning of confidence in the government's
they may originate from issues of land, labor, capital and other factor credibility in order to operate
governance and the structure of markets. effectively, and in the case of
institutions or be economic or social By the end of the 1990s, investors, be induced to take risks.
in nature. In most cases, however, governance had clearly emerged as The perceived security threat on its
poverty is likely to be the result of Pakistan's foremost development eastern border which has dominated
several mutually reinforcing factors concern. Corruption and political Pakistan's political culture has
that together define its scope and instability resulted in waning resulted in the domination of the
pervasiveness. The prime causes of business confidence, deteriorating military in politics, excessive public
spending on defense at the expense of social transparent accountability drives that have
sectors, and erosion of the rule of law. sapped the morale of public servants and
Politically, Pakistan has alternated with private entrepreneurs alike. The most
regularity between democratic and military relevant example of the effects of reversal of
Three of the last governments. Between 1947 and 1988, policy is the renegotiation of agreements
four civilian military governments were in power for 24 with independent power producers IPPs
governments that out of the 41 years. During the period of which started in 1997. The resulting
were in power in parliamentary democracy between 1988 and disputes took four years to resolve, and had
the 1990s were 1999, there were four national elections and extremely adverse impacts on foreign
dismissed nine changes of government. In addition, investment inflows into the country. Other
prematurely by Pakistan's involvement in the war during examples of policy inconsistency in the
successive the 1980s and 1990s in Afghanistan was 1990s include the reversal of decisions on
presidents on responsible for the growth of extremist withdrawal of tariff concessions and
charges of groups, spread of weapons, and frequent incentives for certain industry groups in at
corruption.
breakdowns of internal security. The least one case, an industrial zone, the
uncertainty created by these frequent Gadoon Amazai project. All these factors
changes of government, the associated have in turn affected growth, and
economic policies and lapses in internal subsequently poverty levels in the country.
security has had a negative impact on private In general, political instability and macro-
investment and growth. economic imbalances have been reflected in
poor creditworthiness ratings, even
Three of the last four civilian
compared to other countries of similar
governments that were in power in the
income levels, with resulting capital flight
1990s were dismissed prematurely by
and lower foreign direct investment
successive presidents on charges of
2 inflows3.
corruption . Although the accountability
drives that followed each change of govern-
ment were flawed in many respects, there is 2. Non Transparency in Resource
little doubt that corruption was pervasive Allocation
through much of the last decade3. The
The lack of transparency in public
incidence of corrupt practices, as well as the
sector planning, budgeting and allocation of
atmosphere of uncertainty that followed the
resources in Pakistan has ensured that those
fall of each successive government, were
who do not constitute the political elite are
not conducive to the growth or use of sound
unable to make political leaders and the
business practices. These and other factors
Government responsive to their needs or
not only discouraged private investment,
accountable to promises. This has led to a
but prompted capital flight, as businessmen
supply driven approach to service
either migrated in large numbers (most
provision, with development priorities
notably to Canada), or shifted assets to more
being determined not by potential
favorable locations (such as the United Arab
beneficiaries but by the bureaucracy and a
Emirates).
political elite which may or may not be in
The change of governments in the 1990s touch with the needs of the citizens. The
was also characterized by extreme policy results manifest themselves in, for example,
reversals as well as one sided and non- the existence of "ghost schools" (which
2. While the immediate causes of the dismissals in each case may have been tensions in the centers of
power, the reasons for dismissal cited in each case were the prevalence of corrupt practices in government.
3. Pakistan was ranked the second most corrupt country in the world by Transparency International in 1996.
Its ranking had improved to 12th most corrupt by 2001.
CAUSES OF POVERTY 35
exist only on paper), absenteeism of health has been the inability of the public sector to
and education staff in rural areas (who are remain competitive in attracting better
not held accountable by the authorities, and qualified and competent people owing to the
are often political appointees rather than dismal financial and career incentives
public functionaries appointed on merit)4 offered. Secondly, there has been a steady
and deterioration in the quality of services weakening of meritocratic selection
wherever they do exist. Poor service procedures in recruitment of staff as a
delivery and the restriction of access of the consequence of rampant systemic
poor to services are key determinants of corruption and nepotism. This has worsened
long term poverty and serve to exacerbate in the last decade, during periods of elected
the vulnerability of the lowest income civilian governments, when recourse to
groups in recessionary periods. In addition, political interference and influence became
the absence of a public debate on resource common and, in fact, almost a pre-condition
allocation, and allocation within the social in getting public sector jobs. As a On a larger scale,
sectors has resulted in distortions such as the consequence, the autonomy and objectivity non-transparency
emphasis on provision of tertiary services in of institutions such as the Federal and in the management
urban areas rather than primary services in Provincial Public Service Commissions of public accounts
rural areas. charged with carrying out recruitment for a
has led to a
major proportion of public sector jobs has
On a larger scale, non-transparency in distortion of
been affected, and confidence of citizens in
the management of public accounts has led development
these institutions has weakened. Finally,
to a distortion of development priorities and priorities and a
training, capacity development, and skills
a tendency to safeguard the interests of tendency to
enhancement opportunities across the board
specific groups at the expense of the larger safeguard the
have historically been very limited due to
public interest. Examples include the interests of specific
which there is no serious and systematic
government's hesitance to impose groups at the
effort at capacity upgrading of in-service
agricultural income tax; the tendency to expense of the
employees in most public sector
frequently grant concessions or exemptions larger public
departments. Somewhat ironically,
on taxes and tariffs, which often benefit interest.
however, together with this declining
powerful pressure groups; and ad hoc
capacity to deliver, the State assumed added
decision making on imports and exports as
functions in a number of different areas and
well as pricing in the agricultural sector,
sectors that were perhaps best left to the
which can favor hoarding and speculation.
private sector. This has led to an
unsustainable and unnecessary over-
3. Weak Public Sector Capacity extension of the public sector with the result
Public sector capacity in Pakistan, that whatever internal capacity there was
considered in the 1960s to be in league with had to be more thinly spread over in diverse
that of the top performing Asian countries, sectors rather than being concentrated in a
has eroded significantly for several reasons. few key ones such as regulation and law and
This is despite the massive growth in the order. The result of this development has
numbers of staff employed by the public been the realization of diseconomies of scale
sector over these years. The first and in the public sector (as is evidenced from the
foremost reason for this decline in capacity many examples of loss-making state-owned
4. During a recent monitoring exercise for the SAP, some 19 percent of primary school teachers were not
present at school and only 38 percent of schools could be classified as functional' according to a minimal
criteria. Research also revealed that 21 percent of health staff are absent from basic health facilities. See
Rimmer, M. 2000: Reducing Poverty in Pakistan: Priorities for the Asian Development Bank, Working
Papers, Poverty Assessment. Unpublished report, p. 47.
36 POVERTY IN PAKISTAN
The causes of the slowdown in growth infrastructure, areas where Pakistan was
may be divided into two categories, i.e. competitive were not many. As a result,
structural and others. Among the structural total fixed investment declined
The 1990s can be
causes, the burgeoning debt burden and significantly, bringing about a fall in the
characterized as a
declining competitiveness of the Pakistan economic growth rate.
decade of stop-go
economy in the increasingly skill-based
The adverse impact of structural factors stabilization
global economy are the most important.
was reinforced by other problems such as policies, with the
While the former occurred due to economic
ethnic and sectarian violence, poor state of attendant negative
mismanagement, the latter was because of
law and order, and a high degree of impact on growth,
Pakistan's low level of human capital
economic and political uncertainty because but without the
development.
of the many changes in government. desired
Increasing debt service requirements Throughout the 1990s, the Government was improvement of
resulted in a growing fiscal squeeze, which implementing a series of medium term macroeconomic
in turn led to a declining proportion of GDP structural adjustment programs under the fundamentals.
being spent on development and social aegis of the International Monetary Fund
sectors in the 1990s. Falling public (IMF). However, because of frequent
investment, together with unsuccessful changes in government, adherence to the
attempts at macroeconomic stabilization adjustment program was unsatisfactory, and
also adversely affected private investment. as a result, the 1990s can be characterized as
At the same time, reduction in tariffs, a decade of stop-go stabilization policies,
exhaustion of simple import substitution with the attendant negative impact on
opportunities, and elimination of export growth, but without the desired
subsidies in the 1990s meant that improvement of macroeconomic
international competitiveness became an fundamentals.
increasingly important determinant of As shown in Figure 3.1, annual
investment opportunities in Pakistan. compound growth rates of GDP in Pakistan
Because of the low level of human have declined from 5 percent for the first
development and poor state of physical period of adjustment, to 3.6 percent for the
0
1988-93 1993-98 1998-02
GDP Manufacturing Agriculture Services
Source: Government of Pakistan, Economic Survey, Various Issues.
38 POVERTY IN PAKISTAN
most recent period. Manufacturing growth early 1990s were characterized by the
has been adversely affected by deficiencies intensification of deregulation and
in infrastructure, as well as by sluggish privatization policies. Foreign resources in
domestic demand. In the most recent period terms of loans, investment and foreign
of our analysis, agricultural growth rates currency accounts supplemented domestic
have been particularly low at just 1.6 savings, which are typically low at an
percent. This sharp decline has been mainly average of 14 percent of GDP, and helped in
due to the unprecedented drought, enhancing investible resources and reducing
precipitated by inadequate rainfall, that the investment risks. Resultantly, private
country experienced from 1999 to 2001. investment during this period increased
from 7.4 percent of GDP in FY1988 to 10
The present Government, soon after
percent by FY1993 (Table 3.1). Public
coming into power, initiated an ambitious
investment averaged just over 8.4 percent of
program of reforms to address outstanding
GDP in this period, and total investment
macroeconomic, structural and governance
increased from 17.3 to 19.9 percent.
problems. In October 2000, Pakistan began
implementing a far-reaching The period from FY1993 to FY1998
macroeconomic stabilization and was characterized by a lack of continuity in
The experience of restructuring program under an IMF economic policy and political uncertainty.
the last decade standby arrangement (SBA) which was Fiscal deficits averaged 6.7 percent of GDP
suggests that successfully completed in September in this period and further constrained public
reviving growth 2001.Following the successful finances (see Table 3.3). This was reflected
and reducing implementation of the SBA, the IMF in investment trends, as the adjustment
poverty is strongly approved in December 2001 a $1.3 billion burden fell on public investment, which fell
dependent on the Poverty Reduction Growth Facility to be drastically from 9 percent of GDP in
Government's implemented during 2002-2004. Also in FY1993 to just 4.9 percent in FY1998
ability to stay the December 2001, the Government of because of inadequate resource mobilization
course of Pakistan successfully negotiated a debt efforts. Private investment fluctuated
macroeconomic restructuring agreement with the Paris Club around an average of 9.3 percent in this
and structural which is expected to reduce the net present period, after having reached a peak of 10
reform. value of total debt by at least 30 percent. percent of GDP in FY1993. Total
While the above developments have made it investment declined from 20.6 percent to
possible for Pakistan to achieve sustained, 17.1 percent of GDP.
high growth in a much shorter period than
earlier thought possible, the experience of In subsequent years, the investment
the last decade suggests that reviving growth climate deteriorated even more significantly
and reducing poverty is strongly dependent as a result of the imposition of sanctions on
on the Government's ability to stay the the country after the nuclear tests of 1998,
course of macroeconomic and structural and related policy decisions such as the
reform. freezing of foreign currency accounts.
Total investment declined from 17.1 percent
Trends in the key economic variables of GDP in FY1998 to just 14.7 percent in
that have an impact on poverty are discussed FY2001. This decline was entirely due to a
in more detail as follows. sharp fall in private investment, which
declined from 9.6 percent of GDP in
3. Investment FY1998 to 7.5 percent in FY2001. Initial
Investment is a key driving force for estimates suggest that total investment
GDP growth, and declining investment further declined in FY2002, to 13.9 percent
levels point to low GDP growth rates. The of GDP, primarily due to the post 11
CAUSES OF POVERTY 39
September regional conflict, the military the pattern of investment, as given in Table Growth depends
standoff with India and a further 3.2, show that investment in agriculture has
not only on the
deterioration in internal security. consistently declined over the period under
level of investment,
review, from an average of 1.8 percent of
Growth depends not only on the level of but also the
GDP in FY1988 to just 0.9 percent in
investment, but also the pattern. Trends in pattern.
FY2002. Investment in manufacturing has
fluctuated, and reached a peak of 4.7 considerable pressure on the fiscal account
percent of GDP in FY1993 because of the and budget deficits averaged over 7 percent
implementation of deregulation policies and for the decade. As Pakistan was required to
privatization. However, by FY1998 it had reduce the size of the budget deficit to less
declined to 2.1 percent of GDP. In the last than 5 percent in this period under the IMF's
period of our analysis, there was a modest structural adjustment program, the
improvement in investment in the sector requirements of public debt servicing placed
largely as a result of balancing and serious constraints on the government's
modernization in the textile sector, which budget allocation priorities, leaving very
was preparing for the removal of limited resources available for development
restrictions on international trade in textiles projects. As revenue generation efforts
by 2005 under the World Trade remained largely unsuccessful, successive
Organization. governments attempted to reduce the deficit
by controlling development expenditure,
Investment in the power sector
which led to a declining proportion of GDP
increased from 2 percent of GDP in FY1988
being spent on development and social
to 2.7 percent in FY1998, as a policy geared
sectors in the 1990s.
towards attracting foreign investors as IPPs
was implemented, and attracted significant The pattern of public expenditure in the
amounts of foreign direct investment. 1990s is shown in Table 3.3. The tradeoff
However, investment in the sector declined between development expenditure and
to 1.4 percent of GDP by FY2002 as a result expenditure on interest payments becomes
of the emergence of excess capacity in the apparent as development expenditure
power sector as well as disputes on tariffs declined from 6.4 percent of GDP in
between the Government and the IPPs. FY1991 to 3.9 percent in FY1998 and
further to 2.8 percent in the last fiscal year.
The patterns of investment indicate that
Interest payments have however increased
investment in agriculture, which employs
from 5.5 percent of GDP in FY1991 to 8.2
47% of the labor force, has been low and
percent in FY1998 as the Government
falling in the last decade, while investment
increasingly resorted to short term
in industry has fluctuated sharply. Total
commercial borrowing, and have fluctuated
investment in the power sector has,
Not only has around 8 percent since then. In constant
however, been quite high, even surpassing
investment in the terms, development expenditure in the
investment in manufacturing in FY1998.
last decade country has declined almost continuously
Foreign direct investment, in particular, has
generally been low from FY1992 to FY2001, with the
been concentrated largely in this sector,
and declining, but exception of one year, FY1998, when
which is highly capital intensive. Thus not
has also been expenditures registered a significant
only has investment in the last decade
concentrated in increase. Development expenditure has
generally been low and declining, but has
capital intensive fallen in real terms from Rs. 65.3 billion in
also been concentrated in capital intensive
rather than labor- FY1991 to Rs. 47.6 billion in FY2001,
rather than labor-intensive sectors. The
intensive sectors. crowded out by expenditure on interest
growth witnessed since the early 90s has
payments and defense. Although
not, therefore, been "pro-poor", and has not
expenditure levels have fluctuated, the
served to alleviate poverty to a significant
annual compound growth rate of
extent.
development expenditure in real terms
averages 3.1 percent for the last decade.
4. Fiscal Policy
The Government's fiscal options have,
Pakistan's increasing debt servicing in the last decade in particular, been
requirements in the 1990s exerted significantly constrained because of the
CAUSES OF POVERTY 41
need to meet debt obligations, and the policy terms for debt rescheduling with the Paris
of sustaining expenditure on defense. Club has, however, created some fiscal
Expenditure on defense and interest space for the Government, with estimated Expenditure on
payments together accounted for 88 percent cash flow savings of $2.7 billion until defense and
of total tax revenue in FY1991. From FY2004. interest payments
FY1998 to FY2000 expenditure on these While rigidity in expenditure is one together accounted
two heads has remained at over 90 percent constraint on the Government's resource for 88 percent of
of tax revenue. In the absence of a political allocation policy, the failure to mobilize total tax revenue in
settlement with India, the government has additional revenue is the other side of the FY1991. From
little flexibility in reducing expenditures on coin which has had equally damaging FY1998 to FY2000
defense7. Furthermore, defense expenditure effects. Pakistan's tax-GDP ratio has expenditure on
has the potential to rise sharply if tensions remained more or less stagnant at low levels these two heads
between the two countries are exacerbated. over the past decade. It was recorded at 11 has remained at
In FY2002, for example, defense spending percent in FY1991, rose marginally to 13 over 90 percent of
was higher than anticipated (Rs. 151.6 percent in FY1996, and was estimated at tax revenue.
billion as against the targeted Rs. 131.6 10.9 percent in FY2002. The Government is
billion) as a result of the military standoff committed to major reform and
with India. The successful negotiation of restructuring of the Central Board of
7. Figures from the Economic Survey 2000-01 show that expenditure on defense has remained
more or less stagnant in real terms since FY1997. However, independent analysts surmise that
this may be partially because salaries and pensions of defense personnel were grouped under General
Administration in the budget for FY2001.
42 POVERTY IN PAKISTAN
Revenue to make it more efficient, more estimated to constitute over a third of total
responsive to taxpayers and more household expenditure for the lowest
transparent in its operations, but progress on income brackets.
this issue has been slow. The Government
Expenditure on these subsidies fell
has initiated a series of fiscal reforms,
steadily from FY1991 to FY1995, but then
however, including effecting the separation
increased in subsequent years as wheat
of the audit and accounts functions, the
imports rose from 1.97 million metric tons
reestablishment of Public Accounts
in FY1996 to 4.1 million metric tons in
Committees, and, from FY2003, the
FY1998. In July 1997, the government
introduction of a self-assessment scheme for
launched an Atta Subsidy Scheme for
income tax. The effects of these reforms on
families living on incomes of less than Rs.
revenue collection and expenditure 8
1500 per month . In FY2001, expenditure
management will be closely monitored over
on poverty related subsidies was 21 percent
the medium term.
lower in real terms as compared with
FY1991.
5. Subsidies
In FY1991, federal and provincial 6. Employment
government subsidies amounted to Rs. 10.7
billion and constituted 4.1 percent of total Pakistan's labor force is expanding at an
expenditure. Thereafter, subsidies fell annual rate of 2.4 percent, and the average
significantly in terms of constant 1990 annual GDP growth rate of 4.5 percent
rupees until FY1994, when expenditure on during the 1990s was insufficient to
subsidies was just 1.4 percent of total generate the necessary additional
expenditure. Subsequently, subsidies employment. The average employment
followed a fluctuating trend, rising to 3.8 elasticity in Pakistan is estimated to be 0.4,
percent of total expenditure in FY2000, and which means additional jobs created in the
estimated at 3.0 percent of total expenditure 1990s would have provided employment to
in FY2002. only about two-thirds of the new entrants
into the labor force. It is estimated that about
From a poverty assessment perspective, 0.6 million people are being added to the
it is more revealing to look at the breakdown ranks of the unemployed every year. In the
of subsidies. Subsidies in Pakistan are absence of a formal social security system,
In FY2001, generally divided into two heads, current this does not fully translate into an increase
expenditure on subsidies and development subsidies. in the unemployment rate, but adds to the
poverty related Current subsidies include subsidies on large number of under-employed workers in
subsidies was 21 wheat, sugar and edible oil as well as the informal sector, and a growing number
percent lower in payments made by the government to bodies of working poor.
real terms as such as the Cotton Export Corporation and
compared with the Pakistan Steel Mill. Development The official unemployment rate had
FY1991. subsidies consist of subsidies given to the increased to 7.8 percent by 2000 - 6.1
fertilizer industry, primarily in the form of percent for men and 17.3 percent for women
9
reduced prices for the use of natural gas as (see Box 3.1) . However, unemployment
feedstock. Subsidies on wheat, sugar and statistics in Pakistan are generally unreliable
edible oil are considered as poverty related because of the relatively high incidence of
subsidies, as expenditures on these items are disguised unemployment, and the fact that a
significant proportion of total employment clear from Figure 3.2, however, there has
even outside agriculture is generated in the been a declining trend in inflation since
informal sector. In general, the capacity to FY1997, which is obviously beneficial to
Inflation fell
absorb labor in the economy is expected to the low-income groups.
significantly, to 7.8
have declined over time, given declining
Inflation fell significantly, to 7.8 percent in FY1998,
GDP growth, and increasing capital
intensity in the commodity producing percent in FY1998, and has continued to and has continued
Inflation Rate
14
12
10
FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02
Source: Government of Pakistan, Economic Survey, Various Issues.
(Million US$)
2500
2000
1500
1000
500
0
FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02
Province Less than Greater than 2 and Less 5 Hectares and Above
2 Hectares than 5 Hectares
Farms(%) Area (%) Farms(%) Area (%) Farms(%) Area (%)
Punjab 45 12 34 29 21 61
Sindh 34 9 47 34 19 58
NWFP 69 24 21 29 9 47
Balochistan 23 3 35 12 43 86
Pakistan 47 12 34 27 19 61
Source: Agricultural Census Organization (1994). Census of Agriculture, 1990. Ministry of Food,
Agriculture and Livestock.
most commonly observed tenurial Punjab, southern NWFP and the bulk of
arrangement as detailed in Table 3.5. rural Sindh, the province that also has the
In general, areas However, the form of the contract between lowest proportion of owner operated
with a high degree the owner and the cultivator can vary farms12.
of absentee considerably and is an indicator of how
Ownership of even small landholdings
landlordism, or equitable the agricultural production
can significantly increase the owner's
feudalism, tend to systems are. In general, areas with a high
capacity to absorb economic shocks, and
have high levels of
degree of absentee landlordism, or
ensure food security for the household.
rural poverty.
feudalism, where sharecropping
Land ownership is also the key factor
arrangements are structured to favor the
determining access to credit from the formal
landowner, tend to have high levels of rural
banking sector, thereby decreasing the
poverty. Examples include southern
Source: Agricultural Census Organization (1994). Census of Agriculture, 1990. Ministry of Food,
Agriculture and Livestock.
12. Disaggregated data on incidence of poverty is limited, but studies in this area (quoted in Naqvi:
2000) show that northern Punjab, where rainfed agriculture is prevalent, is the most prosperous region of
Pakistan. This seems to indicate that access to non-agriculture income earning opportunities is a key
determinant of poverty.
CAUSES OF POVERTY 47
13. A recent study on rural primary schools shows a significant association between the existence of a highly
differentiated social system and participation in schooling. Gazdar 2000: State, Community and
Universal Education: A Political Economy of Public Schooling in Rural Pakistan. Asia Research Center,
London School of Economics.
14 This has been true even for the populist government of Zulfiqar Ali Bhutto (1972-1977) which was elected to
implement a socialist agenda.
48 POVERTY IN PAKISTAN
16 Easterly, W., 2001: Pakistan's Critical Constraint: Not the Financing Gap but the Social Gap.
Background Paper for Pakistan Poverty Assessment 2000-01. Development Research Group. World
Bank. Unpublished.
CAUSES OF POVERTY 49
A high population growth rate, which in allowed to participate in the formal labor
turn is fuelled by the lack of access to market. As mentioned earlier, overall
educational facilities, and health and female labor participation for the country is
population planning services, effectively estimated at barely 14 percent17. However,
erodes gains in GDP growth. The this understates female participation in the
population growth rate has also served to agriculture sector and in the informal
magnify inadequate social sector service economy in urban areas where women often
provision, as limited resources tend to be do home based contract work. Some studies
spread more thinly to accommodate ever- indicate that in urban areas, female labor
increasing demand. The relatively high force participation rates in the market for
dependency ratio (43 percent of the professional labor have increased to 20
population was below the age of 15 percent18. Nevertheless, participation rates,
according to the 1998 census) in turn places particularly in the formal sector, remain low
additional pressure on the working compared to other South Asian countries. The proportion of
population, and effectively serves to keep This in turn serves to keep dependency elementary school
average household incomes at subsistence ratios high and average household incomes age girls enrolled
levels. low. It also translates into labor costs that in a primary school
are higher than the average in low-income was 40 percentage
The data also points to persistent gender
countries, which have higher female labor points lower in
discrimination in the country. The
participation rates, thus reducing Pakistan's Pakistan than in
proportion of elementary school age girls
international competitiveness. other comparable
enrolled in a primary school was 40
percentage points lower in Pakistan than in countries in 2000.
other comparable countries in 2000. The 4. Ethnic and Sectarian Conflicts
gender differential persists in all social The increasingly strong nexus between
indicators, and ensures that women face a economic and social factors, and the
disproportionately high share of the poverty importance of the latter as determinants of
burden. The low level of female education, growth was apparent in Pakistan for the
in particular, has manifold implications. period from 1985 onwards, when Pakistan's
There is a high degree of correlation largest city and industrial center, Karachi,
between adult female literacy and lower intermittently remained in the grip of civil
infant mortality, higher primary school strife. The continued unrest in the city,
enrolment and lower dropout rates, and which is the country's financial capital, only
higher contraceptive prevalence rates. seaport, and houses the bulk of Pakistan's
Female literacy may thus be the single most manufacturing capacity, has been cited as at
important determinant of the state of human least one of the factors prompting the
development in a society, and significant average annual growth rate of large scale
improvements in this one indicator can lead manufacturing to slump to 3.5 percent in the
to an across the board improvement in 1990s, from an average of over 6 percent in
human development in the long term. the previous decade.
Societal gender inequality has also In general, ethnic and sectarian
succeeded in keeping female labor force divisions have been exploited for political
participation rates in the formal sectors low, purposes over the last twenty years, which
as women are typically not qualified, or not has led to an increase in ethnic and sectarian
tensions, and recurring episodes of exchange earning sector, and can generate
violence. Of late, the violence has extended considerable employment opportunities in
to sections of society who have not remote areas.
traditionally been targeted in such conflicts.
Thus the city of Karachi, for example, has D. ENVIRONMENTAL
witnessed the targeted killings of over 200 DEGRADATION AND
doctors belonging to the Shia community in POVERTY
the last two to three years, prompting many
members of the medical community to A two-way causality exists between
migrate either to other cities, or out of the environmental degradation and poverty,
country altogether. Similarly, incidents of and the two states reinforce each other as
random attacks on church congregations well. These linkages are further explored as
and worshippers in mosques, shootings of follows.
prominent (and often apolitical) members of
Ethnic and society and bomb blasts etc. have occurred 1. Impacts on Health and Linkages
sectarian conflicts all over the country. Such incidents are a with Poverty
have thus served to
major symptom of the deteriorating law and
order situation in the country, and heighten The most commonly cited indicators of
stifle growth and
the sense of uncertainty and lack of security environmental degradation in Pakistan are
employment
that pervades big cities. This uncertainty is increasing air pollution and contamination
opportunities and
an important factor in the declining private of ground and surface water. Empirical
may have
investment and economic growth rates work on the measurement of air and water
significantly
witnessed in the last decade. Ethnic and pollutants is limited in the country, but
contributed to
sectarian conflicts have thus served to stifle recent studies suggest that emissions of
poverty,
growth and employment opportunities and particulate matter in Pakistan exceed WHO
particularly in
may have significantly contributed to recommended standards. Emissions of
urban areas. pollutants like nitrogen oxides, carbon
poverty, particularly in urban areas. The
law and order situation has also precluded monoxide and lead, from both stationary
the development of industries such as and mobile sources are on the increase, and
tourism which is a potentially high foreign according to some estimates may be costing
CAUSES OF POVERTY 51
Rs. 25 billion in health costs in urban given that they tend to be strongly dependent
areas19. on the exploitation of such resources. The
rural economy in particular is built around
In Pakistan, the environment-poverty
the sustainable use of natural resources,
nexus manifests itself most particularly in
particularly water and cultivable land. In The rural
health effects. For example, water borne
Pakistan, the effects of land degradation population,
diseases are widespread because 17 percent
have been apparent for the last few decades, particularly small
of the urban and 47 percent of the rural
and may have been intensified by the landholders bear a
population do not have access to clean
increased use of fertilizers and pesticides disproportionate
drinking water. Such diseases may in fact
following the green revolution of the late part of the costs of
contribute to 30 percent of hospital cases,
1960s. Unsustainable exploitation of environmental
and 60 percent of the recorded infant
groundwater has led to serious drawdown in degradation in the
deaths20. The prevalence of diseases like
the level of aquifers in areas such as form of lower crop
cholera and typhoid can also be linked to
Balochistan. Similarly, high rates of yields and reduced
solid waste management being minimal,
siltation in denuded watersheds and the productivity of
with only a quarter of estimated waste
degraded state of the irrigation system have agricultural land.
generated actually being collected for
led to inefficiencies in water use and
disposal.
wastage of freshwater resources. Around 25
The poor also tend to be more million acre feet of water is lost every year
21
vulnerable to the effects of air and water due to low water management efficiency .
pollution, both in rural and urban areas, The rural poor are particularly vulnerable to
given their limited access to quality health collusion between rent-seeking Irrigation
care. Extended exposure to such pollutants Department bureaucrats and powerful local
is likely to have significant impacts on feudal elements, and even illegal diversion
22
health in the form of skin and respiratory is resorted to in ensuring this .
diseases, eye infections and in extreme
The rural population, particularly small
cases, disorders of the central nervous
landholders bear a disproportionate part of
system. The prevalence of disease
the costs of environmental degradation in
exacerbates poverty firstly by compelling
the form of lower crop yields and reduced
the poor to devote ever increasing
productivity of agricultural land. The poor
proportions of a limited income to health
also bear the brunt of the degradation of
costs, and secondly by reducing
rangelands, which increasingly support
productivity and working days.
smaller herds, and of forest lands from
which they meet their fuelwood needs. The
2. Effects of Degradation of Natural
high rate of deforestation in the country has
Resources endangered biodiversity and may have
The degradation of natural resources devastating effects on the livelihoods of
can have a devastating impact on the poor, communities in mountain areas, who are
19 Federal Environmental Protection Agency, 2000: Pakistan Country Report to Male Declaration
on Control and Prevention of Air Pollution and its Likely Transboundary Effects for South Asia and
Government of Pakistan, 2001:Economic Survey 2000-01. Economic Adviser’s Wing, Finance Division,
Islamabad.
20 Government of Pakistan, 2001: Economic Survey, 2000-01 .
21 Government of Pakistan, 2001: Three Year Poverty Reduction Program, 2001-2004, Planning
Commission, Islamabad.
22 Dinar, A, et al, (2001): Political Economy and Political Risks of Institutional Reforms in the Water Sector,
Rural Development Department, World Bank, Washington DC.
52 POVERTY IN PAKISTAN
dependent on forests for their energy and effects on water resources and cropping
fodder needs, in addition to putting patterns. The effects of climate change can
medicinal plants and herbs found in forests thus cause widespread loss of the assets of
to a variety of uses. poor communities in the short run, which
tend to be more vulnerable to natural
The poor are also more vulnerable to the disasters. In the longer term, climate change
effects of climate change, which in the short can potentially have negative effects on the
term may manifest itself in the form of yields of crops such as cotton which are
increased incidence of floods, droughts, grown in areas where heat stress is high, and
cyclones and other natural disasters and in rice which requires the regular provision of
the long term could have potentially serious adequate water supplies.
33. Government of Pakistan, 2001: Economic Survey, 2000-01.Economic Adviser’s Wing, Finance Division
Islamabad. Cultivable waste is defined as land available for cultivation, but not cropped in the last two years.
IV RESPONSES TO POVERTY
The government, NGOs and private sector are implementing discussion of the present
programs aimed at improving governance and accountability of Government's poverty reduction
strategy.
public institutions to be able to better respond to the needs of the
poor, assisting them economically through creating income and 1. Governance Reforms
employment opportunities, and improving their access to basic
a. Devolution Plan
services.
The Devolution Plan announced
in March 2000, is a fundamental
governance reform that aims to
replace the existing highly
centralized and control oriented
T here is no general or
universal social protection
system in Pakistan. Neither
is there an umbrella institution that
would extend social protection and
of State institutions and strengthen
their capacity and accountability
with an aim to provide greater public
access to better quality social sector
related, judicial, and other services.
government with a three tiered local
government system that institutes
"people-centered, rights and
responsibility-based, and service
oriented" government structures.
social safety nets to the poor and the Historically, various other poverty- Under the aegis of the Plan, elected
vulnerable. However, a number of targeted policy interventions and local governments took power on 14
programs aimed at improving programs have also been initiated August 2001 in 96 districts in the
governance and accountability of from time to time in the public sector four provinces.
public institutions to be able to better in Pakistan, which can be
respond to the needs of the poor, categorized into three broad sectors: The bulk of basic 'poverty
assisting them economically through public works programs for asset focused' services, like health and
creating income and employment creation and employment education, have been devolved to
opportunities, and improving their generation; micro finance programs district and lower local governments
access to basic services are being to promote income opportunities; under the Plan. Provinces, once
implemented by the government, and social protection programs. In predominantly responsible for
NGOs and the private sector. Each of the paras that follow, the major service delivery, will assume new
these sectors operates in a distinct elements of governance reforms responsibilities to support and
manner as discussed in this section. introduced by the Government are supervise the performance of local
discussed first, followed by a governments, not as administrative
discussion on the policies and appendages of the provincial
A. PUBLIC SECTOR bureaucracy, but as independent
programs undertaken within the
To mitigate the causes of latter three sectoral areas. An corporate bodies accountable to the
poverty, the Government has assessment of an ambitious public electorate through political leaders.
recently introduced several sector social sector development In addition to elected councils,
important governance-related initiative, the SAP is then presented. the Local Government Ordinance
reforms to improve the functioning The section concludes on a 2001 provides a number of
54 POVERTY IN PAKISTAN
beneficiaries. The program funds are to be Support Program (PRSP). However these
1
spent on productive purposes and not as essentially operate as NGOs , and are
administrative expenditure. At the end of discussed in the section on civil society.
2001, a sum of Rs. 11.5 billion had been
More recently, the government has
The objective of released for the program and a large number
played a direct role in promotion of
PPAF's credit and of farms to market roads, water supply
microfinance in Pakistan. Two major
enterprise program schemes, and schools had been constructed
programs in this regard are the Pakistan
is to enable the or renovated. The program has provided job
Poverty Alleviation Fund (PPAF) and the
poor to gain access opportunities to around 2 million people.
Khushali Bank (see Box 4.2). PPAF was set
to capital to The budget allocation for the program for
up by the Government in 1997, with an
finance investment FY2002 was Rs. 7.5 billion and it was
initial equity of Rs. 100 million, and with a
in income estimated that 0.5 million people would be
$100 million loan from the World Bank
generating provided employment under the program
assistance to set up a credit line. The
activities. during the year. Following the events of 11
objective of PPAF's credit and enterprise
September 2001, the allocation for the
program is to enable the poor to gain access
project was doubled, and Rs. 8.5 billion has
to capital to finance investment in income
already been spent under the Program in the
generating activities. Operating through
first eight months of FY2002.
NGOs and the Rural Support Programs
(RSPs), PPAF provides loans to the poor
3. Microfinance that are in the range of Rs. 9,500 to Rs.
In Pakistan, microfinance has 10,000 and have no collateral requirements.
historically been provided by NGOs, with However, a market interest rate is levied on
the Aga Khan Rural Support Program all loans. As of June 30, 2001 PPAF had
(AKRSP) playing a pioneering role in this disbursed Rs. 471 million worth of loans to
regard. In the early 1990s, the government 46,260 beneficiaries. Approximately 28
supported the replication of the AKRSP percent of loans were estimated to have
model nationally by providing grant funding directly benefited women. PPAF also has
to set up the National Rural Support two other program components, community
Program (NRSP) and the Punjab Rural physical infrastructure and human resource
1. However, AKRSP's microfinance portfolio is now part of the newly established First
Microfinance Bank Limited; which has been established by the Aga Khan Development Network as the first
private sector microfinance bank set up in the country.
RESPONSES TO POVERTY 57
development. By mid-2001, PPAF had total disablement pensions, and death grants
supported 796 physical infrastructure to dependents.
schemes at a total cost of Rs. 252 million. The Workers Welfare Fund Scheme and
Amongst older institutions, the Small the Worker's Children Education
Business Finance Corporation (SBFC) was Ordinance were initiated during the early
established to provide credit to borrowers 1970s. These schemes provide for
from small and cottage industries. The education, matrimonial and housing related
SBFC also started the Youth Investment benefits to workers in the formal sector.
Promotion Scheme to disburse credit to Through the Workers Welfare Fund, 6,900
unemployed youth. During FY2000, it houses and 3,950 flats for workers had been
disbursed Rs. 202 million to 492 constructed, and 34,000 residential plots
beneficiaries and is estimated to have developed by May 2000. The estimated
generated employment for 1,476 persons. number of beneficiaries of those projects is
SBFC and Regional Development Finance about 45,000. In addition around 17,000
Corporation have been merged to form the students are enrolled in the 50 schools run
Small and Medium Enterprises (SME) by the Fund.
None of these
Bank, that has been set up to support the In 1976, the Employees Old Age schemes cover
financing needs of small and medium scale Benefits Institution (EOBI) was established workers from the
enterprises. The financing limit of the as a federal scheme to provide old age agriculture sector,
SME Bank has an upper ceiling of benefits, invalidity and survivor's pensions the informal
Rs 30 million. as well as old age grants to those eligible. It economy and those
covers formal sector establishments, in the formal sector
4. Social Protection Programs employing ten or more workers. Presently who are either
the total number of establishments employed
a. Formal Systems of Pension and registered with the institution is 44,704. temporarily or
Social Security Since its inception in 1976, the EOBI had through
insured 1.6 million workers with Rs. 14.8 contractors or are
The Employees Social Security Scheme
billion contribution as of May 2001. The employed in
introduced in March 1967 was the first
employers contribute at the rate of 5 percent establishments with
formal initiative. Initially, this scheme
of the wages of the insured employees.
specifically covered workers in the textile less than ten
From 1983-2001, approximately 133,000
industry with the objective of providing workers.
workers benefited from pensions and
protection against contingencies of
around 56,000 workers benefited from
sickness, maternity, work-related injury,
survivor's pensions and old age grants from
invalidity and death. In 1969, the coverage
EOBI.
of the scheme was expanded with the
inclusion of workers from commercial and None of these schemes cover workers
other industrial establishments having ten or from the agriculture sector, the informal
more employees. The scheme was economy and those in the formal sector who
reorganized on provincial lines in 1970. are either employed temporarily or through
Social security institutions in each province contractors or are employed in
extend medical coverage to secured workers establishments with less than ten workers.
and their dependents. In addition to medical In 1991-92, the coverage of these schemes
coverage which accounts for around 70 was approximately 3 to 4 percent of the total
percent of the total benefits under these employed labor force and in 1998-99 this
schemes, the secured workers are also had declined to 2.3 percent. Permanent
entitled to cash benefits in the event of employees of the federal and the
sickness, employment injury, partial and provincial governments, estimated to be
58 POVERTY IN PAKISTAN
about 4 million, receive pensions and other while disbursements for health constitute
benefits such as provident fund, on 6 percent of the total and have reached
retirement, at the age of 60 or after 25 years 115,649 patients. Four percent each of
of pensionable service. disbursements are for social welfare and
marriage assistance, and are estimated to
b. Zakat and Bait-ul- Maal benefit a total of 43,632 individuals.
Zakat, a donation to charity obligatory In 2001, the Zakat system was
for Muslims, is Pakistan's main social revamped to focus more on rehabilitation
welfare or protection system. The formal rather than relief, with Zakat funds assisting
system of collection of Zakat was initiated in the establishment of small scale
with the Zakat and Ushr Ordinance of 1980. commercial activities, or trades. In
An amount of 2.5 percent is deducted from FY2002, a special allocation has been made
bank deposits and other financial for rehabilitation grants for starting up
instruments annually for payment of Zakat. small-scale business or trade in 44 specified
The Zakat fund is administered by an categories or business sectors. The Zakat
autonomous Zakat council that is fund comprising of savings from Zakat
responsible for the disbursement of funds to proceeds, which is used primarily to
institutions at the national level. At the disburse grants for rehabilitation, has risen
province and district level, local Zakat to Rs 24 billion in 2001. An additional
committees are responsible for determining number of about 1.5 million beneficiaries
needs and allocation of funds to the are expected to be added to the list as Zakat
deserving. Local committees can provide recipients in FY2002.
grants of up to Rs 10,000 while an amount
larger than that is approved by the district Pakistan Bait-ul-Maal was established
committee. Monitoring committees at in 1992 to provide assistance to the needy
district, tehsil and local levels are entrusted not covered by Zakat, i.e. the minorities.
to report on the functioning of the Zakat Funds for the Bait ul Mal are allocated by
committees. The central and provincial the federal government in the form of non-
committees are supposed to have quarterly lapsable grants and small grants from the
meeting to review progress and Central Zakat Fund and the Provincial
implementation. Zakat distribution covers Governments. Pakistan Bait ul Mal
institutions and individuals both. Fifty provided support of Rs 327 million to the
In 2001, the Zakat
percent of Zakat disbursement goes to needy during the past financial year for a
system was
eligible social, health, education, and number of purposes such as medical
revamped to focus support, and education stipends.
more on religious institutions, while the remaining to
rehabilitation needy individuals.
c. Food Support Program
rather than relief, In FY2001, the Zakat collection was
with Zakat funds estimated at Rs 5 billion, and the number of The food support program runs on a
assisting in the estimated beneficiaries were about 1.9 small scale and has limited coverage. It is
establishment of million. The disbursement figures for Zakat designed to mitigate the impact of the
small scale for 2001 show that the highest portion (60 increase in wheat prices that has followed
commercial percent) of Zakat funds consist of the the withdrawal of subsidies on wheat flour.
activities, or Guzara (subsistence) allowance going to Wheat is the staple diet of the population,
trades. 1,324,268 beneficiaries, followed by 18 and a rise in its price can have a significant
percent for educational stipends benefiting impact on household budgets, particularly
354,254 students. Religious educational of the poorest income groups. So far, 1.2
stipends constitute 8 percent of the million poor households who have an
disbursement and reach 56,604 persons, income equal to or less than Rs 2,000 per
RESPONSES TO POVERTY 59
month have been reached through the food estimated at $418 million with a further
stamp scheme. Under the program, a cash $552 million to be provided as
payment of Rs 2,000 is given to poor disbursements from ongoing and planned
households in two bi-annual installments. projects in the SAP sectors. The donor
Three percent of the total allocation is funding was jointly used to reimburse a
reserved for minority families. The proportion of the operational expenditure of The impact of the
program is implemented at the federal and provincial departments (Departments of first phase of SAP
district levels and is going to be linked with Education, Health and Public Health was mixed,with
the Zakat system in future. The total Engineering) and federal ministries some improvement
disbursement under the food support delivering SAP services. The Ministry of in health indicators
program was Rs 837 million in FY2001 that Planning and Development was responsible but no appreciable
had increased Rs. 1.08 billion in the first for executing the project through the SAP development in
half of FY2002. Secretariat with the provincial departments primary education
as the implementing agencies. A multi- and rural water
5. Social Action Program donor support unit was established to act as supply and
a focal point to assist in monitoring the SAP. sanitation.
A comprehensive program for
The first phase of SAP was completed
improving social indicators was initiated by
in 1996 at a cost of Rs 106.4 billion, with 64
the government in 1992 in the form of the
2 percent of the total funding allocated for
SAP . SAP focused on four major areas:
primary education (see Table 4.1). The
elementary education (primary and middle
remaining funds were allocated between
schooling), primary health care, drinking
primary health care (19 percent); rural
water supply & rural sanitation and
water sanitation (14 percent); and
population welfare. The total estimated cost
population welfare (3 percent).
of SAP was $7.7 billion that was financed
with the help of multilateral donors such as The impact of the first phase of SAP
the ADB, the World Bank, and the was mixed (as would also appear from the
European Union and various bilateral donor analysis of the state of human development
agencies. The estimated cost for the first in Pakistan carried out in Chapter II of this
phase was $4 billion, with the Government report), with some improvement in health
providing 76 percent of total cost and the indicators but no appreciable development
balance being provided by the donors. in primary education and rural water supply
Donor financial support for the Social and sanitation. In spite of the problems
Action Program Project (SAPP) was encountered in the first phase, government
2. SAP was the name given to the larger program of the Government of Pakistan, whereas the Social Action
Program Project (SAPP) is a subset of SAP which is funded by donors.
60 POVERTY IN PAKISTAN
A policy shift was and donors, recognizing the importance of physical scope was expanded to cover
taken in SAP-II continuing support to the social sectors, middle schools and non-formal education,
with emphasis agreed to continue with the program. The health and nutrition, and water supply and
diverted from second phase was formulated to cover a five sanitation in urban slums.
expansion to and half year period (January 1997 to June
consolidation and 2002) and with a budget allocation of Rs One of the overriding objectives of both
improvement in 498.84 billion (Table 4.2), of which SAP-I and SAP-II was to increase
quality of service Government was financing 79.8 percent. A government spending on the social sectors,
delivery at the policy shift was taken in SAP-II with but as shown in Figure 4.1 below,
grassroots level, emphasis diverted from expansion to expenditure on social sectors although
with renewed consolidation and improvement in quality of having increased from FY1993 to FY1998,
emphasis on service delivery at the grassroots level, with declined subsequently to pre-program
transparency. renewed emphasis on transparency. The levels.
Percent of GDP
3
2.5
1.5
0.5
While health
Successive Pakistan Integrated enrolment rates fell in this period (although indicators have
Household Surveys (PIHSs) show that while with some improvement in girls' improved
health indicators have improved somewhat enrolment). The overall outcomes of SAP somewhat over the
over the SAP period, education indicators were, therefore, mixed (Box 4.3). SAP period,
improved only marginally from 1991 to education
1996, and deteriorated from 1996 to 1999. By June 2001, the donors supporting indicators
Thus, as is clear from Table 4.3, while SAP were expressing concern not only improved only
immunization almost doubled between 1991 about low allocation and expenditure marginally from
and 1999, and infant mortality and the constraints in the social sectors, but also 1991 to 1996, and
3
fertility rate declined , overall gross about major governance and financial deteriorated from
1996 to 1999.
3. However, as discussed in Chapter II, the PIHS report cautions that data on the fertility rate is unreliable
due to reporting errors
62 POVERTY IN PAKISTAN
4. NGOs in Pakistan are able to register under five different legal sets of regulatory schemes.
These are the Societies Registration Act of 1860; the Trust Act of 1882; the Cooperative
Societies Act of 1925; the Voluntary Social Welfare Agencies Registration and Control
Ordinance of 1961; and the Company Ordinance of 1984.
64 POVERTY IN PAKISTAN
which have benefited over 150,000 people. districts. NRSP has succeeded in forming
In this regard, land development projects and working with over 12,000 community
have brought 21,000 hectares of land under organizations with a collective membership
Sungi operates cultivation In terms of economic impact, the of over 260,000. NRSP also has the largest
through a range of Farm Household Surveys of AKRSP show microfinance program of the RSPs and has
inter-linked that per capita income in the program area advanced loans worth Rs. 2,504 million to
activities such as increased by almost 55 percent during 1991- beneficiaries in target communities.
community-based
97. As a result, it is claimed that poverty
At the end of 1999, the various rural
declined from 49 percent in 1991 to 32
institutional support programs covered 62 districts. The
percent in 1997.
development, Programs have developed a trained cadre of
gender focus The AKRSP's success spawned a 107,257 activists with managerial, technical
initiatives, natural number of Programs seeking to replicate the and vocational skills. They have mobilized
resource AKRSP model in other parts of the country. savings of Rs. 697 million and disbursed
management, small The first such program was the Sarhad credit worth Rs 3 billion.
sustainable village Rural Support Corporation, later
Among the other prominent
infrastructure redesignated as the SRSP which started
development NGOs are the Sungi
projects, health operations in the NWFP in 1989. The
Foundation and the OPP. Sungi was
and sanitation establishment of the SRSP was followed by
established in 1989 as primarily an
interventions, the establishment of NRSP in 1992 and the
advocacy oriented NGO, working on social
capacity building, PRSP in 1998. NRSP, being the largest of
development issues. After the floods of
small rural the RSPs in terms of coverage, is discussed
1992, which caused widespread destruction
enterprise in more detail as follows.
in Hazara, the organization expanded into a
development The NRSP started operations in 1992, development NGO implementing an
through savings, and was established with the help of a Rs. integrated multi-sectoral rural development
credit and crafts 500 million grant from the federal program in the Hazara division of NWFP.
promotion among government. This grant set a unique Sungi operates through a range of inter-
others. precedent in the country's development linked activities such as community-based
history, as it was the first time that the institutional development, gender focus
Government had allocated funds for the initiatives, natural resource management,
establishment of an organization that was small sustainable village infrastructure
essentially to operate as an NGO. By projects, health and sanitation
establishing NRSP, the Government interventions, capacity building, small rural
signaled its commitment to a new enterprise development through savings,
development strategy that would be more credit and crafts promotion among others.
grassroots based, and could serve to form Although it is a grassroots based program
linkages between government institutions like the RSPs, its approach differs from that
and communities. NRSP started work in of the RSPs in that it does not seek to
nine districts of the country, and was set to formulate village or community
expand coverage to eight more in the second organizations in target villages, but works
year of operations, when a change of with existing CBOs. A discussion on OPP
government occurred and the grant of funds appears in Box 4.5.
to the Program was questioned at the highest
levels. The Program was, however, 4. Microfinance Institutions
eventually allowed to continue although no
additional funding was provided to it, and its The concept of using microfinance as a
operations have now expanded to about 30 tool for poverty alleviation has gained
RESPONSES TO POVERTY 67
credibility following the example set by the for Development. Kashaf's pioneering While microfinance
Grameen Bank in Bangladesh. While microfinance program is discussed in more is an important
microfinance is an important component of detail in Box 4.6. component of the
the development approach of RSPs and development
other institutions discussed above, there are An important recent development in the
approach of RSPs
several other NGOs in Pakistan that have microfinance sector has been the
there are several
concentrated on microfinance as the prime establishment of the first private sector
other NGOs in
focus of their activities. Some of the main microfinance bank in the country by the Aga
Pakistan that have
ones in this regard are the Kashaf Khan Development Network. Licensed by
concentrated on
Foundation, the Taraqee Trust, the the State Bank to operate nationally, the
microfinance as the
Community Support Concern, First Microfinance Bank will be providing
prime focus of their
Development Action for Mobilization and both savings and credit services to clients
through 30 bank branches that are planned activities.
Emancipation, and the Awami Committee
international NGOs undertake most of their PMN has been active on policy and
work in conjunction with local CBOs and regulatory issues as well as training and
NGOs. Key international NGOs active in capacity building related to provision of
Pakistan include the two major environment sustainable microfinance services. Another
and conservation NGOs, World such umbrella support organization is the
Conservation Unit and World Wide Fund RSP Network, which was set up to meet the
for Nature, development NGOs such as need for program quality guidance and
Action Aid, Save the Children Foundation, strategic support to the RSPs, and is also
and the Asia Foundation; and those in social emerging as a technical guidance, research,
service provision such as the Marie Stopes and policy-oriented organization. In
Society and Medecins du Monde. addition, there are also a number of
coalitions, such as the Pakistan NGO Forum
The regulatory environment for and Punjab NGO Coordinating Council that
international NGOs is flexible and work on specific development and advocacy
undefined. Those receiving bilateral donor issues.
funds in Pakistan are, however, required to
obtain a protocol agreement with the 9. Indigenous Philanthropy
Economic Affairs Division. They are all
registered in their respective countries of As estimated in an SPDC study (Box
origin. 4.4, page 64), private indigenous
philanthropy accounts for 37 percent of the
revenue base of NGOs, and after fees and
8. Umbrella/Support Organizations
user charges, is the largest source of their
As more NGOs have come into income. Given, therefore, the importance of
operation, donors have increasingly come to national philanthropy as a source of funding
rely on umbrella or support organizations to for the NGO sector, a brief discussion on its
channel funds to grassroots organizations trends is presented here. Based on a recent As more NGOs
and development NGOs. Organizations report on indigenous philanthropy in have come into
such as the Trust for Voluntary Pakistan, it is estimated that in 1998 alone, operation, donors
Organizations, the Aga Khan Foundation, individual contributions amounted to Rs. 41 have increasingly
5
the Asia Foundation, and the Pakistan billion in cash and goods (Table 4.4) . This come to rely on
Poverty Alleviation Fund provide financial amounts to about two-thirds of public umbrella or
and technical support to local CBOs and spending on social sectors which is support
NGOs for implementation of development estimated to be about Rs. 60 billion organizations to
activities. annually. In addition to this, it is estimated
channel funds to
that about Rs. 30 billion were given in terms
There are other non-Government grassroots
of time through volunteerism during the
umbrella organizations that do not provide organizations and
same period, which shows that there is a
funding, but undertake policy, research and development
significant spirit, tradition and capacity of
advocacy, and training activities for, and on NGOs.
volunteerism in Pakistan that could
behalf, of their respective member
potentially be harnessed to further
organizations. One example of such an
contribute towards poverty reduction
organization is the Pakistan Microfinance
efforts.
Network (PMN) that was established in
1999, comprising of all major non-profit Much of the philanthropic giving is ad
microfinance providers in the country. The hoc and through informal channels, often by
5. Aga Khan Development Network, 2000. Enhancing Indigenous Philanthropy for Social Investment,
Islamabad.
70 POVERTY IN PAKISTAN
6. Recognizing this gap, the Aga Khan Development Network has recently conceptualized and set up the
Pakistan Center for Philanthropy.
7. Federal Bureau of Statistics, 1998: Household Integrated Economic Survey 1996-97.Islamabad.
RESPONSES TO POVERTY 71
8. The PIHS does not give data for enrolment in private schools at secondary or tertiary levels.
72 POVERTY IN PAKISTAN
NGOs and the private sector have also sector agencies to focus more on those
demonstrated their usefulness in becoming functional areas and geographical locations
contractors to the Government to facilitate where the private sector is less active. For
community-based implementation of small- example, as was stated earlier, 47 percent of
scale infrastructure and public works all primary school going children in the
schemes. Recently, for example, under the urban areas today are enrolled in private
KPP, the Government of Punjab, instead of sector schools and are perceived to be
hiring private contractors as per routine, receiving better quality education relative to
requested the Punjab Rural Support those in public schools. Thus, for example,
Program to undertake responsibility for by allowing and actively encouraging the
implementing small infrastructure schemes private sector to expand its role further in
under the KPP in collaboration with local the delivery of quality primary education in
communities in some selected districts. To the urban areas, the public sector could
take another example, AKRSP was focus more of its own efforts, and direct
contracted by the Government of the greater resources, to the under-served rural
Northern Areas to help local communities areas. However, in the urban areas, the
build a number of irrigation channel government could provide education
schemes for land development; whereas it is vouchers and stipends to the poor to ensure
generally the Department for Local Bodies their equitable access to private sector
and Rural Development, working through education. Similarly, various NGOs and
private contractors, that is tasked with the private sector organizations are actively
construction of such schemes. Recognizing providing primary health services and
the effectiveness of NGOs and their ability evolving new models of community-
to deliver, the Government set up the PPAF managed service delivery. Here again,
to provide a formal institutional mechanism possibilities for public-private partnerships
through which NGOs are directly receiving might be explored and systematically put
The role of the
public funds to undertake small into place to attain better allocative
NGO and private
infrastructure projects throughout the efficiency of public resources and provide
sector in the
country. The main reason and rationale for cost-effective and qualitatively better health
this model of infrastructure provision is its services in the country. delivery of social
much greater cost-efficiency as compared to services also offers
Microfinance is another niche area for several
the Government executed schemes, and the
NGOs, in which they are running programs opportunities for
greater degree of local ownership and
in both rural and urban areas. Inspired in complementarity
responsibility for maintenance it inculcates
part by the success of these programs, the with the public
through making local communities in-
Government established the Khushali Bank sector, and allows
charge of these schemes. Based on these
to provide microfinance services at a wider public sector
success examples, in future, NGOs could
scale in the country. Following this, the Aga agencies to focus
play an even bigger role in provision of
Khan Development Network has set up the more on those
small-scale infrastructure that could allow
First Microfinance Bank in early 2002,
the relevant Government line departments functional areas
which is the first private sector
to accordingly refocus and rationalize their and geographical
microfinance bank established in the
own work programs for better operational locations where the
country. With both private and public sector
and institutional efficiency. private sector is
microfinance agencies now actively
less active.
The role of the NGO and private sector engaged at the national level, there is
in the delivery of social services also offers significant scope and need for partnership to
several opportunities for complementarity maximize outreach, avoid duplication, and
with the public sector, and allows public share resources in the interest of efficiency
74 POVERTY IN PAKISTAN
Pakistan is faced with the twin challenges of reviving growth and development; and deterioration in
the law and order situation which
reducing poverty. ADB endorses the Government’s poverty
affects both economic activity and
reduction strategy and ADB’s operational strategy for Pakistan the quality of life.
will complement the Government’s efforts. Improving governance The Government's ambitious
will be the central focus of ADB’s operational strategy for governance reform agenda is at the
Pakistan, and will be supplemented by efforts to encourage pro- core of its strategy for reviving
growth, reducing poverty, and
poor growth and ensure that development is socially inclusive. accelerating social development. In
some areas, such as devolution,
public expenditure management,
anti-corruption initiatives, and the
independence of the Central Bank,
appreciable progress has been made.
interventions. Building capacity within the to its neighbors, Pakistan has substantial
Government to effectively monitor potential to gain from sub-regional
infringements of environmental regulations cooperation. ADB will work with the
is crucial, and supporting initiatives such as Government to develop regional
the development of the self-monitoring and transportation networks and infrastructure
reporting tool for reporting industrial for regional gas transmission and
emissions to the environmental protection distribution systems. In the near-term,
agencies. With decentralization of ADB looks forward
Overall, ADB will work closely with
administration to the district level under the to working on
the Government, the private sector, and
revised administrative arrangements, programs that
civil society institutions to bring about
environmental management is also being
structural changes in Pakistan's economy, improve
decentralized to the district levels and ADB
and pave the way for sustainable, long-term governance,
will support the necessary capacity building
development. In the near-term, ADB looks enhance economic
measures. Finally, ADB will explore the
forward to working on programs that growth and reduce
possibility of using special funds at its
improve governance, enhance economic poverty.
disposal to support nature conservation and
growth and reduce poverty. The road ahead
biodiversity in national parks and other
remains challenging, but success requires
protected areas.
that the Government stay the course of
reforms, and ADB will support the
Sub-Regional Cooperation
Government in this endeavor by continuing
Given its strategic location and to provide assistance for implementation of
complementarity in resources and markets Pakistan's poverty reduction strategy.
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