Addressing the Poverty Challenge

Current Issue Assignment

Fatima tuz Zahra Khan

AS 79
Group In-charge: Madam Sana Ghous
Group 3: The Spartans
Addressing the Poverty Challenge

Contents
List of Abbreviations.....................................................................................................................................3
List of Figures:...............................................................................................................................................4
Introduction:...................................................................................................................................................5
Defining Poverty:...........................................................................................................................................5
 Gauging the Concept of Poverty:.......................................................................................................5
Status of Poverty:...........................................................................................................................................6
 Status of Global Poverty:...................................................................................................................6
 Status of Poverty in Pakistan:............................................................................................................7
The Challenge of Poverty:.............................................................................................................................8
 Manifestations of Poverty..................................................................................................................8
 Causes for Rising Trends of Poverty:................................................................................................9
a. Causes of Increasing Poverty Globally:.........................................................................................9
b. Causes of Increasing Poverty in Pakistan:...................................................................................10
Tackling the Issue of Poverty:.....................................................................................................................10
 Global Solutions on Macro-economic Level:..................................................................................10
a. Protection of Households with Fiscal Policy: Lessons from COVID-19:...................................11
b. Taxes, Transfers, and Subsidies: Improving Progressivity and Reducing the Cost to the Poor..11
c. Envisioning a Fiscal Policy for Growth: Identification of High-Value Fiscal Policies...............12
 Global Solutions on Micro-Economic Level:..................................................................................12
a. Promotion of inclusive economic growth:...................................................................................12
b. Economic and institutional reforms:............................................................................................12
c. Promotion of microfinance institutions and programs:...............................................................12
d. Raising the Productive Capacity of Poor:....................................................................................13
e. Cash/Income transfer programs:..................................................................................................13
f. Provision of International Aid:....................................................................................................13
g. Revisiting Trade Policies:............................................................................................................13
h. Provision of Debt Relief:.............................................................................................................13
i. Technology and Innovation.........................................................................................................14
j. Strengthening Governance:..........................................................................................................14
Way forward for Pakistan:.......................................................................................................................14
1. Investment in Education..............................................................................................................14
2. Job Creation.................................................................................................................................15

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Addressing the Poverty Challenge

3. Strengthening Social Safety Nets:...............................................................................................15

4. Infrastructure Development:........................................................................................................15
5. Microfinance:...............................................................................................................................15
6. Empowering Women:..................................................................................................................16
Conclusion:..................................................................................................................................................16
References....................................................................................................................................................17

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Addressing the Poverty Challenge

List of Abbreviations

Human Development Index HDI

Human Poverty Index HPI
Multidimensional Poverty Index MPI
Sustainable Development Goals SDGs
United Nation Development Programme UNDP

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Addressing the Poverty Challenge

List of Figures:

Figure 1: Measurement of Multidimensional Poverty Index

Figure 2: Weightage of Different Parameters in measuring MPI.

Figure 3: Comparison of MPI in South Asian Countries.

Figure 4: State of Poverty Indicators in Pakistan

Figure 5: General Impacts of Poverty

Figure 6: Reasons for Poor Infrastructure in Pakistan

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Addressing the Poverty Challenge

Introduction:
“An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”
Plutarch, Greek historian
Poverty entails the lack of income and productive resources to ensure sustainable livelihoods. It is a
global phenomenon that manifests itself in my forms. It causes lack of access to basic resources
like clean water, health, sanitation, chronic malnutrition, lack of shelter, low life expectancy, and
social exclusion. Its eradication has been considered as a moral social and political responsibility
of mankind. Addressing poverty as a challenge requires a comprehensive and coordinated
approach, involving policies and programs that aim to promote economic growth, increase access
to basic services, and reduce inequality . In modern history dire need of poverty eradication was
accentuated in 2000 when poverty eradication was added to the agenda of Millennium
Development Goals and later re-adopted as Goal number 1 in Sustainable Development Goals
(SDGs) in 2015. Poverty is a global phenomenon that has deep roots in Pakistan too.

Defining Poverty:
It is vital to define poverty in order to clearly determine its manifestations, their impact and
solutions in local as well as international context. There are multiple ways to define poverty one
of which is by world bank. The World Bank defines poverty in terms of poverty lines. It is the
minimum amount of money that a person requires in order to fulfil basic necessities of food and
shelter. (The World Bank, n.d.) The current level of extreme poverty is 2.15$ per person per day.
(The World Bank , n.d.) This level of poverty line was 1.90$ till September 2022. The increase
in poverty line shows an overall increase in the price of basic commodities as per purchase price
index of 2017. The global poverty line is periodically used to measure the changes in prices
across the world. (The World Bank , n.d.)

 Gauging the Concept of Poverty:

The concept of poverty has been redefined in terms Human Development Index (HDI). It gauges
poverty level in terms of life expectancy, knowledge and decent standard of living including
gross national income per capita. It identifies problems in societal structures and focuses upon
correction of poverty level. It also provides society specific investment plans to alleviate poverty.
(Hassan, 2023). The United Nations has also adopted Human Poverty Index (HPI) to facilitate

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Addressing the Poverty Challenge

the measurement of HDI by calculating a summary statistic on economic condition of poor. It is

calculated for developed and developing countries separately. It was used until 2010, when it
was replaced by Multidimensional Poverty Index(MPI). (Desertification Indicator System for
Mediterranean Europe, 2004) MPI is a latest index that calculates the percentage of households
in a country deprived along three dimensions of well-being – monetary poverty, education, and
basic infrastructure services . It uses ten overlapping indicators in order to predict levels of
poverty in households. Smart art below mentions those indicators.

Figure 1: Measurement of Multidimensional Poverty Index (UNDP, 2022)

Status of Poverty:
 Status of Global Poverty:
The latest report of United Nations Development Programme on MPI uses “Poverty profiles” of
countries that can help in analyzing and tackling the problem of poverty in an efficient manner. It
identified “deprivation bundles” which are the recurring patterns of poverty that impact the
overall quality of life. Approximately 1.2 billion people are living in acute poverty which is
double from the previous poverty line of 1.90$. Among half of this population i.e. 593 million
are children under the age of 18. Out of 81 countries, 72 showed an absolute decline in
multidimensional poverty index. The population of these 72 countries is approximately 5 billion.

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Addressing the Poverty Challenge

Among the most impacted regions from poverty are sub Saharan Africa and South Asia
consisting 385 million people in acute poverty. (UNDP, 2022)

Figure 2: Weightage of Different Parameters in measuring MPI. (UNDP, 2022)

 Status of Poverty in Pakistan:

According to the latest reports the HDI for Pakistan has been ranked as “Very Low”. HDI value
is 0.544 and MPI is 0.198 for Pakistan. The MPI of regional countries is interesting to compare
with Pakistan. It should be noted that a low MPI represents a positive trend. (UNDP, 2022)

Sri Lanka
0.011

India 0.069

Nepal 0.074

Bangladesh 0.104

Pakistan 0.544

Figure 3 Comparison of MPI in South Asian Countries. (UNDP, 2022)

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Addressing the Poverty Challenge

The intensity of deprivation in MPI in Pakistan 51.7%, inequality among poor is 0.023. A
cumulative 21.5% population is in acute poverty according to United Nation Development
Programme (UNDP) as of 2022. 12.9% population is vulnerable to acute poverty. Education is
the greatest contributing factor to multi-dimensional poverty with 41.6% impact followed by
standard of living (31.1%) and health (21.9%). With reference to SDG 11 and 12, if the
considered purchasing power parity is 1.90$ the 3.6% population is in acute poverty. (UNDP,
2022)As of 2023 poverty is expected to grow upto 37.2% ($3.65 /day 2017ppp). Approximately
3 million more people have been pushed into poverty compared to 2018. (The World Bank,
2023)

Following figure shows the state of poverty in Pakistan.

Figure 4 State of Poverty Indicators in Pakistan (The World Bank, 2023)

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The Challenge of Poverty:

 Manifestations of Poverty
There are certain generic manifestation of poverty that can be gauged from different indices
like HDI and MPI etc. The smart art given below jots down the different impacts of poverty
on quality of life.

Lack of
adequate
food and
nutrition
High rates Lack of
of access to
unemploym adequate
ent shelter

Poverty
Lack of
High infant
access to
and
safe
maternal
drinking
mortality
water
Low
literacy
rates

Figure 5 General Impacts of Poverty (Oxford Poverty and Human Development Initiative, 2022)

 Causes for Rising Trends of Poverty:

There are certain causes for global and local rise in poverty many of which are common. A major
factor among those in the phenomenon of COVID-19 and its impact on the global economy.
Let’s analyze the causes of rising global and local poverty trends.

a. Causes of Increasing Poverty Globally:

Firstly, for three decades, global efforts were working effectively to curb the challenge of
poverty but the pattern was disrupted in 2019 with the surge of COVID-19. There was an
increase of 70 million people making up to 700 million people under absolute poverty. The
global poverty rate rose from 8.4% in 2019 to 9.3% in 2022 because of the pandemic. Poor strata
of the society has been twice more adversely impacted by steep costs of pandemic.

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Addressing the Poverty Challenge

Unfortunately, their woes still remain partially unattended by the policy makers. Secondly, the
Russia-Ukraine conflict has a major negative impact on the global oil prices, food insecurity and
climatic change. The impact of these crisis is predicted as inability to complete SDG-1 by 2030.
Approximately 534 million people would be living in absolute poverty in 2030. (The World
Bank , 2022)

COVID-19 has been termed as “Once in a Generation” shock that has suddenly caused increase
in poverty for the first time in 25 years. According to World Bank report “Progress on Poverty
and Shared Prosperity” by 2030 the global poverty would be at 7% far more than 3% set under
SDG-1 because of pandemic and international conflicts. It highlights the impact of slowdown of
growth of China on global economy and poverty. (The World Bank , 2022)

b. Causes of Increasing Poverty in Pakistan:

With a deteriorating economic condition, where the country is at the verge of financial default.
Pakistan has slipped from its targets of Poverty eradication. Falling remittances, deteriorating
labor market, high rates of inflation and natural disaster have aggravated the situation. Pakistan
has low social spending which has led to decrease in already low income families. Informal job
market and labor participation are important factors contributing to high poverty rates.
Approximately 40% of labor force is employed in informal agriculture sector. On the other hand,
female labor force participation is very low. Only 1 in 4 women in working age is employed and
80% of this meager ratio is employed in agriculture sector. (The World Bank, 2023)

Tackling the Issue of Poverty:

 Global Solutions on Macro-economic Level:
Following figure shows some generic solutions for poverty that have been proposed and utilized
to fight poverty over decades.

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Addressing the Poverty Challenge

Stimulating economic growth to increase incomes

Prioritizing the basic needs of the poor in national

development policies

Expand employment opportunities

Fighting Promoting microfinance programs to remove constraints to

Poverty innovation, entrepreneurship, and small scale business

Providing incentives to the private sector

Developing and improving marketing systems to improve

production

Social Security/ Targest Cash Transfers

Figure 5 Ways to fight Poverty (Ayoo, 2021)

In the view of current global economic condition following policy measures are viable to tackle
the challenge of Poverty.

a. Protection of Households with Fiscal Policy: Lessons from COVID-19:

COVID 19 acted as a stress test for the global financial systems’s ability to protect households.
There are three takeaways from this stress test. First is the reaching housholds and protection of
jobs in informal economies, secondly, the ability of a country to borrow in order to finance crisis
and thirdly, the ability of a country to identify the deserving poor strata and reach them. All
countries would have to work on their delivery systems, contingency planning and debt plans in
order to be prepared for such disasters in the future. The strength of fiscal policy would protect
countries from global shocks with regards to poverty and help in alleviating it. (The world Bank,
2022)

b. Taxes, Transfers, and Subsidies: Improving Progressivity and Reducing the Cost to
the Poor
axes, Transfers, and Subsidies have a great impact on poverty alleviation at household levels
since they help in economic growth. Many low income countries have a large informal sector.
Increasing income with high percentage of informal sector is difficult. Economies need to focus

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on targeted subsidies and transfer while promoting progressive subsidies in parallel. This
approach would help in strengthening the economy in a long run. Many economies have also
experienced progress with cash transfers and non-progressive taxation but it is not the best
approach to follow. Small economies can also take help of Information technology in order to
improve their tax regime. In a long run all these policies would help in alleviating global poverty.
(The World Bank , 2022)

c. Envisioning a Fiscal Policy for Growth: Identification of High-Value Fiscal Policies

Fiscal policy is a key to alleviate inequality and poverty in short and long run. Economies need
to work on devising fiscal policies that tend to bring transformative growth. In the absence of
positive externalities, it would be better for economies to invest in addressing market failures
post COVID 19 rather than providing subsidies. In political regimes, long term goals are
generally over shadowed. Economies would have to focus on long term goals in order to create a
sustainable growth. (The World Bank , 2022)

 Global Solutions on Micro-Economic Level:

a. Promotion of inclusive economic growth:
Economic growth of any country should be targeted to be higher than the population growth.
Some strategies for inclusive growth include strengthening agriculture sector, introducing credit
programs and investing in public sector infrastructure. Economies should also strengthen their
accountability systems in order to curb the menace of moral and monetary corruption.

b. Economic and institutional reforms:

Economic and institutional reforms are important to create healthy environment for business,
competition and growth of economy. These reforms are instrumental for administering fair
governance and accountability. Major reforms that government should take include reduction in
misuse of public expenditure, addressing macroeconomic structural reforms for sustainable
growth, ensuring inclusivity of all genders in the economy, easing the access to productive
resources and promotion of fairness and accountability. The tax systems of the weak economies
should also be worked upon and re-vamped in order to meet revenues targets.

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Addressing the Poverty Challenge

c. Promotion of microfinance institutions and programs:

Micro-credit facilities are an excellent tool to alleviate poverty. Economies need to promote
micro finance initiatives in order to support small businesses. These systems are easy to access in
terms of collateral and hence attract more beneficiaries. Micro credit loans also promote
creativity, small business ecosystems, exchange of ideas, experiences and entrepreneurship.
Bangladesh is a prime example of the success of micro credit in alleviating poverty considerably.

d. Raising the Productive Capacity of Poor:

Raising the Productive Capacity of Poor is an effective way of alleviating poverty. Competitive
price markets help low income group to thrive financially. With the improvement of market
systems, the poor would be more cushioned from price fluctuation and the pooling of resources
would lead to value addition, protection from economic shocks and improvement in returns.
Economies need to focus on building a robust agri-indutrial sector to create jobs and support
businesses.

e. Cash/Income transfer programs:

While fighting the cause of poverty, governments need to focus on groups that are unable to
participate in economic activities due any social or natural disadvantages. In order to strengthen
the economic condition of these groups, the government needs to provide cash transfers to these
groups in order to fulfill their basic needs. For instance, the menace of child labor can be coped
with cash transfers; when a household would have enough cash to fulfill its basic needs, it would
not send it child to work. Brazil, Mexico, Bangladesh, Chile and South Africa are the countries
that have significantly benefited from such cash transfers. (Ayoo, 2021)

f. Provision of International Aid: International aid can provide financial and technical
assistance to developing countries to help address poverty. Aid can be targeted towards
specific sectors, such as health or education, or broader programs that aim to promote
economic growth and reduce inequality.
g. Revisiting Trade Policies: Trade can be a powerful tool for reducing poverty by creating
jobs, increasing incomes, and promoting economic growth. However, trade policies must
be fair and equitable to ensure that developing countries can compete on a level playing
field.

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Addressing the Poverty Challenge

h. Provision of Debt Relief: Developing countries often struggle with high levels of debt,
which can limit their ability to invest in social and economic programs. Debt relief
programs can help alleviate the burden of debt and free up resources for poverty
reduction programs.
i. Technology and Innovation: Technology and innovation can play a critical role in
reducing poverty by improving access to essential services, increasing productivity, and
creating new job opportunities. Governments and international organizations can promote
policies and programs that encourage technology transfer and innovation in developing
countries.
j. Strengthening Governance: Corruption and weak governance can exacerbate poverty
by limiting access to essential services and opportunities. Governments and international
organizations can work to strengthen governance systems and promote transparency and
accountability to reduce corruption and improve the effectiveness of poverty reduction
programs.

Overall, addressing poverty globally requires a coordinated and sustained effort from all
stakeholders. By working together, we can make progress towards ending poverty and promoting
inclusive and sustainable development for all.

Way forward for Pakistan:

In the light of above discussion, Pakistan needs to follow almost the same set of macro and micro
economic measures in order to alleviate poverty. According to the World Bank, Gini Co-efficient
(a summary measure of inequality by world bank) has remained relatively stable in case of
Pakistan over the past two decades. Among all provinces, the rural poverty is double to urban
poverty. On the other hand income disparities remain consistent due to lack of growth of
economy. There is a need of large investment in the public sector in order to attain desired results
for education, health, sanitation, decent work, drinking water and electricity. Gender non-
inclusiveness is also a hindrance in the economic growth. (The World Bank, 2023) Following are
some recommendation in the light of Annual Plan 2022-23. Poverty is a complex issue that
affects Pakistan's economy and society at large. Despite some progress in recent years, poverty
remains a significant challenge for the country. There are several solutions that can be
implemented to address poverty in Pakistan, including:

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Addressing the Poverty Challenge

1. Investment in Education: Education is key to breaking the cycle of poverty. By

investing in education, Pakistan can equip its citizens with the skills and knowledge they
need to secure better-paying jobs and improve their standard of living.
2. Job Creation: Creating more job opportunities, particularly in the manufacturing and
service sectors, can help reduce poverty in Pakistan. The government can incentivize
businesses to invest in the country by providing tax breaks and other incentives.
3. Strengthening Social Safety Nets: Implementing social safety net programs such as cash
transfers, food assistance, and health insurance can provide immediate relief to those
living in poverty. Different social safety net programs like Benzir Income Support
Program, Kifalat Program, Ehsaas Program and Waseela e Taleem etcaim to provide
support to vulnerable and marginalized populations in Pakistan, helping to reduce poverty
and promote social inclusion. However, there are ongoing challenges in ensuring that
these programs reach the intended beneficiaries and are effective in achieving their goals.
4. Infrastructure Development: Investing in infrastructure development can improve
access to basic services such as water, sanitation, and electricity, which can help improve
the quality of life for those living in poverty. Pakistan has historically faced poor
infrastructure due to following reasons given in the smart art

Limited
Investment

Natural Inadequate
Disasters. planning

Poor
Infrastructure

Security Governanc
Concerns. e issues

Figure 6 Reasons for Poor Infrastructure in Pakistan

The country needs to mitigate the above mentioned issues with the development of infrastructure.

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Addressing the Poverty Challenge

5. Microfinance: Providing access to microfinance can help low-income individuals start

their own businesses and increase their income. Model of organizations like Akhuwat can
be used to finance small businesses
6. Empowering Women: Empowering women can have a significant impact on reducing
poverty in Pakistan. By providing women with access to education, healthcare, and
employment opportunities, they can contribute more to their households' income and
improve their families' standard of living.

Overall, addressing poverty in Pakistan requires a multi-faceted approach that involves both the
government and civil society. By implementing these solutions, Pakistan can make progress
towards reducing poverty and improving the lives of its citizens.

(Ministry of Planning Development and Special Initiatives Panning Commision Government of Pakistan ,
2022)

Conclusion:
Poverty is a multifaceted issue. Addressing this challenge is not an easy task specially when the
poverty is rising due to external shocks like pandemic and war. Pakistan is also an example of a
nations that are facing downward trend in poverty alleviation with millions in transient poverty.
Both in national and global context there is a need for both macro and micro economic structural
changes. Addressing poverty globally is a multifaceted challenge that requires a range of
strategies, including sustainable development goals, international aid, fair trade policies, debt
relief, technology and innovation, and strengthening governance. To make significant progress in
reducing poverty, a coordinated and sustained effort from all stakeholders is required, including
governments, civil society organizations, and international institutions. By working together to
address poverty, we can promote inclusive and sustainable development for all and create a
world where everyone has access to essential services, opportunities, and a decent standard of
living.

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Addressing the Poverty Challenge

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Hassan, S. M. (2023). Historical Evolution and Calculation of the Human Development Index. Daha
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Addressing the Poverty Challenge

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