Fact Files

Poverty Alleviation in Pakistan

Editor
Dr. Noor ul Haq

Assistant Editor
Nuzhat Khanum

Contents

Preface                                                                                               

1.          Poverty Facts and Statistics                                                       

2.          Poverty Reduction                                                                      

3.          Statement by Khadija Haq                                                          

4.          Poverty Rises While Economic Growth Falls                                    

5.          Causes of Poverty                                                                       

6.          Poverty is Cancer not Flu                                                             

7.          UNDP Poverty Report 2000                                                           

8.          Speech of the Finance Minister for the Pakistan Development Forum

9.          Poverty in Pakistan: Issues, Causes and Institutional Responses  

10.        Q&A: Poverty Alleviation Requires Policy Changes: UNDP         

11.        Breaking the Vicious Cycle of Poverty through Micro Credit    

12.        Poverty Reduction Strategy Paper [Extract]                       

13.        Twelfth SAARC Summit Islamabad Declaration [Extract]     

14.        Developed World Asked to do More: Poverty Reduction         

15.        UN Secretary-General: Message on the International Day for the   

             Eradication of Poverty

16.        Statement by Anwarul K. Chowdhury UN Under-Secretary-General

17.        UN Secretary General: Micro Credit Extends Same Rights to Poor as

             are Available to Every One

18.        UN General Assembly Resolution 59/247      

19.        Growth with Justice     

20.        Rural Poverty Rose by 14pc: ADB Study    

21.        Refocusing on Poverty        

22.        Reducing Inequalities         

23.        Serious About Poverty Alleviation?      

24.        World Bank Analysis: Fighting Poverty in Pakistan 

25.        ADB Urges Minimum Wages Law  

26.        Poverty Reduction Strategy Paper Second Quarter Progress  

             Report for the Year 2004-05

27.        World Bank and IMF Report Calls for Urgent Action  

28.        Population and Poverty     

29.        New World Bank Book Explores How to Empower the Poor  

30.        Whither Poverty Reduction?  

31.        Rising Inflation an Area of Concern: SBP 

32.        Economic Survey of Pakistan 2004-2005 on “Poverty”  
 

Preface 

Poverty is generally determined on the basis of income and consumption levels, but poverty has many dimensions: 

Poverty means hunger, lack of medical treatment, and poor access to basic services such as electricity and water supply. It means being unable to send children to school, and often needing them to work instead. Poverty means a lack of assets – such as land and savings – and thus extreme vulnerability to shocks due to economic downturns, family illness or natural disasters.  

Poverty alleviation is a challenging task for developing countries. In spite of international, regional and national efforts to overcome this problem, it is “still pervasive in most developing countries”. 

The critics claim that poverty is on the rise in Pakistan, but the Economic Survey of Pakistan 2004-2005 comes out with statistics of GDP growth at 8.4 per cent which makes Pakistan the fastest growing economy after China. The per capita income has increased to $736, but inflation rate has also risen to 9.3 per cent. 

            The poverty line in 2000-2001 was Rs 748.56 per month per adult, based on the Household Income and Expenditure Survey (HIES) conducted in 2000-2001. The current HIES is under completion and would be available by December 2005 to give level of poverty. However, a sample survey at district and provincial level covering 76,520 households was started in September 2004 and completed in March 2005. Its results, pertaining to living conditions and social sector, are reported in the Economic Survey of Pakistan 2004-2005. 

Realizing the rising trend of poverty, the Government of Pakistan had formulated a strategy for poverty reduction. This is reflected in Poverty Reduction Strategy Paper (PRSP), which was finalized in December 2003.  

The Factfile includes extracts from the PRSP, the executive summary of UNDP Poverty Report of 2000, World Bank analysis on “fighting poverty in Pakistan”, extracts from PRSP Second Quarter Progress Report (2004-2005) and the chapter on “Poverty” in the Economic Survey of Pakistan 2004-2005 released on 4th June 2005, besides assorted documents and articles. 

       5 June 2005                                                                           Noor ul Haq

Poverty Facts and Statistics

1.                   Half the world -- nearly three billion people -- live on less than two dollars a day.

2.                   The GDP (Gross Domestic Product) of the poorest 48 nations (i.e. a quarter of the world's countries) is less than the wealth of the world's three richest people combined.

3.                   Nearly a billion people entered the 21st century unable to read a book or sign their names.

4.                   Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn't happen.

5.                   51 percent of the world's 100 hundred wealthiest bodies are corporations.

6.                   The wealthiest nation on Earth has the widest gap between rich and poor of any industrialized nation

7.                   The poorer the country, the more likely it is that debt repayments are being extracted directly from people who neither contracted the loans nor received any of the money.

8.                   20% of the population in the developed nations, consume 86% of the worlds goods.

9.                   The top fifth of the world's people in the richest countries enjoy 82% of the expanding export trade and 68% of foreign direct investment -- the bottom fifth, barely more than 1%.

10.                In 1960, the 20% of the world's people in the richest countries had 30 times the income of the poorest 20% -- in 1997, 74 times as much.

11.                An analysis of long-term trends shows the distance between the richest and poorest countries was about:  

o        3 to 1 in 1820

o        11 to 1 in 1913

o        35 to 1 in 1950

o        44 to 1 in 1973

o        72 to 1 in 1992

12.                “The lives of 1.7 million children will be needlessly lost this year [2000] because world governments have failed to reduce poverty levels”

13.                The developing world now spends $13 on debt repayment for every $1 it receives in grants.

14.                A few hundred millionaires now own as much wealth as the world's poorest 2.5 billion people.

15.                “The 48 poorest countries account for less than 0.4 per cent of global exports.”

16.                “The combined wealth of the world's 200 richest people hit $1 trillion in 1999; the combined incomes of the 582 million people living in the 43 least developed countries is $146 billion.”

17.                “Of all human rights failures today, those in economic and social areas affect by far the larger number and are the most widespread across the world's nations and large numbers of people.”

18.                “Approximately 790 million people in the developing world are still chronically undernourished, almost two-thirds of whom reside in Asia and the Pacific.”

19.                “7 Million children die each year as a result of the debt crisis. 8525038 children have died since the start of the year 2000 [as of March 24, 2001].”

20.                For economic growth and almost all of the other indicators, the last 20 years [of the current form of globalization, from 1980 - 2000] have shown a very clear decline in progress as compared with the previous two decades [1960 - 1980]. For each indicator, countries were divided into five roughly equal groups, according to what level the countries had achieved by the start of the period (1960 or 1980). Among the findings: 

o        Growth: The fall in economic growth rates was most pronounced and across the board for all groups or countries.

o        Life Expectancy: Progress in life expectancy was also reduced for 4 out of the 5 groups of countries, with the exception of the highest group (life expectancy 69-76 years).

o        Infant and Child Mortality: Progress in reducing infant mortality was also considerably slower during the period of globalization (1980-1998) than over the previous two decades.

o        Education and literacy: Progress in education also slowed during the period of globalization.

21.                “Today, across the world, 1.3 billion people live on less than one dollar a day; 3 billion live on under two dollars a day; 1.3 billion have no access to clean water; 3 billion have no access to sanitation; 2 billion have no access to electricity.”

22.                The richest 50 million people in Europe and North America have the same income as 2.7 billion poor people. “The slice of the cake taken by 1% is the same size as that handed to the poorest 57%.”

23.                The world's 497 billionaires in 2001 registered a combined wealth of $1.54 trillion, well over the combined gross national products of all the nations of sub-Saharan Africa ($929.3 billion) or those of the oil-rich regions of the Middle East and North Africa ($1.34 trillion). It is also greater than the combined incomes of the poorest half of humanity.

24.                A mere 12 percent of the world's population uses 85 percent of its water, and these 12 percent do not live in the Third World.

25.                Consider the global priorities in spending in 1998

Notes and Sources

1)     This figure is based on purchasing power parity (PPP), which basically suggests that prices of goods in countries tend to equate under floating exchange rates and therefore people would be able to purchase the same quantity of goods in any country for a given sum of money. That is, the notion that a dollar should buy the same amount in all countries. Hence if a poor person in a poor country living on a dollar a day moved to the U.S. with no changes to their income, they would still be living on a dollar a day. In addition, see the following:

• Ignacio Ramonet, The politics of hunger, Le Monde diplomatique, November 1998
• The 9th International Anti-Corruption Conference Plenary Address by James Wolfensohn, August 2000
• March recognizes the billions living on less than two dollars a day, EarthTimes.org, October 24, 2000
• The poverty lines: population living with less than 2 dollars and less than 1 dollar a day from PovertyMap.net provides two maps showing the concentration of people living on less than 1 and 2 dollars per day, around the world.
• Also note that these numbers, from the World Bank, have been questioned and criticized.
  • The World Bank has been criticized for almost arbitrarily coming up with a definition of a poverty line to mean one dollar per day (of which they say there are about 1.3 billion people). That figure and how it has been chosen has been much criticized by many, as shown by University of Ottawa Professor, Michel Chossudovsky in the previous link.
  • In addition, in the United States for example, the poverty threshold for a family of four has been estimated to be around eleven dollars per day. The one dollar a day definition then misses out much of humanity to understand the impacts. Even the two dollars per day that I have pointed out here, while affecting half of humanity, also misses out the numbers under three or four, or eleven dollars per day. These statistics are harder to find, and as I come across them, I will post them here!
  • More fundamental than that though, for example, is a critique from Columbia University, called How not to count the poor. The report describes an ill-defined poverty line, a misleading and inaccurate measure of purchasing power equivalence, and false precision as the three main errors that may lead to “a large understatement of the extent of global income poverty and to an incorrect inference that it has declined.” (Emphasis added). This allows the World Bank to insist that the world is indeed “on the right track” in terms of poverty reduction strategy, attributing this “success” to the design and implementation of “good” or “better policies”.
• But the statistic is not lost on some of the most prominent people in the world
  • The New York Times in one of their email updates, in their Quote of the Day section, for July 18, 2001 provided the following quote: “A world where some live in comfort and plenty, while half of the human race lives on less than $2 a day, is neither just, nor stable.” — President Bush
  • See also James Wolfenson, The Other Crisis, World Bank, October 1998 who said: “Today, across the world, 1.3 billion people live on less than one dollar a day; 3 billion live on under two dollars a day; 1.3 billion have no access to clean water; 3 billion have no access to sanitation; 2 billion have no access to electricity.” (See also note 21 below.)
  • Koffi Anan, UN Secretary General, in a speech on the International Day for the Eradication of Poverty, 17 October 2000, said “Almost half the world’s population lives on less than two dollars a day, yet even this statistic fails to capture the humiliation, powerlessness and brutal hardship that is the daily lot of the world’s poor.”

2)     Ignacio Ramonet, The politics of hunger, Le Monde Diplomatique, November 1998

3)     The State of the World’s Children, 1999, UNICEF

4)     State of the World, Issue 287 - Feb 1997, New Internationalist

5)     Holding Transnationals Accountable, IPS, August 11, 1998

6)     The Corporate Planet, Corporate Watch, 1997

7)     Debt - The facts, Issue 312 - May 1999, New Internationalist

8)     1998 Human Development Report, United Nations Development Programme

9)     1999 Human Development Report, United Nations Development Programme

10)    Ibid

11)    Ibid

12)    Missing the Target; The price of empty promises, Oxfam, June 2000

13)    Global Development Finance, World Bank, 1999

14)    Economics forever; Building sustainability into economic policy PANOS Briefing 38, March 2000

15)    Human Development Report 2000, p. 82, United Nations Development Programme

16)    Ibid, p. 82

17)    Ibid, p. 73

18)    World Resources Institute Pilot Analysis of Global Ecosystems, February 2001, (in the Food Feed and Fiber section). Note, that dispite the food production rate being better than population growth rate, there is still so much hunger around the world.

19)    Progress of Nations 2000, UNICEF, 2000.

Note that the statistic cited uses children as those under the age of five. If it was say 6, or 7, the numbers would be even higher.

20)    The Scorecard on Globalization 1980-2000: Twenty Years of Diminished Progress, by Mark Weisbrot, Dean Baker, Egor Kraev and Judy Chen, Center for Economic Policy and Research, August 2001.

21)    James Wolfenson, The Other Crisis, World Bank, October 1998, quoted from The Reality of Aid 2000, (Earthscan Publications, 2000), p.10

22)    Larry Elliott, A cure worse than the disease, The Guardian, January 21, 2002

23)    John Cavanagh and Sarah Anderson , World’s Billionaires Take a Hit, But Still Soar, The Institute for Policy Studies, March 6, 2002

24)    Maude Barlow, Water as Commodity - The Wrong Prescription, The Institute for Food and Development Policy, Backgrounder, Summer 2001, Vol. 7, No. 3

25)    Consumerism, Volunteer Now! (undated)

Anup Shah, 18 February 2005

<http://www.globalissues.org/TradeRelated/Facts.asp> 

Poverty Reduction

What is poverty?

Poverty is hunger and not knowing where your next meal is coming from, because you have already eaten the seeds you had stored for next year's planting. Poverty is not having a roof over your head and having nowhere to go. Poverty is being sick and not being able to see a doctor. It is the death of a child from a preventable illness because you are unable to pay for medicine or clean water. Poverty is not being able to read and not being able to go to a school. Poverty is being unemployed and having little chance of getting a job even if there are any because you have no training. Poverty is powerlessness, lack of representation and freedom with no hope of change. Poverty is living one day at a time. Poverty is not being able to bury your dead.

Poverty at a national level means a country may have insufficient economic resources to invest in education, health, infrastructure, political, legal systems and public institutions which can lead to instability and civil unrest. In developed countries, deep and persistent poverty remains a serious social problem but is less widespread than in developing countries. It is often concentrated in certain segments of society - defined by region, by age, or by social group.

How is Poverty measured?

Finding a suitable measure, which captures the depth and breadth of poverty, at a national and individual level, is a difficult challenge. There are difficulties with each of the following commonly used methods. Collecting data is difficult and costly and definitions may vary so accuracy and comparisons between countries may not be reliable.

GDP and GNP per Capita

The most common way to measure a country's wealth or poverty is GDP or GNP per capita. Gross Domestic Product (GDP) measures the value of the goods and services that a country produces. Gross National Product (GNP) is slightly different, because it measures the value of goods and services produced by assets that a country and its citizens own, even if the production takes place elsewhere. So GDP/GNP tells us how much income a country has in total, but it doesn't work perfectly as a measure of poverty and wealth. This is because it measures costs which may not impact on a household level, and it fails to consider such costs as unpaid labour and environmental damage.

A country's total GDP or GNP is often divided by the population to give an indication of the average income per person. However this gives no indication of actual distribution of the income within a nation. A few people may be extremely rich while the majority may be very poor.

 Also, international comparisons require conversions into a common currency (usually $US) using the average official exchange rate reported by the International Monetary Fund. This may produce inaccurate results, and does not take proper account of how prices vary between countries. Sometimes GDP or GNP figures are adjusted to take account of price differences - this is known as purchasing price parity (PPP). However it is very difficult to measure accurately the differences between countries or communities where consumption patterns are very different.

The figure also does not measure how well off people are in terms of their human development or standard of living. Subsistence farmers may be able to provide most of their needs even though they contribute only a very small amount to the GDP/GNP.

Population below $US1 per Day

Another way to measure poverty is by the percentage of the population whose income or consumption falls below a certain level. Such a level is usually called the poverty line. One example of a poverty line is $US1 per person per day, measured at 1985 purchasing power parity. The figure of $US1 a day was chosen because it is typical of the poverty lines in low-income countries but it is much lower than the poverty lines found in middle-or high-income countries.

Human Development Index (HDI)

The HDI is a "summary composite index", that is, it combines a number of indicators into a single figure. It is based on life expectancy at birth, educational attainment (adult literacy and school enrolment rates) and income per capita. It attempts of give an indication of standard of living beyond simple economic factors.

Access to Basic Needs

The basic needs approach to poverty measurement includes access to such necessities as food, shelter, schooling, health services, potable water and sanitation facilities, employment opportunities, and even touches on opportunities for community participation. They provide a sense of human well being but there is no way of aggregating them meaningfully.

Who are the poor?

Rural

The majority of the world's poor live in rural areas, and are disproportionately dependent on natural resources for their livelihoods. They are especially vulnerable to climate changes and natural disasters and soil degradation. They have to travel big distances on poor roads to markets and health and education services which are often lower in quality.

Women and Girls

In most societies, women are more likely to be poorer than men, even though they may contribute more to the economy. From an early age, they perform all domestic duties including carrying water long distances, growing all the food and caring for younger children and the aged. They often work other jobs, some involving hard labour, and often for less pay than men and the heavier workload affects their health. They are less likely to go to school, or for as many years, as boys. Often cultural constraints mean that they have limited legal rights, lack opportunities for training or a say in community affairs, and lack access to land, credit and employment.

Children

More than half a billion children - representing a staggering 40% of all children in developing countries live in poverty. It causes millions of preventable child deaths through hunger and disease each year. Millions of children missing out on school or are forced into child labour causing lifelong damage to children's minds and bodies and continuing the cycle of poverty into the next generation.

Marginalised Groups

The aged, disabled, indigenous and displaced people generally lack education and social connections to earn an adequate income. In developing countries there are few social services to protect these groups.

How can Poverty be Reduced?

Poverty is a complex issue and needs to be tackled on a range of fronts, including but not limited to improving economic growth. Countries must attain basic thresholds in several key areas: governance, health, education, infrastructure, debt levels and access to markets to alleviate poverty. Some of the ways this can be done are:

Aid

Aid is necessary to assist developing countries develop sound governance, effective infrastructure, and quality health and education services. Investment in people is necessary before being able to attract foreign investment for commercial development. Aid also assists community development helping people to work together for shared improvements. Micro-enterprise, low interest loans and training provide opportunities for men and women to undertake new and/or expanded ways to earn an income and greatly improve their economic and social welfare.

Debt Relief

Many countries have debt levels which are much higher than their GDP. This means that they must use their limited financial resources just to pay interest on loans. They have no resources for investing in basic services to improve their well being. Debt relief assists developing countries to invest in the future. It can include buybacks, debt and debt service reduction exchanges, forgiveness, rescheduling and refinancing. Often debt relief is conditional on investment in health and education services to improve the lives of the poor. As aid levels have been falling debt relief is a way to support future development.

Private Sector Development

A dynamic private sector creates jobs and income, generates wealth and ensures resources are used efficiently as well as providing governments with tax revenues to fund basic essential services and infrastructure development. As net private flows are now about four times the size of aid flows, their role in development along with domestic savings is crucial. The private sector in developing countries includes many forms of enterprise. Large scale businesses may be locally owned (including privatised state enterprises) or they may be local branches of multinational corporations, or joint ventures between foreign owned companies and local businesses. Small to medium sized enterprises may be family-based but often also employ some non-family members. The smallest businesses are micro-enterprises typically consisting of 1-3 people, often family members and often female, and usually engaged in activities such as farming, handicraft production, street trading, services or small-scale manufacturing.

Trade

Trade relations allow developing countries to sell their goods and services abroad and create jobs, generating income for local businesses and citizens as well as revenue for governments. Developing countries often have many advantages and resources that allow them to be competitive in world trade. However many developing countries encounter problems in gaining access to overseas markets due to trade barriers such as tariffs (taxes on imports) and quarantine regulations. Also many developed countries heavily subsidise their own producers, making it harder for developing countries to compete. …

The Global Agenda

Multilateral institutions are reinforcing their commitment to poverty through a wide range of initiatives including the following:

Debt Initiative for Heavily Indebted Poor Countries (HIPC)
URL:  <http://www.worldbank.org/hipc/>

HIPC is an initiative of the World Bank. Its principal objective is to bring the debt burden of HPIC to sustainable levels, subject to satisfactory policy performance so as to ensure that adjustment and reform efforts are not put at risk by continued high debt and debt service burdens. Key statistics on long-term debt sustainability, development and country profiles can be downloaded from the site. Related papers by NGOs and Churches (Oxfam, UNDP, COFAM) on debt relief are also available.

Global Development Research Center (GDRC)
URL:  <http://www.gdrc.org>

The Global Development Research Center (GDRC) is a virtual organisation that carries out initiatives in education, research and practices, in the spheres of environment, urban, community and information, and at scales that are effective.

Millenium Development Goals (MDGs)
URL:  <http://www.undp.org/mdg/>

The Millennium Development Goals (MDGs) of the United Nations Development Programme (UNDP) are an ambitious agenda for reducing poverty and improving lives that world leaders agreed on at the Millennium Summit in September 2000. For each goal one or more targets have been set, most for 2015, using 1990 as a benchmark. The first goal is to eradicate extreme poverty and hunger. Rich countries have pledged to increase foreign aid, and poor countries have pledged to improve their policies and institutions, to try to reach the Millennium Development Goals, and together create and support partnerships to fight poverty and provide advice, advocacy and resources to empower the poor.

Overcoming Human Poverty: UNDP Poverty Report 2000
URL:  <http://www.undp.org/povertyreport/>

This report, from the United Nations Development Program, addresses the relationship between poverty and poor governance. The full version of the report is available, along with executive summaries, country profiles and a PowerPoint slide show. Sections of the site are available in several languages.

Poverty Reduction Strategies and PRSPs
URL:  <http://www.worldbank.org/poverty/strategies/>

Poverty Reduction Strategy Papers (PRSP) describe a country's macroeconomic, structural and social policies and programs to promote growth and reduce poverty, as well as associated external financing needs. PRSPs are prepared by governments through a participatory process involving civil society and development partners, including the World Bank and the International Monetary Fund (IMF).

PovertyNet (Worldbank)
URL:  <http://www.worldbank.org/poverty/>

PovertyNet is a World Bank web site developed to provide resources for people and organisations working to understand and alleviate poverty. It provides broad introductions to key issues, data sets and country analysis. Learning resources include poverty reduction strategies, poverty diagnostic, and the impact of macroeconomic crises and adjustment programs on poverty and inequality

Pro-Poor Policies (UNDP)
URL:  <http://www.undp.org/poverty/propoor.htm>

United Nations Development Programme (UNDP) pro-poor policies advocates for nationally-owned solutions and helps to make them effective through ensuring a greater voice for poor people, expanding access to productive assets and economic opportunities, and linking poverty programmes with countries' international economic and financial policies. At the same time, UNDP contributes to efforts at reforming trade, debt relief and investment arrangements to better support national poverty reduction and make globalisation work for poor people. UNDP promotes the concept of human poverty as a complement to income poverty, emphasizing that equity, social inclusion, women's empowerment, and respect for human rights matter for poverty reduction.

Virtual Library on Microcredit and Microfinance URL:  <http://www.gdrc.org/icm/iym2005/>

Microcredit and other financial services for poor people are important instruments for poverty reduction and for empowerment, especially for women. In declaring 2005 the International Year of Microcredit there is an opportunity to raise awareness of the importance of microcredit and microfinance in the eradication of poverty, share good practices and further. In 1998, proclaiming 2005 as the International Year of Microcredit (resolution 53/197 of 15 December), the General Assembly requested that the Year's observance be a special occasion for giving impetus to microcredit programmes throughout the world. The Assembly asked all those involved in poverty eradication to take additional steps to make available credit and related services for self-employment and income-generating activities to an increasing number of people living in poverty. Governments, NGOs, the private sector and the media were invited to highlight the role of microcredit in poverty eradication, its contribution to social development, and its positive impact on the lives of the poor.

<http://www.globaleducation.edna.edu.au/globaled/go/cache/offonce/pid/181>

Introductory Statement by Khadija Haq
President, Mahbub ul Haq Human Development Centre

Widespread poverty remains Pakistan’s most persistent and urgent problem. Whether we define poverty using the narrow definition of lack of adequate food or income or the broader definition of lack of access to opportunities, the number of people in poverty in Pakistan falls between the range of a quarter to a half of the total population. Income poverty in Pakistan has increased from 25% in 1985 to 30% in 1995.

But for poor people, poverty means poverty of opportunity, not just poverty of income. Income poverty is only one of many deprivations. Other human deprivations include lack of education, ill health, social exclusion, discrimination on the basis of ethnicity, gender or religion and political repression. Poverty is a multi-dimensional phenomenon, not a single-dimensional issue.

Poverty of opportunity is the cause; poverty of income is the result. For policy makers, it is important to focus on strategies that address poverty of opportunity because only then the poor can be integrated into the mainstream of development. The poor must be empowered; income transfer or charity is not the lasting solution to poverty.

Pakistan’s growing poverty lies with the successive governments’ failure to translate economic growth into poverty reduction and sustainable development prospects for the poor. We can draw several lessons from Pakistan’s failure to reduce poverty even when it experienced reasonable economic growth.

First, equitable patterns of growth are essential for sustained reduction of poverty. This requires a two-pronged approach consisting of broad-based economic growth across income groups and improved access to education, healthcare, family planning, sanitation, clean drinking water and micro-credit. These two elements are mutually reinforcing and should be implemented simultaneously.

Second, different strategies are required to address poverty in rural and in urban areas. Rural poverty requires more immediate attention as there are more poor people in rural areas than in urban areas. This means that the prevailing urban bias in public spending for social services has to be corrected and resources have to be redirected toward rural development and agricultural support programmes. It also means correcting gender bias in providing social service and micro-credit. But most important of all, it is essential to have meaningful land reforms and agricultural income tax. The poor must have a share in the growth of the economy.

Third, strategies should be disaggregated down to local level so that they can respond to the felt needs of a community or a village. Poverty alleviation strategies based on national data are irrelevant to the needs and concerns of poor people at the local level.

Finally, the real answer to poverty reduction lies in changing the very model of development from traditional economic growth to human development where human capabilities are built up and human opportunities enlarged, and where people become the agents and beneficiaries of economic growth. Such human development models rely on certain core strategies for poverty elimination, in particular, basic education and basic health for all, credit to the poor, women’s empowerment, land reforms, equitable growth and good governance. This is the main lesson from the experience of several countries that have substantially reduced poverty over the last two decades, including Malaysia, China, Republic of Korea and Colombia.

<http://www.un.org.pk/hdc/Poverty%20Monitor%20Page.html>

Poverty Rises While Economic Growth Falls

A ground-breaking study investigates the return of poverty in Pakistan

“The poverty bomb, which was never defused in high growth periods, can easily explode in a period of slow growth, high inflation, rising unemployment, and deteriorating social services. Poverty, misgovernance, and unevenly distributed growth are today locked in a fatal embrace.”(Mahbub ul Haq) This is the sombre prophecy of a seminal study entitled 'A Profile of Poverty in Pakistan', prepared by the Mahbub ul Haq Centre for Human Development in collaboration with the United Nations Development Programme. The message is a timely reminder of an impending social crisis, even as euphoria over nuclear bombs today dominates national psyche. This study has been highly acclaimed by leading academics, thinkers, researchers, policy makers, and international donors.

            The Study has been prepared as a part of UNDP’s South Asia Poverty Monitor Project, designed to periodically monitor poverty in the seven countries of the region. Under the direct supervision of the late Dr. Mahbub ul Haq, the then President of the Centre, a core team of four researchers prepared the study on Pakistan. The researchers were: Dr. Pervez Tahir, Joint Chief Economist at the Planning Commission; Dr. Moazzam Mahmood, former Chief of Research at the Pakistan Institute of Development Economics; Dr. Younus Jafri, Deputy Director General at the Federal Bureau of Statistics; and Murtaza H. Syed, Senior Policy Analyst at the Mahbub ul Haq Centre.

            The study presents a new approach to determining levels and trends of poverty in Pakistan. Its main features include:

·         Latest poverty estimates, from 1986 to 1994, based on different definitions.

·       Construction of a new poverty index – poverty of opportunity - designed to          capture  the many dimensions of poverty.

·         An analysis of macro economic trends of poverty over the last three decades.

·         A critique of successive government plans to eradicate poverty.

·         Presentation of data, tables, and figures on poverty in Pakistan.

The study reaches many important conclusions:

·         If poverty is defined on the basis of calorie intake or income, a quarter to one-  third of the population falls below the poverty line. But if we use the broader definition of poverty of opportunity, based on lack of education, health and income, about half of Pakistan’s population is below the poverty line. 

·         After a sharp decrease during the 1980s, poverty in Pakistan has started rising during the 1990s. Rural poverty has increased at a faster rate than urban poverty. 

·         Income inequality in the 1990s is higher than at any time in Pakistan’s history. 

·         Of all the indicators of poverty of opportunity, education is the most pervasive in Pakistan; and women are the most deprived in all indicators. 

·         While the achievement of high growth has always been a paramount objective of government planning in Pakistan, poverty alleviation or income redistribution have never received any serious policy attention.

·         Strategies for poverty alleviation should focus on improving education, health and income of the poor, and targeting women in all programme designs. Helping the poor move into more formal markets (through the development of infrastructure and human development) is another component of such a strategy.

<http://www.un.org.pk/hdc/Poverty%20Monitor%20Page.html> 

Causes of Poverty 

All over the world, disparities between rich and poor, even in the wealthiest of nations is rising sharply. Fewer people are becoming increasingly “successful” and wealthy while a disproportionately larger population are also becoming even poorer.

There are many issues involved when looking at global poverty and inequality. It is not simply enough (or correct) to say that the poor are poor due to their own (or their government's) bad governance and management. If fact, you could quite easily conclude that the poor are poor because the rich are rich and have the power to enforce unequal trade agreements that favor their interests more than the poorer nations.

Structural Adjustment - A Major Cause of Poverty

The IMF and World Bank-prescribed structural adjustment policies have meant that nations that are lent money are done so on condition that they cut social expenditure (such as health and education) in order to repay the loans. Many are tied to opening up their economies and being primarily commodity exporters in such a way that poor countries have found themselves in a spiraling race to the bottom as each nation competes against others to provide lower standards, reduced wages and cheaper resources to corporations and richer nations. This has increased poverty and dependency for most people. It also forms a backbone to what we today call globalization. As a result, it maintains the historic unequal rules of trade.

Poverty Around the World

Around the world, inequality is increasing, while the world is further globalizing. Even the wealthiest nation has the largest gap between rich and poor compared to other developed nations. In many cases, international politics and various interests have led to a diversion of available resources from domestic needs to western markets. Historically, politics and power play by the elite leaders and rulers has increased poverty and dependency. These have often manifested themselves in wars, hot and cold, which have often been trade and resource-related. Mercantilist practices, while termed free trade, still happen today. Poverty is therefore not just an economic issue, it is also an issue of political economics.

Economic Democracy

This next page is a reposting of a flyer about a new book from J.W. Smith and the Institute for Economic Democracy, whom I thank for their kind permission. The book is called Economic Democracy: The Political Struggle Of The 21st Century. Typically on this site, I do not advertise books etc, (although I will cite from and link to some, where relavant). However, in this case, I found that just the text in this flyer alone to provide an excellent summary of the multitude of issues that cause poverty and its historic roots. (Please also note that I do not make any proceeds from the sale of this book in any way.)

World Hunger Related to Poverty

People are hungry not because of lack of availability of food, or “over” population, but because they are too poor to afford the food. Politics and economic conditions have led to poverty and dependency around the world. Addressing world hunger therefore implies addressing world poverty as well. If food production is further increased and provided to more people while the underlying causes of poverty are not addressed, hunger will still continue because people will not be able to purchase food.

Food Dumping [Aid] Maintains Poverty

Even non-emergency food aid, which seems a noble cause, is destructive, as it under-sells local farmers and can ultimately affect the entire economy of a poor nation. If the poorer nations are not given the sufficient means to produce their own food, if they are not allowed to use the tools of production for themselves, then poverty and dependency will continue.. Here you will also find a chapter from a book which describes this situation in detail and looks at the myth that “more US aid will help the hungry” as the chapter is titled. A must read!

IMF and World Bank Protests, Washington D.C.

To complement the public protests in Seattle, the week leading up to April 16th/17th 2000 saw the other two global institutions, the International Monetary Fund (IMF) and World Bank, as the focus of renewed protests and criticisms, in Washington, D.C. The purpose of the mass demonstrations were to protest against the current form of globalization, which is seen as unaccountable, corporate-led, and non-democratic and to show the link with poverty due to the various policies of the IMF and World Bank.

Poverty Facts and Statistics

While the world is globalizing and the mainstream media in many developed nations point out that economies are booming (or, in periods of downturns, that the current forms of “development” and economic policies are the only ways for people to prosper), there are an increasing number of poor people who are missing out on this apparent boom, while increasingly less people are becoming far more wealthy. Some of these facts and figures are an eye-opener to say the least.

Anup Shah, 18 February 2005

<http://www.globalissues.org/TradeRelated/Poverty.asp>

Poverty is Cancer not Flu

Introductory remarks at the Special Event on Poverty Eradication arranged by UNDP, 20 May 1997

Let me use the privilege of the Chair to make just a few preliminary observations to give some perspective to our subsequent discussion.

First, what is critical for our analysis is poverty of opportunity, not poverty of income. Poverty of income is often the result, poverty of opportunity is often the cause. Poverty of opportunity is a multi-dimensional concept, embracing lack of education and health, lack of economic assets, social exclusion and political marginalization. It is only through a full understanding of the poverty of opportunity that we can begin to sense why people remain poor. In fact, I firmly believe that World Bank’s measure of $1 a day for absolute poverty has seriously misled policy makers. It has focussed our attention on the symptoms, not the causes. To ignore the poor upstream and to count them endlessly downstream is merely an intellectual luxury. Our concepts, our measures, our analyses must deal with poverty of opportunity, not just with poverty of income. That is why I am delighted that the 1997 Human Development Report – with which I was associated as an advisor – makes a major breakthrough in defining and measuring the multidimensional nature of poverty. It is time to say a final farewell to single-dimensional measures of poverty and to adopt a more multi-dimensional view, however inadequate the measurement may be in the initial stages.

Second, poverty cannot be treated as a mere flu, it is more like body cancer. We cannot leave intact the model of development that produces persistent poverty and wistfully hope that we can take care of poverty downstream through limited income transfers or discrete poverty reduction programmes. If the poor lack critical assets (particularly land), if they lack credit since the formal credit institutions do not bank on them, if they are socially excluded and politically marginalized, then a few technocratic programmes downstream are not the answer. The answer lies in a fundamental change in the very model of development so that human capabilities are built up and human opportunities are enlarged. In other words, the real answer lies in a major transition from traditional economic growth models of human development where people become the real agents and beneficiaries of economic growth, and no longer remain an abstract residual of inhuman development processes.

Third, we can all learn a great deal from various successful country experiences for poverty reduction. Several countries have reduced the proportion of their people living in poverty quite dramatically in the last two decades – including Malaysia, China, South Korea and Colombia. There are many explanations for their successful experiences but, for busy policy makers, fervently searching for a few core strategies, it appears that six elements stand out:

·         Liberal investment in basic education;

·         land reforms;

·         availability of credit to the poor;

·         a high rate of economic growth, evenly distributed;

·         people-centered development models, with at least the essential

    ingredients of women’s empowerment and significant
   decentralization of decision making powers; and

·        good governance, more good governance, and still more good
governance.

Take these six core elements, shake them up vigorously, put them in a policy crucible, and it is likely – in fact, it is more than likely – that pro-poor growth will come out at the other end. We shall soon discover from our distinguished panel what combination of various policies and programmes have made the critical difference in their countries.

My fourth and last observation is about the constant debate between those who believe that free markets and good for every one, including the poor, and those who advocate judicious state intervention to protect the poor. I believe that it is time to bury this counterproductive controversy. There is no country in the world without some mix of market competition and state intervention. The real challenge is to discover that happy blend which delivers pro-poor growth. Let us face political realities. Markets are not elected by poor people, governments are. Markets can be brutal or indifferent to the needs of the poor, governments cannot be. Markets are there to promote efficiency, as they should. Equity is none of their concern. But governments cannot ignore equity since increasing inequalities can disrupt the political and social fabric of a society. So the real answer lies in finding a judicious blend between market competition and state intervention if are to ensure that, while GNP increases, human lives do not shrivel. And in the process, let us also not forget that what finally makes a difference in the lives of the poor are many civil society initiatives – neither governments nor markets. …

UNDP, 20 May 1997 

<http://www.un.org.pk/hdc/Speeches%20of%20Dr.%20Haq%20Folder/poverty%20cancer.htm>

UNDP Poverty Report 2000

Executive Summary

A new global strategy against poverty needs to be mounted - with more resources, a sharper focus and a stronger commitment. Based on commitments made at the 1995 World Summit for Social Development, developing countries are being encouraged to launch full-scale campaigns against poverty. Yet despite having set ambitious global targets for poverty reduction, donor countries are cutting back on aid and failing to focus what remains on poverty.

UNDP, too, has to do more to honour its commitments made at the Social Summit. It needs to provide better assistance - more focused on helping to improve national policy-making and institutions and less dispersed among a myriad of small-scale projects. And it needs to do more to help countries committed to reducing poverty put effective systems of governance in place to pursue this objective.

Effective governance is often the "missing link" between national anti-poverty efforts and poverty reduction. For many countries it is in improving governance that external assistance is needed - but not with a new set of poverty-related conditionalities imposed on top of the existing economic conditionalities.

Based on their commitments at the Social Summit, countries establish their own estimates of poverty, set their own targets and elaborate their own plans. The role of external assistance is to help them build the capacity to follow through on their decisions and resolutions.

The Commitments to Poverty Reduction

More than three-quarters of countries have poverty estimates, and more than two-thirds have plans for reducing poverty. But fewer than a third have set targets for eradicating extreme poverty or substantially reducing overall poverty - the Social Summit commitments. This is a serious shortcoming.

Moreover, the poverty targets set at the Social Summit are based on monetary measures, while most development practitioners now agree that poverty is not about income alone, but is multidimensional. Thus countries should begin incorporating explicit human poverty targets - such as reducing malnutrition, expanding literacy and increasing life expectancy - into poverty programmes.

Another shortcoming: many anti-poverty plans are no more than vaguely formulated strategies. Only a minority of countries have genuine action plans - with explicit targets, adequate budgets and effective organizations. Many countries do not have explicit poverty plans but incorporate poverty into national planning. And many of these then appear to forget the topic.

Much remains to be learned about how to make anti-poverty plans effective. Overcoming Human Poverty, UNDP Poverty Report 2000 focuses on this issue - to contribute to the United Nations General Assembly's five-year review of progress since the Social Summit and to help accelerate the collective campaign against poverty in the next five years.

Developing National Anti-poverty Plans

Anti-poverty plans help focus and coordinate national activities and build support. But to be effective, they must be comprehensive - much more than a few projects "targeted" at the poor. And they need adequate funding and effective coordination by a government department or committee with wide-ranging influence. Most critical, they should be nationally owned and determined, not donor driven. These are some of the conclusions from UNDP-sponsored assessments of the poverty reduction activities of 23 of its programme countries.

While some of the countries most successful in reducing poverty have lacked plans, they have been exceptions. A plan is evidence of a national  commitment and of an explicit allocation of resources to the task. It is also a means to build a constituency for change. Without such organized public action, market-driven economies rarely promote social justice.

            A major problem with most poverty programmes is that they are too narrow, confined to a set of targeted interventions. One reason: many were constructed as a social safety net during a major national breakdown - a financial crisis, a prolonged recession, a wrenching adjustment to external shocks. But macro-economic and national governance policies have as much impact on poverty as targeted interventions - if not more. Attempting to make such policies more pro-poor should be a major part of any anti-poverty plan. One reason that many poverty programmes become disjointed is that external donors provide much of the funding for individual projects, and the funds are not allocated through regular government channels. National control and coordination get elbowed aside. And the need to build government's long-term capacity to administer poverty programmes is neglected.

Many national programmes lack a good management structure, located within the government rather than outside it. A multidimensional problem, poverty should be addressed by a multisectoral approach - cutting across government ministries and departments. But most programmes hand the responsibility for poverty reduction over to a ministry of social affairs, which generally lacks authority over other ministries. Where a central coordinating committee is set up to overcome this problem, it rarely has enough power to get the job done.

Most governments have difficulty in reporting how much funding goes to poverty reduction - unable to distinguish between activities that are related to poverty and those that are not. They often confuse social spending with poverty-related spending. But much government spending could be considered pro-poor if it disproportionately benefits the poor. Under these conditions it is probably best to set up a special poverty reduction fund - to give a better financial accounting and to allow government departments and ministries to apply to the fund for financing for their poverty-focused programmes.

Linking Poverty to National Policies

A review of national anti-poverty plans underscores the importance of developing a new generation of programmes that focus on making growth more pro-poor, target inequality and emphasize empowering the poor. The old-school prescriptions of supplementing rapid growth with social spending and safety nets have proved inadequate.

In countries with widespread poverty too many programmes still rely - mistakenly - on targeted interventions. It is better to concentrate on building national capacity for pro-poor policy-making and institutional reform - the areas where external assistance should also concentrate its resources. This focus will also help provide greater coherence to national programmes - overcoming the tendency to rely on a disjointed set of small-scale projects.

Standing in the way of integrated poverty programmes, however, is the common "two-track" approach to poverty reduction: growth on one track and human development on the other. The two tracks rarely intersect: economic policies are not made pro-poor, while social services are assigned the burden of directly addressing poverty. This is one legacy of old-style structural adjustment programmes, which took up poverty after the fact or as a residual social issue.

The current consensus on the importance of pro-poor growth is still hobbled by an inability to recommend practical policies and concrete reforms of structural adjustment programmes. Part of the problem is confusion about what constitutes pro-poor growth and how to gauge it. Another part stems from failure to squarely address the sources of inequality - such as unequal distribution of land, the most important asset of the rural poor in many low-income developing countries.

Linking Countries' International Policies to Poverty

Countries should link their poverty programmes not only to their national policies but also to their international economic and financial policies - a connection rarely made. In a world of increasing economic integration, this link can be crucial.

External debt is now being clearly linked to poverty. But as preparations for World Trade Organization (WTO) negotiations illustrate, trade policies are not.

The Enhanced Heavily Indebted Poor Countries Initiative promises faster, deeper and broader debt relief, and the World Bank and International Monetary Fund are seeking to tie debt relief to national poverty reduction strategies. But many of the indebted countries doubt that these measures will go far enough - especially if donors reduce aid to finance debt relief. And countries are wary of being subjected to new poverty-related conditionalities.

One reason that poor developing countries cannot pay off their debt is that they cannot penetrate major export markets in industrial countries - in part because of the formidable walls of protection that remain. Rich countries continue to protect their farmers, for example, while developing countries are being asked to open up their own agricultural sectors - a measure that threatens to undermine their food security and spread poverty.

But such concerns were not addressed at the WTO meeting in Seattle in late 1999. If trade expansion is to benefit the poor, the international rules of the game must be made fairer. A high priority is to eliminate the protectionism that is biased against developing countries. And to do this, the capacity of developing countries to negotiate global and regional trade agreements needs to be strengthened - another important area for development assistance.

Official development assistance is supposed to strengthen the hand of developing countries in combating poverty. But it not only has been declining markedly; it also remains ill focused. Many donors still do not make poverty reduction a priority, or know how to focus their resources on the poor or monitor their impact. They say that they are opposed to aid conditionality but have not yet figured out how to make their counter-parts in developing countries equal partners. Partly to blame is donors? hit-and-miss project approach to development - bypassing the government, dispersing efforts and eroding sustainability.

Governance: The Missing Link

Responsive and accountable institutions of governance are often the missing link between anti-poverty efforts and poverty reduction. Even when a country seeks to implement pro-poor national policies and target its interventions, faulty governance can nullify the impact. So to get poverty reduction campaigns off the ground, reforms of governance institutions often need to be emphasized.

Holding governments accountable to people is a bottom-line requirement for good governance. Having regular elections - free and fair - contributes to accountability, especially if they are also held at the local level. But such democratic forms are no vaccination against poverty.

To hold officials accountable between elections, people need to be organized. And to make democracy work, they need to be well informed. New technologies can make information readily available, but special efforts are needed to connect people to the technologies. Making these connections can be an important contribution of development assistance.

Shifting decision-making power closer to poor communities by devolving authority to local government can help promote poverty reduction - as long as the new responsibilities are accompanied by resources and capacity building. But that is only half the story. The other half is helping poor communities organize themselves to advance their interests. A major source of poverty is people's powerlessness - not just their distance from government.

Accountability in the use of public funds is crucial to poverty reduction efforts. The poor pay a high price for corruption. And programmes that target resources for poverty reduction are less likely to be bankrupted by the administrative costs of identifying and reaching the poor than by the diversion of a big part of the resources into other hands.

If corruption were cleaned up at the same time that the poor organized themselves, many national poverty programmes would undoubtedly ratchet up their performance in directing resources to the people who need them. Many problems of targeting are, at bottom, problems of unaccountable, unresponsive governance institutions.

Pro-poor Local Governance: The Neglected Reforms

Campaigns against poverty have often bypassed and ignored local government. Donors used to favour funnelling resources through central governments and now increasingly rely on civil society organizations. But the critical role of local government - when elected and accountable - continues to be forgotten. Thus the effectiveness of poverty programmes in reaching the poor continues to be hampered.

If poverty reduction programmes are to succeed, local government must be strengthened - and held accountable both to the central government for the funds allocated to it and to its constituents for how it uses them. Central government has to continue its involvement, monitoring how local government exercises its new authority and disburses funds - and helping prevent the capture of power by local elites.

In the long run building stronger and more accountable local government is the only way to make decentralization pro-poor. But it requires time, resources and capacity building. For the poor the lasting benefits will outweigh the immediate costs. The current fad, however, is to opt for quick-disbursing mechanisms, even though they are unlikely to be sustainable.

Opening up local government to popular participation and building partnerships with civil society organizations can foster greater transparency and accountability. Instituting monitoring and evaluation systems that tie financing to performance can also enhance accountability. Complaints about lack of local capacity often mask other problems, such as an inadequate incentive structure to motivate poverty reduction efforts by local government.

The Poor Organize: The Foundation for Success

The foundation of poverty reduction is self-organization of the poor at the community level. Such self-organization is the best antidote to powerlessness, a central source of poverty. Organized, the poor can influence local government and help hold it accountable. They can form coalitions with other social forces and build broader organizations to influence regional and national policy-making.

What the poor most need, therefore, is not resources for safety nets but resources to build their own organizational capacity. Ensuring resources for such capacity building is the direction in which UNDP's support to civil society organizations is moving.

Civil society organizations arising outside poor communities can play an important role in delivering essential goods and services but are less successful in directly representing the poor. Moreover, relying on these organizations for the delivery of goods and services - more the responsibility of government - is inadvisable over the long term.

But such organizations can play a valuable role by engaging in policy advocacy on behalf of the poor and influencing national policy-making. By contrast, community-based organizations are effective in directly representing the poor, but have difficulty in wielding influence outside their localities - until they build broader organizations.

When national or local governments are unresponsive, people must rely on civil society organizations to advance their interests. The goal is not for civil society organizations to take over the legitimate functions of the state, however, but to forge a strategic alliance between the state and civil society for poverty reduction.

A new generation of poverty programmes focus on building community organizations to directly articulate people's needs and priorities - rather than concentrating on income-generating activities alone. Some of their greatest successes have been in mobilizing and organizing poor women. Experience confirms that, once afforded the opportunity, communities can quickly build their own organizations and develop their own leaders. Communities often start with small self-help groups, then combine these into larger area-based institutions to exert influence with local government or the private sector.

The most successful community organizations tend to be broad-based - including both poor and non-poor - and to use participatory methods to encourage people's active involvement. One of their greatest accomplishments is to increase people's access to knowledge, skills and technology - often the biggest priority cited by community members.

Focusing Resources on the Poor

Most national poverty programmes rely on targeting benefits to the poor, but still assume that external agents deliver the benefits and that the poor are passive beneficiaries. Little wonder that the benefits rarely reach the poor. At the root of this predicament is a governance problem.

If the poor lack organization and power, the benefits of poverty programmes are unlikely to reach them - or, if they do, to make a lasting difference. Effective targeting follows from empowerment, not the other way around. The very term targeting probably clouds the issue: better to talk more generally about focusing poverty reduction resources.

One way to focus resources is to adjust macroeconomic policies to make growth more pro-poor. Another is to direct resources to sectors where the poor are employed - agriculture, rural off-farm enterprises, urban microenterprises. A third way is to allocate resources to poor areas or communities. To be effective, this third approach requires a geographical map of poverty based on a reliable set of human poverty indicators. Geographical targeting invariably includes many non-poor households. But trying to direct resources to poor households alone is both difficult and expensive. Moreover, if the delivery of resources to the poor is tied to their empowerment, targeting by government should probably stop at the community level - and let community organizations take the lead.

UNDP has supported many regional development programmes and rehabilitation programmes in poor areas. The success of these programmes has depended on combining decentralization of government decision-making to regional and local authorities with empowerment of communities. This model has worked well even in countries with unstable or adverse national conditions.

But programmes that focus resources on poor areas, no matter how successful, might not reach disadvantaged social groups - women, ethnic minorities, indigenous peoples, low-status castes. Special interventions are usually needed. Take the situation of indigenous peoples, who often suffer the most severe poverty.

Self-determination as a people is one of their most pressing demands. Thus participatory methods are needed more than usual - particularly those that help foster their distinct languages and cultures. Their self-determination also depends crucially on control of their ancestral lands and the natural resources these lands contain. Thus conservation of the environment is often closely tied to protection of their livelihoods.

Sometimes targeting is carried out not by trying to reach a certain group but by using a certain type of intervention - such as providing basic social services, microfinance or physical infrastructure. Such interventions are common components of national poverty programmes, which assume that the poor will benefit most when these resources and services are offered to all.

Restructuring government expenditures to make resources and services more available to the poor does not guarantee, however, that the poor will use them. In some cases the moderately poor might benefit more than the extremely poor - such as from rural roads that can be used to market agricultural products. And when services are offered on a subsidized basis - as microfinance often still is - they are not financially sustainable.

While such local interventions can often be effective in reaching the poor, the bigger problem is that too often they are regarded as the core of national poverty programmes - and as a substitute for reform of national economic policies or governance institutions.

Integrating Key Issues into Poverty Programmes

A general weakness of poverty programmes is their lack of integration. Part of the problem is that they are seen primarily as a set of targeted interventions - a series of small-scale projects not integrated with national policies. Another part of the problem is the artificial divide between economic and social policies. A third is the habit of thinking sectorally - and organizing government departments along sectoral lines. Poverty, a multisectoral problem, does not fit neatly into any one department or ministry.

The problem is especially acute with respect to such issues as gender and the environment - two major areas of concentration for UNDP. The links between these two areas and poverty remain weak.

Most poverty programmes do not focus on gender inequality as a major source of poverty - despite stark gender differences in human poverty. They rarely incorporate major components for women or examine how their components will benefit poor women. Instead, small-scale interventions tend to be preferred for tackling women's poverty, downgrading it, in effect, to a minor problem.

Nor do national poverty programmes usually have a strong environmental component. Even in countries where environmental degradation has a big impact on the poor, the ministry of environment is rarely represented on government coordinating committees for poverty reduction. So far, countries have kept poverty plans and environmental plans separate.

Part of the reason is the rigid functional divisions within governments that work against cross-cutting concerns. Another part is the assumption of a straightforward causal link between environmental damage and poverty. This assumption leads to simplistic policies that strive either to reduce poverty at the expense of the environment or to protect the environment at the expense of the poor. But UNDP has found that "win-win" solutions exist for both the environment and the poor - policies and public actions that can break the supposed "downward spiral" of impoverishment and environmental damage.

Initiatives to promote basic education and health care - perhaps surprisingly - also need greater integration with national poverty programmes. The close links between ill health and lack of income still are not fully appreciated, even in anti-poverty policies. Recognizing these links is particularly important for combating major health epidemics, such as malaria and HIV/AIDS, which continue to ravage many developing countries.

Monitoring Progress against Poverty

Countries need a comprehensive but workable monitoring system to gauge their progress against poverty. Targets for eradicating extreme poverty and substantially reducing overall poverty should guide this system. And tracking progress against human poverty should be an integral part of it.

Traditional surveys do not illuminate the causes of poverty or generate enough policy-relevant information. So large income and expenditure surveys will have to be supplemented with rapid monitoring surveys focused on human poverty and with participatory assessments.

Many countries want to generate information more frequently to influence policy-making, but this can be expensive unless done with light surveys, using short questionnaires and canvassing small but representative samples. Participatory assessments are particularly useful for policy-making because they provide valuable insights into how poor people assess their situation and what they think should be done.

            A general weakness of poverty monitoring systems is that they are not designed to also provide evaluations of anti-poverty policies and programmes. Thus there is little systematic verification of what policies work - and what policies do not - to help countries move closer to their poverty reduction targets.

UNDP Poverty Report 2000

<http://www.undp.org/povertyreport/exec/english.html> 

Speech of the Finance Minister for the
Pakistan Development Forum (PDF)
 

Madam Co-chairperson!
Excellencies!
Distinguished guests!
Ladies and Gentlemen! 

It is my pleasure to welcome you this morning in the Pakistan Development Forum meeting, taking place in Islamabad. This is the second meeting of the Forum being held in this very hall after the gap of almost three years. A forum like this provides an opportunity for intensive and deeper interaction between Pakistan authorities and donor communities, and international financial institutions. Taking advantage of this august gathering, I believe, it is an appropriate time for me to apprise the Forum the multi-dimensional challenges we are facing today on economic and social scene; what have we done so far to address these challenges; and also outline the present government’s strategy for economic and social developments over the medium-term.

Excellencies!  

2.          I consider the decade of the 1990s as lost decade for Pakistan. Many nations have made progress in the 1990s but unfortunately Pakistan has lurched from one crisis to another, mainly of our own making. As you Excellencies are aware, Pakistan’s economic problems are structural in nature the resolution of which requires courage and determination on the part of the authorities. On the contrary, we have witnessed persistent lapses in the implementation of various structural reform and the continued reluctance to take difficult stabilization measures by successive governments, which not only made the economy crisis-prone but also damaged Pakistan’s credibility with the international donor community. The deteriorating state of governance further accentuated the macroeconomic difficulties, contributed to low investor confidence and above all, slowed economic growth. The poor state of governance severely reduced the effectiveness of public expenditures and contributed to high levels of corruption. Lack of transparency in the government’s decision making and weaknesses in accounting practices resulted in misreporting of fiscal data, causing serious damage to Pakistan’s image and credibility in the comity of nations.

Excellencies!

3.          It is quite understandable that such state of affairs is bound to have far reaching impact on the country’s socio-economic development. Indeed, we have witnessed economic growth slowing down; debt burden reaching alarming proportions; more and more people slipping below the poverty lines; social indicators deteriorating; exports and fiscal efforts remaining stagnant; and above all, the people of Pakistan loosing confidence on the government’s ability to manage its economic affairs, thus creating an image of a failed economy.

4.          The daunting task to address these multi-dimensional challenges fell on the shoulder of the present regime. Our task was made even more difficult by the initial reaction of the international community to the change in the government. Realizing the fact that Pakistan’s economic problems are structural in nature, the present government, without wasting any time, undertook a series of comprehensive and wide-ranging structural reform measures, the salient features of which include: (i) tax survey and documentation of the economy, (ii) imposition of GST across-the-board, (iii) imposition of agricultural income tax, (iv) strengthening of tax administration and reform of the income tax law; (v) reforms in the energy sector; (vi) banking and capital market reforms; (vii) initiating a multifaceted poverty alleviation programme; (viii) linking expenditure with resource mobilization so as to remain prudent on fiscal management; (ix) accelerating the pace of privatization and (x) improving governance by ensuring transparency in economic policy-making and minimizing the level of corruption. We have documented all the structural reform measures, and I presume that this has been distributed to you. In addition to various reform measures we succeeded in restoring Pakistan’s relations with international financial institutions and successfully resolved the IPP issues including the HUBCO ones.

Excellencies!

5.          You would agree that undertaking such wide-ranging structural reform measures including taking difficult decisions in a short period of 17 months, is not a mean achievement. The positive outcome of these measures may not be realized in short period, however, it is our firm belief that these reform measures will have salutary effects on Pakistan’s economy in the medium-to-long-run.

6.          Let me now turn to the various challenges facing Pakistan’s economy; the measures we have taken so far to address these challenges, and outline our strategy to revive economic activity, restore macroeconomic stability, reduce poverty, and improve governance in the medium-term.

Growth

7.          The first and foremost challenge we are facing today is to how to reinvigorate growth. There is a clear and perceptible evidence that the growth performance of Pakistan’s economy has deteriorated in the 1990s. Against an average growth rate of 6 percent per annum in the 1980s, the real GDP growth slowed to an average of 5 percent in the first half and 4 percent in the second half of the 1990s. More so, the real GDP growth slowed to an average of 3.1 percent during 1996-99.  Fixed investment averaged almost 17 percent of GDP in the 1980s but declined to an average of 15 percent in the second half of the 1990s and culminating in a steep fall in 1998-99 to about 13 percent. National savings also declined from an average of almost 15 percent of GDP in the 1980s to 12 percent by 1998-99.

8.          Taking the economy from a low and declining growth path to a higher and sustainable path is a daunting task. An initial attempt was made last year to arrest the declining trend in economic growth. We witnessed a modest recovery in growth fully supported by agriculture. This recovery is not likely to be sustained in the current fiscal year because of the protracted drought adversely affecting the single largest sector of the economy i.e., agriculture. Over the medium-term, we believe that our economic growth will remain constrained because of our balance of payment difficulties. Foreign savings, so vital for raising domestic investment to achieve higher growth rate, will remain limited because Pakistan will have to bring down current account deficit steadily by 2003-04. Thus, the real challenge is to how to increase growth from less than 4 percent to 5.5 percent by 2003-04.

9.          As your Excellencies are aware, the present government has identified four major drivers of growth which include agriculture, energy sector, small and medium enterprises (SMEs), and information technology. We believe that with little investment not only more growth can be achieved but the quality of growth will also improve. We are striving for “inclusive growth”, not just growth for the rich. We have made substantial progress in all the four areas, as outlined in one of the publications distributed to you.

Poverty Reduction 

Excellencies!

10.        The second most important challenge facing the nation today is the rise in poverty and human deprivation. The natural outcome of declining economic growth is the shrinking employment opportunities and concomitant rise in poverty. There is a general consensus that poverty in Pakistan has increased in the 1990s. Almost one-third of the country’s population has slipped below the poverty line; the number was only 17 percent some 13 years ago. Apart from declining economic growth, reduction in the flow of remittances from overseas Pakistani workers, persistence of a double-digit inflation, and deteriorating state of governance have been the main factors responsible for the rise in poverty in Pakistan in the 1990s. Poverty alleviation has, therefore, taken the center stage of the government’s economic agenda.

11.        You would agree that the fight against poverty requires courage, commitment, and prolonged efforts. We will succeed only if it is based on a poverty reduction strategy. What is our strategy? Growth, accompanied by macro-economic stability, is our best hope for poverty reduction. Growth is also a vital source of financing social sector development. Our thinking about poverty reduction has been greatly influenced by the recognition that growth and poverty reduction are mutually reinforcing in nature. While sound macroeconomic polices and growth-enhancing structural reforms favour the poor, poverty reduction and improved social indicators feed back positively into growth. While growth is absolutely essential for reducing poverty, without poverty reduction, it is difficult to sustain sound macroeconomic policies and structural reforms long enough to maintain price stability and increase the country’s economic growth.

12.        As your Excellencies are aware, growth is critical for poverty reduction but focus on growth alone is not enough. Where poverty is endemic, the high economic growth policy must be accompanied by direct poverty alleviation measures and anti-poverty programmes. This is the approach we have taken in Pakistan. Our poverty alleviation programme consist of four major elements which include (i) integrated small public works programme in both the urban and rural areas; (ii) food support programme; (iii) revamping of zakat system with a view to using it as an effective means of cash transfer to the targeted poor as well as to provide income opportunities to the targeted poor on a sustainable basis; and  (iv) establishment of a micro credit bank to help improve poor peoples’ access to credit. The details of each of the four elements are well documented in a paper which has been circulated to you. We recognize that the prospects for higher economic growth—which is indispensable for reducing poverty—will depend on the ability of the country to unlock the creative energies of the people. This requires investment in human capital, particularly in primary education and basic health. Thus, our fifth element in alleviating poverty is the higher spending on social sector. As compared with last year, the social sector spending has gone up by 29 percent in the current fiscal year. Allocation to social sector will continue to rise with the improvement in resource position of the country. In the event of fiscal slippages, allocation to social sector will be protected. Our Interim Poverty Reduction Strategy Paper (IPRSP) has been built on the very principle that I have just explained. This document has also been circulated to you.

Excellencies!

13.        I fully share the views of Mr. Horst Kohler, the Managing Director of the IMF that widespread poverty in the midst of global prosperity is both unsustainable and morally unacceptable. Fighting poverty by a low-income country like Pakistan alone will be a daunting task; but together with strong support of developed countries and international institutions, the battle can be won. Thus, there is a crucial test of developed countries in their support to global poverty reduction. We have long known that exports and economic growth are strongly correlated. Higher export growth leads to higher economic growth—so vital for reducing poverty. Increased access to markets is still the best way to support poor countries in  their efforts to reduce poverty and share the world’s prosperity. Trade restrictions on the other hand are direct impediments to export growth, hence economic growth and poverty reduction. The major industrial countries have duty to help those who are trying to help themselves by providing free access to their markets. To be meaningful, free access should cover the products that matter most to the countries fighting poverty.

Democracy

Excellencies!

14.        You would agree that any effort to reduce poverty must start with—and build-upon—peace, democracy, and good governance at home. Armed conflict, mismanagement, and corruption are fundamental obstacles to growth and development. These are also the enemies of the poor and powerless. Pakistan is a moderate, peace loving Islamic country. We believe that armed conflict is no solution to the long-standing issues. It is in this background that the Chief Executive of Pakistan has offered many times to India to settle the long-standing issue of Kashmir through dialogue any time, anywhere. The Chief Executive has announced that Pakistan will not enter into arms race with India by recklessly increasing its defense budget. We want to spend our money on primary education, basic health and reducing poverty.

15.        Let me also assure you, your Excellencies, that this government is fully committed to democracy. We believe in grass root democracy where people are masters of their own destiny. We believe in democracy which improves governance, improves the delivery system of social services, increases transparency, help alleviate poverty, where the national objective is supreme, and which promote national cohesion. We don’t want such democracy which promotes corruption, “ghost” schools, bad governance, where national objective is made subservient to personal agenda, and promote national disharmony. This requires structural reform in our political system as well. The devolution plan is a first and a significant step towards restructuring of our political system. You will have enough opportunity to hear from the person who is in charge of this gigantic task.

Debt Burden

Excellencies!

16.        Let me turn to the third major challenge we are facing today—i.e., the burden of public and external debt. Pakistan’s debt problem has reached crisis proportions. Our external debt obligation was slightly less than $ 10 billion in 1980; we added another $ 10 billion in one decade and yet another $ 10 billion in just 6 years (I have not included the Foreign Currency Accounts). Pakistan’s external debt and foreign exchange obligations including those to resident, stood at $ 37 billion by the end of 2000. External debt was 200 percent of our foreign exchange earnings in 1980; by May 1998 it reached to an unsustainable level of 364 percent (including resident foreign currency deposits). It has now declined to 300 percent only because foreign currency accounts were frozen. Similarly, 18 percent of foreign exchange earnings were committed to debt-servicing in 1980s by 1998 we were using more than 41 percent of our foreign exchange earnings for debt-servicing, this has been reduced to less than 40 percent by 2000.

17.        Pakistan’s public debt stood at Rs 155 billion in 1980 but increased to Rs 3570 billion by end of 2000. It was 400 percent of total revenue in 1980 but now it is around at 625 percent. Only 20 percent of government revenue was used for debt-servicing, and today, 60 percent of our revenue is used for servicing domestic debt, constraining government’s ability to spend on key development activities. Why and how have we landed in such a difficult situation? The chairman of the Debt Committee, Dr. Parvez Hasan, will be giving you the details in a short while. We have also distributed the Debt Committee report as part of the official document to you. I believe that several factors have worked in league over the years to put Pakistan in a difficult situation today. Large and persistent fiscal and current account deficits; imprudent use of borrowed resources such as wasteful government spending, resort to borrowing for current consumption, undertaking of low economic priority development projects, and poor implementation of foreign aided projects; weakening of debt-servicing capacity in terms of stagnation or decline in real government revenues and exports; and rising real cost of government borrowing, both domestic and foreign. I believe that there is no magic solution to our debt problems. Pakistan will have to live with the macroeconomic consequences of heavy debt burden for several years. While, we will be doing our best to reduce debt burden in the medium-to-long run, we still need strong support from the international donor community in our efforts to stabilize debt problem.

Governance and Transparency
Excellencies!

18.        Weak governance has been an important source of macroeconomic difficulties, particularly in the 1990s. It has contributed in slowing Pakistan’s economic growth. Weak governance has also severely reduced the effectiveness of public expenditures; weakened the overall macroeconomic management; undermined investors’ confidence; encouraged tax evasion, loan defaults, non-payment of utility bills; and corruption. The government is fully aware of the problem and attached highest priority to improving governance. In fact, the government believes that good governance along with stabilization and structural reforms are essential to achieve sustainable economic growth. While initial actions have focused on accountability, especially with respect to loan and tax defaulters, the government has already embarked on a series of reform measures to improve governance. The key elements of the reform measures include devolution and decentralization of state power to the local level; downsizing/rightsizing of government offices; and the introduction of greater transparency in economic decision-making process. I would like to state that we have released the once most secret document i.e. the Policy Matrix agreed with the IMF along with the Memorandum of Economic and Financial Policies on our website. We are also releasing monthly economic update, the reconciled fiscal data as well as Economic Survey on our website. The government has also decided to make the Debt Committee Report public and would like to post it on its website as well.

Gender Issue

Excellencies!

19.        Let me turn to another important issue i.e. the gender issue. The government recognizes that women’s social indicators in Pakistan have consistently lagged behind those of men, despite the significant gains made in recent years. The government is fully committed to reducing gender disparities and has taken various measures to address this issue. The main thrust of the government’s on going development efforts is to reduce gender disparities in access to social services, particularly for rural women and low-income women in urban areas. Our Interim Poverty Reduction Strategy Paper (IPRSP) also recognizes the fact that poverty has a gender dimension and provides a roadmap for reducing such disparities. Recent initiatives to improve the representation of women holding elected offices, women’s access to productive resources such as micro-finance, extension services, and training, are noteworthy.

20.        Before, I close my opening remarks let me briefly dwell upon two important issues agitating the minds of investors, donor communities, and international financial institutions. First, what is going to happen to various reform measures initiated by this government after October 2002? Second, what is going to happen after June 2001, when, according to the judgement of the Supreme Court, Pakistan’s economy will be transformed into a Riba free economy? As regards, the first issue let me assure your Excellencies there is no looking back, no roll back of any reform measure initiated by this government. I am saying this for two reasons. Firstly, success breeds success. The success of these reforms will ensure their continuity. Secondly, the government is fully aware of this issue and is working on different alternatives for ensuring the continuation of the policies and structural reform measures. We will announce once it is finalized.

21.        As regards, the Riba free economy the Supreme Court of Pakistan in its judgement of December 23, 1999 on Riba has directed the government to take necessary actions to transform the economy consistent with Islamic injunction by June 2001. The government has set up three task forces—one dealing with financial system, the other on government finances, and the third one is on law. These three task forces have not yet submitted their reports. Once these reports will be available the government will look into their recommendations and will see what can be implemented. Furthermore, even with the transformation to a Riba free economy, all the existing financial obligations including under any instruments, or any other financial commitments made by or on behalf of the Federal Government or a Provincial Government or a financial or statutory corporation or other institution to make payments envisaged therein, shall be honoured and the international transactions will not be affected.

22.        At the end, your Excellencies, I would like to draw your attention to a very serious developments unfolding on our economic scene. It will have far-reaching impact on the country’s future growth, macroeconomic stability, and poverty. Pakistan was facing a long dry spell in some parts of Pakistan i.e. Balochistan and Sindh for quite some time resulting in serious drought-like situation last year. Hundreds and thousands of livestock were destroyed in the desert areas of Balochistan and Sindh inflicting heavy financial losses to millions of poor in those areas. The dry spell has now engulfed the entire country causing serious damage to agriculture in particular and the economy in general. Agriculture is currently facing 40 percent shortage of irrigation water. If this dry spell persists, there is a danger that the next year’s crop will also be impacted which could affect our efforts to revive economic growth and reduce poverty.

Excellencies!

23.        Let me reassure you, your Excellencies that reinvigorating growth, restoring macroeconomic stability, reducing poverty, and improving governance will be the central pillars of the government’s economic strategy. Our macroeconomic policies are being integrated with social and sectoral objectives to ensure that the policies are mutually supportive and consistent with a common set of objectives to spur growth and reduce poverty. We look to the future of Pakistan with optimism and hope, while at the same time being fully conscious of the challenges we face. Your continuous support to our efforts in making Pakistan moderate, democratic and economically stronger will be vital.  

<http://www.finance.gov.pk/other/speech.html> 

Poverty in Pakistan: Issues, Causes and Institutional
Responses 

A Poverty Assessment by the Asian Development Bank, Pakistan Resident Mission

ISLAMABAD, PAKISTAN (12 August 2002) - Poverty reduction has always been an important objective for the Asian Development Bank (ADB), and the Bank's Poverty Reduction Strategy, approved in November 1999 further articulated poverty reduction as ADB's overarching goal. The Pakistan Resident Mission (PRM) has carried out a poverty assessment for Pakistan as part of the process of developing a medium term Country Strategy and Program (CSP) for the country. This assessment is the prime input in the preparation of the CSP. The assessment was finalized after a series of consultations with key stakeholders, over a period of more than a year.

As the report shows, more than 12 million people were added to the ranks of the poor in Pakistan between 1993 and 1999. During this period, the level of poverty worsened from 26% of the population falling below the poverty line in 1993 to 32% below the line in 1999. The number of people falling below the poverty line is expected to have further increased after 1999, as growth has slowed, development spending has declined and the country has experienced a severe drought. Thus it would not be an exaggeration to say that more than a third of the country's population is currently living in poverty. Inequality has also intensified in the 1990s, with income distribution in urban areas being consistently more unequal than rural areas. In 1997, the income share of the bottom 20 percent of households had declined to 6.9 percent from 7.9 percent in 1987, and the income share of the bottom 40 percent of households declined from 20 percent to 18 percent. During the same period, the ratio of the share of the top quintile to that of the bottom quintile increased to 6.5 from 5.2 for all areas.

While poverty has intensified in the last decade, the country's long term prospects for achieving high growth are also being compromised by the low level of social sector investment. The UNDP's Human Development Index (HDI) shows that Pakistan's level of human development is low for its level of income. Pakistan's education indicators are the worst in South Asia - the fact that the education index in Nepal and Bangladesh, two countries with significantly lower per capita incomes than Pakistan, is 10 to 20 percent higher than Pakistan is a clear indicator of the low priority accorded to education in Pakistan's development policies. Pakistan's public sector spending on education and health, at barely 2.1 percent of GDP, is significantly lower than that of other countries in the region. At the same time, experience in Pakistan shows that accelerating human development is as much an issue of increasing expenditure on social sectors as of improving the effectiveness of spending through better governance, and future social development initiatives must be designed keeping this in mind. The report also analyses the links between poverty and vulnerability in Pakistan, and concludes that, in general, the capacity of the poor in Pakistan to access public entitlements like political processes, or goods and services which determine human development contrasts strikingly with that of the rich.

The report provides a comprehensive commentary on the causes of the increase in poverty in the 1990s, and hypothesizes that poor governance is the key underlying cause of poverty in Pakistan. Corruption and political instability, which are both manifestations of governance problems, have resulted in waning business confidence, deteriorating economic growth, declining public expenditure on basic entitlements, low efficiency in delivery of public services, and a serious undermining of state institutions and rule of law, which in turn translates into lower investment levels and growth. The effects of poor governance have compounded the economic causes of rising poverty such as decline in GDP growth rate, increasing indebtedness, inflation, falling public investment and poor state of physical infrastructure. At the same time, social factors such as the highly unequal distribution of land, low level of human development, and persistent ethnic and sectarian conflicts are also obstacles to the achievement of long term sustained development. Environmental degradation is also closely interlinked with increasing poverty and has impacts on the health of the poor as on the unsustainability of their livelihoods.

The report also analyzes responses to poverty in the country. Foremost among the Government's governance a related reform is the Devolution Plan. Under this plan, the delivery of services in the social and other poverty-focused sectors has been decentralized, with the elected local governments given the mandate and responsibility to manage and run these services. The Government is also in the process of introducing important reforms to improve the functioning of judicial institutions to enhance equitable access of the citizenry to justice. Other poverty alleviation measures of the Government include the introduction of microfinance banks, the institution of a small civil works program in the form of the Khushhal Pakistan Program, and a revamping of the Zakat system. ADB is assisting the Government in implementation of these poverty alleviation initiatives through key initiatives such as the $300 million Devolution Support Program loan being processed this year, which will enhance service delivery capacity in local governments; the $350 million Access to Justice Program loan, approved in December 2001, which aims to bring about reform in the lower judiciary and police, and the $150 million loan, approved in December 2000, for setting up the Khushhali Bank, which provides microfinance to poor households.

NGOs and Community Based Organization (CBOs) are working throughout Pakistan in a wide range of poverty reduction activities. While some NGOs are purely welfare oriented, many are involved in broader poverty reduction efforts including strategies to improve income-generation opportunities, savings and credit initiatives, and social development. The private sector has also started to play an increasing role in the delivery of social sector services, particularly health and education. This growing role of the civil society and private sector offers opportunities for public-private partnerships that could facilitate and enhance the quality and outreach of social and development services in the country.

Poverty alleviation has to be effected not only through macroeconomic policies, but also by bringing about significant improvements in the structure and functioning of systems of governance. The Government's ambitious governance reform agenda is at the core of its strategy for reviving growth, reducing poverty, and accelerating social development. In some areas, such as devolution, public expenditure management, anti-corruption initiatives, and the independence of the State Bank of Pakistan, appreciable progress has been made. In others, such as reform in the tax administration, the justice system, the police, and the civil service, the process, although started, is at a relatively early stage. However, for the success of the proposed development agenda it will be critical to consolidate the reforms in the first category, and accelerate the process in the second.

ADB will support the Government in this endeavor by continuing to provide assistance for Pakistan's poverty reduction strategy. According to the Country Director, ADB, M. Ali Shah, improving governance will be the central theme and the major focus of ADB's poverty reduction strategy for Pakistan. To this end, ADB's support will be channeled through a two-pronged approach: firstly, all ADB assistance envisioned under the CSP in the various sectors, such as supporting capacity building in public policy, enforcing women's and child rights, promoting public private partnerships in provision of social services and revitalizing instruments for social protection, will be developed and implemented in a manner consistent with the overall governance reforms in the country. Secondly, direct assistance would be provided to support the Government's governance reform agenda.

ADB will also support higher growth and greater stability of income and employment in rural areas by focusing on (i) getting the policy and institutional framework right; (ii) increasing agriculture productivity and diversification by moving to market-based agricultural prices, strengthening research and extension services, and expanding the role of the private sector in storage and agriculture support services; (iii) increasing nonfarm employment opportunities by developing agribusiness for exports and rural SMEs; (iv) promoting rural-urban linkages by improving communications, particularly rural roads; (v) expanding rural economic infrastructure, especially for irrigation, drainage, and water resource conservation and management; (vi) promoting financial intermediation, mobilizing savings, and enhancing access to credit in the rural areas; and (vii) investing in infrastructure in areas where incidence of poverty is high, and where the lack of infrastructure is a critical barrier to development.

Finally, to accelerate social development in Pakistan, ADB will concentrate on improving provincial resource management capacity for better allocative efficiency of human development investments; establishing decentralized financing, planning, and delivery of selected social services (health and population, and education); financing incremental services (new teachers, textbooks, medicines, etc.) or small scale civil works (building or repairing boundary walls or toilet facilities in girls schools for example) targeted at making existing social sector facilities operational, or improving their utilization; improving quality of primary education by supporting changes in governance structures, institutions and incentives; promoting public-private/civil society partnerships in the context of devolving service responsibilities to local governments; and improving municipal services in the context of devolving of municipal functions to local governments, with particular focus on services for the poor. ADB's development strategy shall target the most vulnerable groups, particularly women, children and the indigent.

12 August 2002

<http://www.adb.org/Documents/news/PRM/2002/prm_200203.asp> 

Q&A: Poverty Alleviation Requires Policy Changes:
UNDP

KARACHI: Lena M Lindberg, deputy resident representative, United Nations Development Program (UNDP) was recently in Karachi to participate in a 2-day conference on “Economic Development in Sindh”. The Daily Times caught up with her to discuss how the UNDP perceives vital issues faced by the country, including poverty, development and, environment. Excerpts from the interview follow:

Daily Times: Will infrastructure development as planned by President Musharraf’s government succeed in improving social sector indicators, including unemployment?

Lena Lindberg: We agree with the finance minister of Sindh when he said that to deal with unemployment of this size, unemployment is large in Pakistan and it has increased recently, it is not sufficient to step in and organise public works programmes that are not sustainable, not enough. So there has to be a combination of infrastructure programmes as well as improving the environment for small and medium-size businesses.

DT: Many economists have criticized the World Bank’s Poverty Reduction Strategy Paper. How would you rate it?

LL: We have discussed it a lot in the UNDP. We understand that it’s a homegrown paper. It’s not really a World Bank formulation. The World Bank has assisted it; made conditions for amending it. But it’s the government of Pakistan which formulated it and it’s in consultation with the provinces and to some extent also with civil society. We think it’s a good paper and a good strategy although it has some weaknesses in the areas of environment challenges and gender issues. These two very important fields are not sufficiently reflected in this strategy.

DT: What are those weaknesses?

LL: The environmental challenge, e.g. drought, which has extended over the years and become more and more severe, is merely mentioned, but there is no strategy to deal with it. And also land degradation and salinity, drainage problems and problems related to irrigation malpractices are not dealt within this strategy. Almost not at all. When it comes to water the strategy includes aspects of drinking water and water for sanitation but almost nothing about water management, water distribution, water efficiency and the fact that in some areas in Pakistan groundwater is almost being depleted like in Balochistan. The great leakage of water from irrigation systems, where only 40 percent comes to effective use-all these things are left out. Also, gross industrial pollution is dealt with very superficially in a paragraph or two whereas it is a major problem causing land degradation, air pollution and environmental health problems. That’s almost missing. All these land degradation problems, natural resource management issues are mostly left out.
DT: What are the UNDP’s priority areas in Pakistan?

LL: We have three broad fields where we are working now. The first is governance. We are very involved in the support of the devolution plan process; capacity-building of councillors, especially women councillors. We are also undertaking some experimental projects to help local communities with urban development planning. Instead of waiting for the plans to come from the top, the communities should prepare their own development plans and then present them to the higher levels and that way, for example, infrastructure projects should be much better planned. And also surface-sector projects could be better planned involving these initiatives. Another big thing is poverty reduction where we have community-based activities; helping communities identify their problems, their priorities and to some extent finding the solutions also. Then we assist them in those small schemes. We also provide training in different skills, we promote self-employment and production at the household level and community level and we provide certain amounts of micro-credit.

And then the third big thing is assistance in the environment where we have so been working in the area of biodiversity because we have extra funding from a global environment facility. So we have biodiversity activities on wildlife and ecosystems. We also have a project on vehicular pollution to reduce emissions from vehicles.

DT: Certain quarters have accused the UNDP of failing to address poverty in an effective and meaningful manner in Pakistan. What are your comments on this?

LL: First of all, the UNDP has limited funds. So how can a development agency with such small resources make a difference when you have a country of 140 million and 40 percent of them face dire poverty? It’s impossible for the UNDP. The only impact we hope to have is to help develop methodology on a micro-scale and to demonstrate to the authorities, NGOs and, community organizations how things can be done in a different and better way. And then hopefully, those partners will be interested to work and scale it up, especially on the government’s side and with the involvement of other development partners and local governments. Of course, the demonstration has to be followed through by somebody upscale since we don’t have any money for investment. We can only provide some expertise and identify expertise within the country. We don’t use international expertise very much. We always make use of homegrown expertise first. Then we also make use of Pakistanis abroad. We have special programmes for them. Many of them actually accept work for a short period of time in Pakistan without a salary, for two, three or, four weeks.  

DT: How does the UNDP rate Pakistan’s military government’s poverty alleviation programme?

LL: The big schemes for poverty reduction; the Khushali Pakistan programme, the Khushali Bank are of course very good but not enough. They are sort of anti-poverty measures but they cannot change the way poverty is generated in this country. There is a need to review most of the policies in the country to see how they impact the people. Many of them in fact have a negative impact. Many, many policies have to be changed. We would like to promote action that is not welfare but that provides the necessary rules of the game in the country.

DT: How does the UNDP appreciate Pakistan’s economic woes in the backdrop of the US-led military operation in Afghanistan?

LL: It was of course very important for Pakistan to join the support for the coalition. Of course, it was welcomed from most of the world. I don’t think the President had much choice at the time. Another decision probably would have led to a very bad situation to Pakistan, externally, and perhaps also within the country. My own impression is that a majority of the common people support this decision. The minority is not happy with it. We take it as a good decision. Hopefully it will continue in the direction of countering all terrorists.
 Shahid Husain, Daily Times,
 5 October 2002
 <http://www.dailytimes.com.pk/default.asp?page=story_5-10-2002_pg5_5> 

Breaking the Vicious Cycle of Poverty Through Micro
 Credit 

The Grameen Bank is based on the voluntary formation of small groups of five people to provide mutual, morally binding group guarantees in lieu of the collateral required by conventional banks. At first only two members of a group are allowed to apply for a loan. Depending on their performance in repayment the next two borrowers can then apply and, subsequently, the fifth member as well.

The assumption is that if individual borrowers are given access to credit, they will be able to identify and engage in viable income-generating activities - simple processing such as paddy husking, lime-making, manufacturing such as pottery, weaving, and garment sewing, storage and marketing and transport services. Women were initially given equal access to the schemes, and proved not only reliable borrowers but astute enterpreneurs. As a result, they have raised their status, lessened their dependency on their husbands and improved their homes and the nutritional standards of their children. Today over 90 percent of borrowers are women.

Intensive discipline, supervision, and servicing characterize the operations of the Grameen Bank, which are carried out by "Bicycle bankers" in branch units with considerable delegated authority. The rigorous selection of borrowers and their projects by these bank workers, the powerful peer pressure exerted on these individuals by the groups, and the repayment scheme based on 50 weekly installments, contribute to operational viability to the rural banking system designed for the poor. Savings have also been encouraged. Under the scheme, there is provision for 5 percent of loans to be credited to a group find and Taka 5 is credited every week to the fund.

The success of this approach shows that a number of objections to lending to the poor can be overcome if careful supervision and management are provided. For example, it had earlier been thought that the poor would not be able to find renumerative occupations. In fact, Grameen borrowers have successfully done so. It was thought that the poor would not be able to repay; in fact, repayment rates reached 97 percent. It was thought that poor rural women in particular were not bankable; in fact, they accounted for 94 percent of borrowers in early 1992. It was also thought that the poor cannot save; in fact, group savings have proven as successful as group lending. It was thought that rural power structures would make sure that such a bank failed; but the Grameen Bank has been able to expand rapidly. Indeed, from fewer than 15,000 borrowers in 1980, the membership had grown to nearly 100,000 by mid-1984. By the end of 1998, the number of branches in operation was 1128, with 2.34 million members (2.24 million of them women) in 38,957 villages. There are 66,581 centres of groups, of which 33,126 are women. Group savings have reached 7,853 million taka (approximately USD 162 million), out of which 7300 million taka (approximately USD 152 million) are saved by women.

It is estimated that the average household income of Grameen Bank members is about 50 percent higher than the target group in the control village, and 25 percent higher than the target group non-members in Grameen Bank villages. The landless have benefited most, followed by marginal landowners. This has resulted in a sharp reduction in the number of Grameen Bank members living below the poverty line, 20 percent compared to 56 percent for comparable non-Grameen Bank members. There has also been a shift from agricultural wage labour (considered to be socially inferior) to self-employment in petty trading. Such a shift in occupational patterns has an indirect positive effect on the employment and wages of other agricultural waged labourers. What started as an innovative local initiative, "a small bubble of hope", has thus grown to the point where it has made an impact on poverty alleviation at the national level ".  

<http://www.grameen-info.org/bank/bcycle.html>

Poverty Reduction Strategy Paper, Ministry of Finance, Government of Pakistan, December 2003
 [Extract] 

Introduction

1.1        The decade of the 1990’s ended on a worrying note for Pakistan’s economy. The incidence of poverty increased from 26.1 percent in 1990-91 to 32.1 percent in 2000-01, reversing the declining poverty trend in the 1970’s and the 1980’s. The reversal in poverty decline happened in the setting of a decade long slowdown in economic growth, decline in private and public investment, increase in fiscal and current account deficits and rapid debt accumulation. These adverse economic outcomes pointed towards deep structural flaws in the economy that needed urgent attention.

1.2        In late 1999, the Government began to implement measures to address the structural flaws and arrest the deterioration in economic trends. In November 2000, the government adopted a strategy to reduce poverty and restore economic stability. The strategy was articulated in the Interim Poverty Reduction Strategy Paper (IPRSP) that provided an integrated focus on a diverse set of factors that impact on poverty and other development outcomes. The core elements of the IPRSP were to engender growth, improve human development and governance and reduce the vulnerability of the poor to shocks.

1.3        Under the IPRSP, the economy has made significant progress towards macroeconomic stabilization and revival of economic growth. The economy is now more stable and growth has picked up. Policies are more transparent and predictable. Confidence of the private sector is restored and expatriate Pakistanis are remitting their savings. The stock market is buoyant and the Balance of Payments is in a comfortable position. Foreign exchange reserves have crossed the $ 12 billion mark (sufficient to finance 12 months of imports) and the exchange rate is stable. Inflation and interest rate are at their lowest levels in many years. Domestic and external debt has declined, the fiscal deficit has been reduced and the current account balance is in surplus. Tax revenue is growing, exports have picked up and the country’s credit rating in the international market has improved. These achievements are all the more remarkable, given that Pakistan had to contend with a series of domestic and external shocks in the period of the IPRSP, such as an unprecedented drought, the events of 9/11, regional tensions, and rising uncertainties in the run up to the war in Iraq.

1.4        The I-PRSP discussed a number of measures the Government had taken to achieve the objectives and goals of the strategy. A lot more has been accomplished since then. Political devolution has progressed rapidly, banking sector reforms are at an advanced stage and progress has been made in strengthening poverty monitoring. The stage is now set for the revival of investment and acceleration of economic growth. Continued broadening and deepening of reform on several fronts will ensure that growth translates into improved poverty and human development outcomes.

PRSP Challenges and Strategy

1.5        The development challenges for Pakistan include achieving high and sustained broad-based economic growth particularly in rural areas; reducing poverty; providing essential social and economic services and infrastructure to the poor; creating job opportunities, and improving governance. Noticeable progress has been achieved over the last three and half years. However, poverty reduction is still a major challenge. The core elements of the strategy in the PRSP are: 

a)    Accelerating economic growth while maintaining macroeconomic stability.

b)   Improving governance.

c)    Investing in human capital.

d)   Targeting the poor and the vulnerable. 

1.6        The strategy recognizes that: 

·         For growth to reduce poverty, it must emanate from sectors that have greater potential to generate employment.

·         Since various forms of poverty in Pakistan are acute, these require targeted policy interventions to provide quick relief through short-term employment opportunities, social safety nets and financial assistance.

·         Additional income alone would not eliminate poverty unless the causes of poverty are addressed. Hence the need to improve access to basic needs such as primary education, primary health care, drinking water, access to justice, in order to win the fight against poverty.

·         Improvement in public service delivery and governance and increase in resources is needed.

·         Involvement of the poor in the formulation of these policies and management of their affairs is critical in attaining the objectives of the strategy, and there is need to forge a broad-based alliance with civil society and the private sector in this regard.

·         There is need for a strong program for monitoring and capacity development, as well as impact assessment.

·         Availability of adequate resources for poverty reduction programs is important in determining the effectiveness of the strategy. Detailed costing of proposed initiatives is expected to take some time as it involves comprehensive exercise at the district, provincial and federal levels. 

1.7        The growth strategy proposed in the PRSP has a strong labour bias focusing on rapid growth in agriculture, small and medium enterprises, housing and construction, information technology (IT) and telecommunication sectors and exports, all of which have strong potential to create jobs and associated self employment opportunities. The strategy emphasizes continuity in opening up of the economy through stable set of macroeconomic policies in the areas of privatization, trade liberalization, banking and financial sector, labour markets, regulatory environment to take advantage of opportunities unleashed by evolving global trade regime while pursuing technological transformation in agricultural and industrial sectors to face the challenges of competitive international environment. It reinforces the need for improved access to social services, broad-based governance reforms, and access to assets through micro-credit, gender equality, targeted interventions, private sector development and its participation in all sectors of the economy, and efficient judicial system.

1.8        The impact of full PRSP outputs will provide increased security against macroeconomic instability, increased per capita income, improved coordination and financing of investment programs within the social sectors so as to provide adequate coverage of the basic social service needs of the people. Further, improved access to social amenities and sources of economic empowerment will be pursued through improvements in public sector enterprises’ management, expansion of infrastructure, and provision of social safety nets. The economic activity envisaged will provide an opportunity for increased revenue mobilization and release of more resources for investment. The strengthening of monitoring and evaluation capacity at all levels of the government will facilitate tracking of budgetary and non-budgetary expenditures as well as progress and impact monitoring.

1.9        The proposed strategy also focuses on attainment of Millennium Development Goals (MDGs) for sustainable development and poverty reduction. For this purpose, the strategy aims at forging an alliance with civil society and private sector to reduce poverty and accelerate growth. The PRSP includes strategy to address issues of gender, employment, and the nexus of environment with poverty. Vital elements of the PRSP include devolution program, human development and rural development strategy. Pakistan intends to initiate second-generation reforms in some of the key areas such as financial sector, capital markets, etc. The deepening of reforms in the power sector will continue over the medium term.

1.10      The Government believes that it carries the primary responsibility for improving the standard of living of its people. The Government also recognizes that the external assistance is a supplement to domestic resources, not a substitute, and that it must endeavour to increase the latter. The Government has made substantial progress in mobilizing its own resources but the magnitude of the resources needed to achieve Millennium Development Goals (MDGs) is such that the support of development partners is essential. The PRSP recognizes that economic growth has to be the center of our attention as the most effective and sustainable means of reducing poverty. However, sustainable growth itself is largely a function of investing in programs that are truly home grown, based on the country’s own capacity and priorities. Ownership is the key and can be assured in several ways. Firstly, it is critical that donors’ support is built around genuinely home grown PRSPs and development strategies. Secondly, it is essential that the quality of aid is scaled up and micro management and transaction costs be reduced. In this context, we do realize that monitoring is a crucial aspect of results based development and welcome the focus on this critical issue. Nonetheless, monitoring should not become an end in itself. The real issue is effective follow-up and implementing remedial measures and the reinforcement of accountability for results. The design of the monitoring framework should be country specific, consistent with the capacity, and fully harmonized amongst donors.

1.11      Pakistan seeks to draw the focus of the development partners on the unsustainable debt burden of the non-HIPC countries that have credible macroeconomic and structural reform programs but are unable, because of their debt overhang, to raise resources to finance human development and badly needed infrastructure. Debt relief, write-offs or swaps will give Pakistan the required fiscal space. Pakistan also seeks a level playing field with open access to markets, as it firmly believes that it will be trade and not aid, which will ensure sustainable reduction in poverty. In particular, there is need to address the issue of agricultural subsidies in the developed world to facilitate developing countries to achieve agricultural growth and higher market share.

1.12      The full PRSP addresses important gaps in the poverty reduction strategy identified in the IPRSP. The PRSP now articulates a more comprehensive strategy including policies for rural development, gender issues, employment and the environment. In addition, the full PRSP now includes a more focused human development strategy. The PRSP utilizes a fiscal framework which takes into account mechanisms for transfer of resources and responsibilities from the federal to the provincial and then to the district governments, as well as preliminary costing of programs to achieve targets especially in the education and a credible monitoring framework in particular for tracking intermediate indicators in the social sectors and antipoverty programs.

1.13      Pakistan now has three tiers of fully functional governments, national, provincial, and district and their respective roles are defined in the 1973 Constitution and Local Government Ordinance 2001. All the three tiers have given primary importance to reducing poverty. In order to pool poverty reduction efforts at all three levels of government, national, provincial and districts, have contributed towards the formulation of the PRSP, which in turn have provided the basis of the full PRSP. There is an ensuing debate over devising the most effective mechanism to transmit policy priorities from higher-level governments to the lower level. In the meantime, harmonization in priorities is being resolved through the evolving relationship between three tiers of government.

1.14      The provincial governments are in full agreement to adopt a structured framework to plan and implement reforms in consultation with the local governments, provincial line departments, civil society, and other stakeholders. They have already completed the consultative process and their draft PRSPs are ready for approval by their respective governments except Punjab, which has already approved by the Chief Minister. Baluchistan has also finalized its PRSP. Clearly, this will facilitate a broad linkage between national priorities and provincial policies as well as implementation at district level.

1.15      The full PRSP is a comprehensive policy document that translates the government’s vision and strategy into concrete programs with a well-defined road map to achieve both economic growth and poverty reduction objectives. It develops linkages between the macroeconomic framework, structural adjustment, and sectoral development policies, and measures to support targeted segments of the poor to ensure sustainable development. In short, the full PRSP is a living document based on six principles with in-built mechanism for adjustment overtime:  

(i)   It is home grown, involving broad based participation by key stakeholders;

(ii)   it is result oriented, focusing on monitorable outcomes that benefit the poor;

(iii)  it is comprehensive, recognizing the multidimensional nature of poverty;

(iv)  it is prioritized, so implementation is feasible in both fiscal and institutional terms;

(v)  it is oriented to build public-private partnership; and

(vi)  it is aligned with the Millennium Development Goals (MDGs). 

1.16      Both the process and content of the PRSP are viewed as dynamic in nature. The Ministry of Finance took the lead in the formulation of PRSP in collaboration with the line ministries, provincial and local governments. This process included wide ranging consultations with stakeholders, Parliamentarians, civil society, non-governmental organizations, and donors at various workshops and community dialogues. This brought about greater awareness of the PRSP, which will facilitate its implementation. Looking ahead, PRSP will need strengthening the mechanism and corresponding capacity building for periodical updating to reconcile it with emerging socio-economic realities, impact analysis of policy choices, evaluation of poverty reduction strategies, macroeconomic targets, linkages between policies and poverty outcomes, and improvements in the service delivery, as new data from various surveys ands sources become available.

1.17      Towards these goals, the PRSP is being supported with a strong participatory monitoring program as well as capacity building at each level of government. The Core Welfare Indicators Questionnaire (CWIQ) survey will provide data for intermediate indicators in social sectors at the district level to determine the baselines. Subsequently, annual updates will be used for evaluation and impact assessment of poverty reduction expenditures. The surveys will also evaluate the efficiency of public service delivery systems, which will contribute towards the adjustment of policy interventions to achieve target outcomes. The CWIQ or any other survey except PIHS/HIES will not be used or recognized for poverty measurement in the country. Social sector targets have been explicitly indicated in the PRSP. Investment programs will be more specifically formulated as soon as the costing of education, health and population programs becomes available.

1.18      The Government clearly recognizes that there are some risks and challenges in implementing the PRSP. First, the effective implementation of the reform agenda will require political commitment and pro-active collaboration among many ministries and departments. To monitor and evaluate the performance when there are gaps in available information, will require developing a reliable and comprehensive database that is periodically updated, for monitoring and evaluation of PRSP process is a multi year undertaking. Second, capacity building will need to be addressed quickly at the provincial and local government levels since both levels of government are new to the PRSP approach and suffer from capacity constraints in certain areas. Third, there is need to ensure consistency between the priorities of three tiers of governments: Federal, provincial, and district. The mechanism needs to be strengthened to transmit the priorities of the higher level of governments to district governments. Fourth, the risk of waning interest of Pakistan’s international development partners in the country’s development process could jeopardize the significant progress made over the last three and half years. The daunting challenge is to translate structural reforms and stable macroeconomic framework into broad based economic growth. On the whole, the success of the PRSP will depend critically on the effective implementation, continuous evaluation of the impact and regular feedback to policy makers for appropriate adjustment in the policies and institutional regime, enhanced market access in the global markets, debt relief, and concessional lending to achieve the output objectives of the program. …

December 2003
<http://www.finance.gov.pk/poverty/prsp_03.pdf>
 

Twelfth SAARC Summit Islamabad Declaration
[Extract] 

Poverty Alleviation

10.        We recognize poverty alleviation as the greatest challenge facing the peoples of South Asia and declare poverty alleviation as the overarching goal of all Saarc activities. It is imperative to relate regional cooperation to the actual needs of the people.

11.        Provision of basic needs, promotion of literacy, and better health care are a regional priority. It is important to undertake effective and sustained poverty reduction programmes through pro-poor growth strategies and other policy interventions with specific sectoral targets.

12.        The Plan of Action on Poverty Alleviation, prepared by the meeting of finance and planning ministers in Islamabad in 2002, is hereby approved.
13.        The reconstituted Independent South Asian Commission for Poverty Alleviation (Isacpa) has done commendable work. An effective strategy should be devised to implement suggestions made in its report "Our future our responsibility". In this context, Isacpa should continue its advocacy role. It should prepare and submit to the next Saarc summit a comprehensive and realistic blueprint setting out Saarc development goals for the next five years in the areas of poverty alleviation, education, health and environment, giving due regard, among others, to the suggestions made in the Isacpa report.

14.        The Saarc secretariat should periodically update and submit regional poverty profiles.

15.        Saarc should continue to collaborate with international organizations and UN agencies in the field of poverty alleviation. Arrangements for Saarc food security reserves should be made more effective. We also recommend the establishment of a regional food bank for which a concept paper should be prepared.

16.        Investment in human resources is critical for future development of South Asia. It is, therefore, essential to establish a network of centres of higher learning, training and skill development institutes (SDIs) across South Asia. In this context, the role of the SAARC Human Resource Development Centre (SHRDC) is important. … 

6 January 2004
<http://ipripak.org/factfiles/ff47.shtml> 

Developed World Asked to do more: Poverty
Reduction 

SHANGHAI, May 27: The Global Conference on Poverty Reduction ended in Shanghai on Thursday amidst calls for the developed world to help poor countries in achieving their goals of reducing poverty.

After two days of discussions that highlighted some of the success stories coming out of third world countries, speakers at the conference warned of dire consequences if the developed world did not contribute more to the uplift of the poor in developing countries.

While much of the criticism was directed at developed countries, most of which were conspicuously missing from the conference, the World Bank and other multilateral agencies also came in for a fair amount of attack from participants.

In Thursday's session, Ugandan president Yuveri Museveni questioned the concept of micro-finance, as propounded by donor agencies and said that under existing system of trade, it was the third world countries that were in fact the donors "as we donate our profit margins and our job opportunities to the West by exporting raw materials."

The Ugandan president gave the example of coffee prices and said that while his country was the fourth largest producer of the commodity, a small fraction of the money spent on coffee came to it because most of the money was made in roasting, packaging and selling the product instead of its production.

He echoed popular sentiment when commenting that the developing world was not looking for hand-outs but wanted to be an equal partner in a fair system of trade. On Tuesday, China called for establishing a new international, political and economic order "that is fair and rational."

Speakers talked of taking a holistic view of development in which the governments of the host countries would have to be involved. In a case study on Pakistan presented on Thursday, NGO specialist Shoaib Sultan Khan of the Rural Support Programme Network that the impact of social uplift programmes could only be felt when "time, coverage and complimentary public investment were made." Khan's work in the Aga Khan Rural Support Programme was highlighted at one of the sessions.

For the World Bank, which has been plugging at more donor funding being channelled through it, what was clear was that future programmes would have to be home-grown and not finalized in Washington.

World Bank South Asia economist Shanta Devarajan said that poverty reduction in South Asia is possible as shown by experiences in Bangladesh and India. Devarajan said that the West has to do more as it is evident this is not the case at present.

"The OECD countries give agriculture subsidies worth of $300 billion to their farmers and $50 billion in aid to poorer countries. When pushed to give more their excuse is that they do not have the fiscal space to do so," said Devarajan, adding "but what we are saying is that they should reduce their subsidies if they can't raise aid funds."

World Bank officials also pointed out that only one fifth of those cases that were being discussed at the conference were actually funded by the bank. They said that one of the aims of the conference was to tell donor agencies and developed countries that aid money was being utilized effectively.

Kamal Siddiqi, Dawn, 28 May 2004

<http://66.102.7.104/custom?q=cache:iCe1i6KEq-YJ:www.dawn.com/2004/05/28/ebr7.htm+poverty&hl=en&ie=UTF-8> 

UN General Assembly Secretary-General: Message on
the International Day for the Eradication of Poverty
17 October 2004

Next September, world leaders will gather at UN Headquarters for a high-level event to review progress in implementing the Millennium Declaration they adopted in 2000. But even now, well before that event, we already know that a major breakthrough will be needed if the eight Millennium Development Goals derived from the Declaration are to be met by the target year of 2015.

There have been some notable advances and cause for hope. The goals have transformed the practice of development cooperation. The broad consensus around a set of clear, measurable and time-bound goals has generated unprecedented, coordinated action, not only within the United Nations system, including the Bretton Woods institutions, but also within the wider donor community and, most importantly, within developing countries themselves.

In terms of actual progress towards the goals, the data available so far suggest that developing countries fall into three broad groups. The first, comprising most of Asia and Northern Africa, is largely on track to meet the target of halving extreme poverty and to achieve many of the social targets. The second, mainly in West Asia and Latin America and the Caribbean, has been making good progress towards some individual goals, such as achieving universal primary education, but has been less successful in reducing poverty. The third group, largely comprising countries in sub-Saharan Africa but also least developed countries in other regions, are far from making adequate progress on most of the goals.

Intent as we are on drawing up a solid statistical picture of our gains and shortfalls, let us also remember that our concern is not numbers but individuals: young people at work and out of school, children orphaned by AIDS and other preventable diseases, mothers who die in childbirth, communities affected by environmental degradation. It is well within our power to overcome these and other terrible manifestations of poverty and underdevelopment.

Ten years from the target date, the goals remain feasible and affordable. But we need a quantum leap in aid, debt relief and trade concessions on the part of developed countries as expressed in goal number eight. And we need similarly dramatic changes on the part of developing countries to retool their development programmes. On this International Day for the Eradication of Poverty, I urge all countries to uphold their responsibilities. And I urge the world’s leaders to make next year’s high-level event not just a simple stock-taking exercise, but an occasion on which we inject new political energy into an effort that is crucial for the world’s future security and well-being.

<http://www.un.org/esa/socdev/poverty/poverty_link3.htm> 

Statement by Mr. Anwarul K. Chowdhury United
Nations Under-Secretary-General 

Statement by Mr. Anwarul K. Chowdhury United Nations Under-Secretary-General and High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States in the Second Committee of the 59th session of the General Assembly  on item 89 (a) Implementation of the first United Nations Decade for the Eradication of Poverty (1997-2006)

Mr. Chairman,

Distinguished delegates,

The adoption by the United Nations General Assembly of the resolution in 1995 on the first United Nations Decade for the Eradication of Poverty (1997-2006) marked a turning point in mobilizing international support for the global fight against poverty. Five years later in the Millennium Declaration, poverty has been identified as the greatest challenge of the new century. Indeed, more people die nowadays from poverty than in conflicts or from violence. This year’s Report of the Secretary-General on the Decade (A/59/326) covers extensively the contribution of microcredit to poverty eradication. The General Assembly recognized in 1997 that special role in its resolution 52/194, subsequent to which the Secretary-General has submitted a number of reports highlighting the significant support that microcredit programmes was providing to poverty reduction in various parts of the world. Having originated in 1976 from Bangladesh, through its legendary Grameen Bank, it is estimated that over 67 million poor and low income people had access to microfinance worldwide in 2003. The last count indicated that as many as 70 countries – developing, economies in transition and developed – have active microcredit / microfinance programmes.

Experience of the Least Developed Countries (LDCs) show that microcredit and microfinance are effective tools of poverty eradication and empowerment of people, particularly women. In Bangladesh, the Grameen Bank, the largest provider of microcredit in the world, has a network of nearly 1300 branch offices in more than 46,000 villages that serve 3.8 million clients, 96 per cent of whom are women. It has disbursed so far loans worth US$ 4.5 billion. Microcredit has been incorporated into the national development strategy of Bangladesh and has become its most powerful engine in pursuit of the 2015 Millennium Development Goals (MDGs) on poverty eradication. Experience of Bangladesh is not unique. From Benin in Africa to Bolivia in Latin America, from Nepal in South Asia, to Samoa in the Pacific, to Bosnia and Herzegovina in Europe, poor people can tell many success stories about microcredits that brought dramatic change to their lives and opening up the doors to a meaningful future. As a matter of fact, Benin which leads the LDC Group, has the largest number of microfinance institutions (MFIs) in the West Africa Monetary Union (UMOA) region with more than 1,100 outlets and 700,000 clients.

The 2004 ECOSOC High-Level Segment deliberations on the theme of “resources mobilization and enabling environment for poverty eradication” in the context of implementation of the Programme of Action for the Least Developed Countries for the Decade 2001-2010 took stock, among other things, of the role of financial intermediation (savings, credits and remittances) in poverty reduction in the LDCs and concluded that microcredit can be an effective tool for increasing productive capacities of local communities, inclusion of poor people in economic flows, promoting local markets growth, creating jobs and employment opportunities. During the same segment, a roundtable of the Investment Forum on “Local Private Sector Development: The Role of Microfinance/Microcredit” chaired by H.E. Mathieu Kerekou, President of Benin examined the obstacles to microfinance activities in LDCs and identified lack of policy and regulatory environment, insufficient access to information and weak human and institutional capacity for microfinance as significant. It concluded that as a result of these impediments access to microcredits remains limited. In most LDCs, the penetration rates hardly exceed 1 per cent. That, at the same time, also tells us about the huge potential of expansion of microcredit programmes in these countries, thereby contributing to their poverty reduction efforts.

The impact of microcredit shows that it has been most pronounced in extreme poverty. Microfinance should not, however, be viewed as the sole instrument for poverty reduction. Its enormous potential can be fully realized only in combination with other interventions like social protection programmes, wage employment schemes, education and training and as part of a broader poverty eradication strategy. Microcredit is an inducer, a catalyst for economic activity of the poor people. Another of its far-reaching impact is the empowerment of people, particularly women. Numerous studies conclude that microcredit lead to the empowerment of women by providing them with income, increasing their role in household decisions, changing family attitudes and societal perception, providing with opportunity for networking and with access to information and markets. It increases self-confidence and advances the status of women in the community. On the occasion of the launch of the International Year of Microcredit (IYM 2005) this week on 18 November, the United Nations Office of the High Representative has teamed up with the International Fund for Agricultural Development (IFAD) to host a roundtable on the subject of “Empowering Women through Microcredit”.

The International Year of Microcredit provides us with the unique opportunity for improving awareness, sharing knowledge, as well as best practices and lessons learned in microcredit and microfinance. The Secretary-General has renewed his invitation in his present Report to Member States to establish national coordinating committees for the observance. He has also asked the United Nations system and other stakeholders to develop new partnerships to link their microcredit activities. Many LDCs have already undertaken national activities related to the Year (Angola, Bangladesh, Mali, Mauritania, Togo, Zambia, etc.) and many more, I am sure, will follow their suit. The Office of the High Representative is actively involved in the United Nations Secretariat’s preparations for the observance of the Year. From a personal point, I feel particularly enthusiastic about the IYM 2005 as I had the pleasure of proposing the initiative in 1998 in a different incarnation.

Microcredit/microfinance pose enormous potential for the human security in the LDCs. For the LDCs microcredit is more than just a development tool. It is a vital means of income generation, social inclusion and empowerment. In short, it is an important means of our continuing and wide-ranging struggle against poverty in the LDCs and its teeming millions. 

15 November 2004
<http://www.grameen-info.org/bank/HRStatement.html> 

UN Secretary General: Micro credit Extends same
Rights to Poor as are Available to every one else
 

Following is the text of Secretary-General Kofi Annan’s video message on the launch of the International Year of Microcredit today, 18 November:

Microfinance has proved its value, in many countries, as a weapon against poverty and hunger.  It really can change peoples’ lives for the better -- especially the lives of those who need it most.

A small loan, a savings account, an affordable way to send a pay cheque home can make all the difference to a poor or low-income family.  With access to microfinance, they can earn more, build up assets, and better protect themselves against unexpected setbacks and losses.  They can move beyond day-to-day survival towards planning for the future.  They can invest in better nutrition, housing, health, and education for their children.  In short, they can break the vicious circle of poverty.

If we are to reach the Millennium Development Goals, that is exactly the kind of progress we need to make.

Let us be clear:  microfinance is not charity.  It is a way to extend the same rights and services to low-income households that are available to everyone else.  It is recognition that poor people are the solution, not the problem.  It is a way to build on their ideas, energy, and vision.  It is a way to grow productive enterprises, and so allow communities to prosper.

Where businesses cannot develop, countries cannot flourish.  Let us use this International Year of Microcredit to put millions of families on the path to prosperity.

<http://www.un.org/News/Press/docs/2004/sgsm9601.doc.htm>
 

UN General Assembly Resolution 59/247 

Implementation of the first United Nations Decade for the Eradication of Poverty (1997–2006)

The General Assembly,

Recalling its resolutions 47/196 of 22 December 1992, 48/183 of 21 December 1993, 50/107 of 20 December 1995, 56/207 of 21 December 2001, 57/265 and 57/266 of 20 December 2002 and 58/222 of 23 December 2003,

Recalling also the United Nations Millennium Declaration, adopted by Heads of State and Government on the occasion of the Millennium Summit, and their commitment to eradicate extreme poverty and to halve, by 2015, the proportion of the world’s people whose income is less than one dollar a day and the proportion of people who suffer from hunger,

Underlining the priority and urgency given by the Heads of State and Government to the eradication of poverty, as expressed in the Monterrey Consensus of the International Conference on Financing for Development and in the outcomes of the World Summit on Sustainable Development,

Recalling the outcomes of the major United Nations conferences and summits in the economic and social fields,

Bearing in mind the outcomes of the World Summit for Social Development and the twenty-fourth special session of the General Assembly,  

Expressing its deep concern that the number of people living in extreme poverty in many countries continues to increase, with women and children constituting the majority and the most affected groups, in particular in the least developed countries and in sub-Saharan Africa,

Welcoming the initiative launched by the Presidents of Brazil, Chile and

France and the Prime Minister of Spain, with the support of the Secretary-General, to convene in New York on 20 September 2004, the Summit of World Leaders for Action against Hunger and Poverty,

Noting the report of the Commission on Private Sector and Development entitled Unleashing Entrepreneurship: Making Business Work for the Poor, Reiterating the need to strengthen the leadership role of the United Nations in promoting development,

1.          Takes note of the report of the Secretary-General;

2.          Reiterates that eradicating poverty is the greatest global challenge facing the world today and an indispensable requirement for sustainable development, in particular for developing countries;

3.          Underlines the fact that each country has the primary responsibility for its own sustainable development and poverty eradication, that the role of national policies and development strategies cannot be overemphasized, and that concerted and concrete measures are required at all levels to enable developing countries to eradicate poverty and achieve sustainable development;

4.          Acknowledges that sustained economic growth, supported by rising productivity and a favourable environment, including for private investment and entrepreneurship, is necessary to eradicate poverty, achieve the internationally agreed development goals, including those contained in the United Nations Millennium Declaration, and realize a rise in living standards;

5.          Reaffirms the importance of the contributions and assistance of developing countries to the other developing countries in the context of South-South cooperation in order to achieve development and eradicate poverty;

6.          Recognizes that, for developing countries to reach the targets set in the context of national development strategies for the achievement of the internationally agreed development goals, including those contained in the Millennium Declaration, in particular the goal on the eradication of poverty, and for such poverty eradication strategies to be effective, it is imperative that developing countries be integrated into the world economy and share equitably in the benefits of globalization;

7.          Reaffirms that, within the context of overall action for the eradication of poverty, special attention should be given to the multidimensional nature of poverty and the national and international conditions and policies that are conducive to its eradication, fostering, inter alia, the social and economic integration of people living in poverty and the promotion and protection of all human rights and fundamental freedoms for all, including the right to development;

Global Response for the Eradication of Poverty

8.          Stresses the importance of the follow-up to the outcome of the International Conference on Financing for Development, and calls for the full and effective implementation of the Monterrey Consensus;

9.          Reaffirms that good governance at the international level is fundamental for achieving poverty eradication and sustainable development; that, in order to ensure a dynamic and enabling international economic environment, it is important to promote global economic governance through addressing the international finance, trade, technology and investment patterns that have an impact on the development prospects of developing countries; that, to that end, the international community should take all necessary and appropriate measures, including ensuring support for structural and macroeconomic reform, a comprehensive solution to the external debt problem and increasing market access for developing countries; that efforts to reform the international financial architecture need to be sustained, with greater transparency and the effective participation of developing countries in decision-making processes; and that a universal, rule-based, open, nondiscriminatory and equitable multilateral trading system, as well as meaningful trade liberalization, can substantially stimulate development worldwide, benefiting countries at all stages of development;

10.        Also reaffirms that good governance at the national level is essential for poverty eradication and sustainable development; that sound economic policies, solid democratic institutions responsive to the needs of the people and improved infrastructure are the basis for sustained economic growth, poverty eradication and employment creation; and that freedom, peace and security, domestic stability, respect for human rights, including the right to development, and the rule of law, gender equality, market-oriented policies and an overall commitment to just and democratic societies are also essential and mutually reinforcing;

11.        Welcomes the outcomes of the eleventh session of the United Nations Conference on Trade and Development, held in São Paulo, Brazil, from 13 to 18 June 2004, and the adoption of The Spirit of São Paulo, and the São Paulo Consensus;

12.        Recognizes the major role that trade plays as an engine of growth and development and in eradicating poverty, and welcomes the adoption by the General Council of the World Trade Organization of its decision of 1 August 2004, in which the members rededicated and recommitted themselves to fulfilling the development dimensions of the Doha development agenda, which places the needs and interests of developing and least developed countries at the heart of the Doha work programme;

13.        Also recognizes that fighting corruption at all levels is a priority and that corruption is a serious barrier to effective resource mobilization and allocation and diverts resources from activities that are vital for poverty eradication, the fight against hunger and economic and sustainable development;

14.        Underlines the fact that, together with coherent and consistent domestic policies, international cooperation is essential in supplementing and supporting the efforts of developing countries to utilize their domestic resources for development and poverty eradication and in ensuring that they will be able to achieve the development goals as envisioned in the Millennium Declaration;

15.        Welcomes the recent increase in official development assistance, and reiterates that a substantial increase in official development assistance and other resources will be required if developing countries, in particular the least developed countries, are to achieve the internationally agreed development goals and objectives, including those contained in the Millennium Declaration, and that to build support for official development assistance, cooperation is necessary to further improve policies and development strategies to enhance aid effectiveness, both nationally and internationally;

16.        Stresses the importance of enhanced and predictable financing to ensure the sustainability of the development and poverty eradication efforts of developing countries;

17.        Urges developed countries that have not done so to make concrete efforts to reach the targets of 0.7 per cent of their gross national product as official development assistance to developing countries and 0.15 to 0.20 per cent of their gross national product to least developed countries, as reconfirmed at the Third United Nations Conference on the Least Developed Countries, held in Brussels from 14 to 20 May 2001, encourages developing countries to build on progress achieved in ensuring that official development assistance is used effectively to help to achieve development goals and targets, acknowledges the efforts of all donors, commends those donors whose official development assistance contributions exceed, reach or are increasing towards the targets, and underlines the importance of undertaking to examine the means and time frames for achieving the targets and goals;

18.        Recalls the decision to give further consideration to the subject of possible innovative and additional sources of financing for development from all sources, public and private, domestic and external, taking into account international efforts, contributions and discussions, within the overall inclusive framework of the follow-up to the International Conference on Financing for Development;

19.        Recognizes that an enabling domestic environment is vital for mobilizing domestic resources, increasing productivity, reducing capital flight, encouraging the private sector and attracting and making effective use of international investment and assistance, and that efforts to create such an environment should be supported by the international community;

20.        Also recognizes that creditors and debtors must share the responsibility for preventing and resolving unsustainable debt situations and that debt relief can play a key role in liberating resources that should be directed towards activities consistent with attaining poverty eradication, sustainable economic growth and sustainable development and achieving the internationally agreed development goals, including those contained in the Millennium Declaration, and in this regard urges countries to direct those resources freed through debt relief, in particular through debt cancellation and reduction, towards these objectives;

21.        Calls upon the developed countries, by means of intensified and effective cooperation with developing countries, to promote capacity-building and facilitate access to and transfer of technologies and corresponding knowledge, in particular to developing countries, on favourable terms, including concessional and preferential terms, as mutually agreed, taking into account the need to protect intellectual property rights, as well as the special needs of developing countries;

22.        Recognizes the crucial role that microfinance and microcredit could play in the eradication of poverty, the promotion of gender equality, the empowerment of vulnerable groups and the development of rural communities, invites Member States to consider undertaking policies to facilitate the expansion of microfinance and microcredit institutions in order to service the large unmet demand among poor people for financial services, including the identification and development of mechanisms to promote sustainable access to financial services, the removal of institutional and regulatory obstacles and the provision of incentives to microfinance institutions that meet national standards for delivering such financial services to the poor;

23.        Also recognizes the potential of information and communication technologies to serve as a powerful tool for development and poverty eradication and to help the international community to maximize the benefits of globalization, and welcomes in this regard the holding of the first phase of the World Summit on the Information Society from 10 to 12 December 2003 in Geneva and the offer of Tunisia to host the second phase in Tunis from 16 to 18 November 2005;

Policies for the Eradication of Poverty

24.        Reaffirms that the eradication of poverty should be addressed in an integrated way, as set out in the Plan of Implementation of the World Summit on Sustainable Development (“Johannesburg Plan of Implementation”), taking into account the importance of the need for the empowerment of women and sectoral strategies in such areas as education, the development of human resources, health, human settlements, rural, local and community development, productive employment, population, environment and natural resources, water and sanitation, agriculture, food security, energy and migration and the specific needs of disadvantaged and vulnerable groups in such a way as to increase opportunities and choices for people living in poverty and to enable them to build and to strengthen their assets so as to achieve development, security and stability, and in that regard encourages countries to develop their national poverty reduction policies in accordance with their national priorities, including, where appropriate, through poverty reduction strategy papers;

25.        Underlines, in this context, the importance of further integration of the internationally agreed development goals, including those contained in the Millennium Declaration, in the national development strategies and plans, including the poverty reduction strategy papers where they exist, and calls upon them international community to continue to support developing countries in the implementation of these development strategies and plans;

26.        Recognizes the importance of disseminating best practices for the reduction of poverty in its various dimensions, taking into account the need to adapt those best practices to suit the social, economic, cultural and historical conditions of each country;

27.        Reaffirms that all Governments and the United Nations system should promote an active and visible policy of mainstreaming a gender perspective in all policies and programmes aimed at the eradication of poverty, at both the national and international levels, and encourages the use of gender analysis as a tool for the integration of a gender dimension into planning the implementation of policies, strategies and programmes for the eradication of poverty;

28.        Also reaffirms that poverty eradication, changing unsustainable patterns of production and consumption and protecting and managing the natual resource base of economic and social development are overarching objectives of, and essential requirements for, sustainable development;

29.        Emphasizes the critical role of both formal and non-formal education, in particular basic education and training, especially for girls, in empowering those living in poverty, reaffirms in that context the Dakar Framework for Action adopted at the World Education Forum, and recognizes the importance of the United Nations Educational, Scientific and Cultural Organization strategy for the eradication of poverty, especially extreme poverty, in supporting the Education For All programmes as a tool to achieve the Millennium Development Goal on universal primary education by 2015;

30.        Recognizes the devastating effect of HIV/AIDS, malaria, tuberculosis and other infectious, contagious diseases on human development, economic growth, food security and poverty reduction efforts in all regions, in particular in sub- Saharan Africa, and urges Governments and the international community to give urgent priority to combating those diseases;

31.        Also recognizes that HIV/AIDS continues to exact a devastating toll on individuals and families, in particular women and girls, and that in the hardest-hit countries it threatens decades of health, economic and social progress, reducing life expectancy, slowing economic growth, deepening poverty and contributing to chronic food shortages; that urgent action is needed to address gender inequality and economic dependency and poverty; and that addressing HIV/AIDS is therefore an important component of poverty eradication and a key requisite when working to achieve the internationally agreed development goals, including those contained in the Millennium Declaration;

32.        Emphasizes the link between poverty eradication and improving access to safe drinking water, and stresses in that regard the objective to halve, by 2015, the proportion of people who are unable to reach or to afford safe drinking water and the proportion of people who do not have access to basic sanitation, as reaffirmed in the Johannesburg Plan of Implementation;

33.        Recognizes that the lack of adequate housing remains a pressing challenge in the fight to eradicate extreme poverty, particularly in the urban areas in developing countries, expresses its concern at the rapid growth in the number of slum-dwellers in the urban areas of developing countries, particularly in Africa, stresses that, unless urgent and effective measures and actions are taken at the national and international levels, the number of slum-dwellers, who constitute one third of the world’s urban population, will continue to increase, and emphasizes the need for increased efforts with a view to significantly improving the lives of at least 100 million slum-dwellers by 2020;

34.        Encourages Governments to support the Global Campaign for Secure Tenure and the Global Campaign for Urban Governance of the United Nations Human Settlements Programme as important tools for, inter alia, promoting administration of land and property rights, in accordance with national circumstances, and enhancing access to affordable credit by the urban poor;

35.        Recognizes that the eradication of rural poverty and hunger is crucial for the achievement of the internationally agreed development goals, including those contained in the Millennium Declaration, and that rural development should be an integral part of national and international development policies;

Specific Initiatives in the Fight against Poverty

36.        Recognizes the important potential contribution of the World Solidarity Fund to the achievement of the internationally agreed development goals, including those contained in the Millennium Declaration, in particular the objective to halve, by 2015, the proportion of people living on less than one dollar a day and the proportion of the people who suffer from hunger;

37.        Takes note of efforts to define the strategy of the World Solidarity Fund and to mobilize resources to enable it to start its activities, and invites Member States, international organizations, the private sector, relevant institutions, foundations and individuals to contribute to the Fund;

38.        Recalls that in the Millennium Declaration, the Heads of State and Government, inter alia, identified solidarity as one of the fundamental and universal values that should underlie relations between peoples in the twenty-first century, and in this regard decides to consider at the sixtieth session of the General Assembly the issue of proclaiming 20 December of each year International Human Solidarity Day;

39.        Invites Governments and relevant stakeholders to utilize entrepreneurship, taking fully into account national interests, development strategies and priorities to contribute to poverty eradication;

Africa, Least Developed Countries, Landlocked Developing Countries and Small Island Developing States

40.        Stresses, as recognized in the Millennium Declaration, the importance of meeting the special needs of Africa, where poverty remains a major challenge and where most countries have not benefited fully from the opportunities of globalization, which has further exacerbated the continent’s marginalization;

41.        Reaffirms its support for the New Partnership for Africa’s Development, encourages further efforts in the implementation of the commitments contained therein in the political, economic and social fields, and calls upon the Member States and the international community, and invites the United Nations system, to continue to support the implementation of the Partnership, the primary objective of which is to eradicate poverty and promote sustainable development on the basis of African ownership and leadership and enhanced partnerships with the international community, in accordance with the principles, objectives and priorities of the Partnership;

42.        Takes note of the Plan of Action for Promotion of Employment and Poverty Alleviation in Africa adopted at the extraordinary summit of the African Union on employment and poverty alleviation, held in Ouagadougou from 3 to 9 September 2004, and notes the role of the International Labour Organization in assisting the African countries in implementing the Plan of Action adopted at the summit;

43.        Calls upon the Governments of the least developed countries and their development partners to implement fully the commitments contained in the Brussels Declaration and the Programme of Action for the Least Developed Countries for the Decade 2001–2010, adopted at the Third United Nations Conference on the Least Developed Countries, held in Brussels from 14 to 20 May 2001;

44.        Stresses the vulnerabilities of the small island developing States, reiterates the importance of international support for the full implementation of the Programme of Action for the Sustainable Development of Small Island Developing States, supports in this regard the holding of the International Meeting to Review the Implementation of the Programme of Action for the Sustainable Development of Small Island Developing States in Mauritius from 10 to 14 January 2005, and looks forward to its outcomes;

45.        Recognizes the special problems and needs of the landlocked developing countries within a new global framework for transit transport cooperation for landlocked and transit developing countries calls for, in this regard, the full and effective implementation of the Almaty Programme of Action: Addressing the Special Needs of Landlocked Developing Countries within a New Global Framework for Transit Transport Cooperation for Landlocked and Transit Developing Countries, and stresses the need for the implementation of the São Paulo Consensus, adopted in São Paulo, Brazil, on 18 June 2004 at the eleventh session of the United Nations Conference on Trade and Development, in particular paragraphs 66 and 84 thereof, by the relevant international organizations and donors in a multi-stakeholder approach;

The United Nations and the Fight against Poverty

46.        Calls for the full implementation of General Assembly resolution 57/270 B of 23 June 2003 on the integrated and coordinated implementation of and follow-up to the outcomes of the major United Nations conferences and summits in the economic and social fields, which provides a comprehensive basis for the follow-up to the outcomes of those conferences and summits and contributes to the achievement of the internationally agreed development goals, including those contained in the Millennium Declaration, in particular the eradication of poverty, and stresses the importance of the 2005 high-level event to be held at the commencement of the sixtieth session of the General Assembly, as decided by the Assembly in its resolution 58/291 of 6 May 2004;

47.        Reaffirms the role of United Nations funds and programmes, in particular the United Nations Development Programme and its associated funds, in assisting the national efforts of developing countries, inter alia, in the eradication of poverty, and the need for their funding in accordance with the relevant resolutions of the United Nations;

48.        Requests the Secretary-General to submit a report to the General Assembly at its sixtieth session on the implementation of the present resolution;

49.        Decides to include in the provisional agenda of its sixtieth session the item entitled “Implementation of the first United Nations Decade for the Eradication of Poverty (1997–2006)”.

75th plenary meeting
22 December 2004
<http://daccessdds.un.org/doc/UNDOC/GEN/N04/491/08/PDF/N0449108.pdf?OpenElement> 

Growth with justice

Prime Minister Shaukat Aziz has drawn a highly rosy picture of the economy and projected a rosier picture for the future while speaking at the annual dinner meeting of the American Business Council (ABC).

He told his audience that the year 2005 would be a high-growth year for Pakistan. He projected a per capita income of $1,500 by the year 2015 as against $600-plus now. He hoped that during the current year agriculture will show a growth rate of four per cent with the cotton crop already yielding a record 14 million bales.

He also predicted a double-digit growth for the manufacturing sector. Mr Aziz also talked at length about his government's privatization plans and hoped that foreign investment would flow in thick and fast.

Higher growth is certainly welcome. But the belief that its trickle down effect will take care of the all pervasive poverty and that chronic distributive injustices that exist in this country would disappear as a consequence of higher growth is misplaced.

In fact, such a policy only worsens inequality causing rich to become richer and poor poorer and which in turn chokes off growth itself in the longer run. This has happened in Pakistan twice in the past.

The average growth rates of six per cent per annum during the decades of the 60s and '80s added more poor to the population while making the rich even richer. Both these decades of high growth ended up in wide socio-economic disparities, causing the country to go into reverse gear and face imminent loan default situations.

According to a recent study conducted by Social Policy and Development Centre (SPDC), given the distribution of income in Pakistan based on 2001-02 estimates, every rupee increment in GDP accrues 48 paisa to the richest 20 per cent of the population and seven paisa to the poorest 20 per cent.

The study says that irrespective of the rate of growth, the economy is structurally locked into a low employment, high inequality and high poverty trap. One, therefore, tends to agree with the conclusion of the study that distribution-neutral growth alone cannot be counted upon to reduce poverty.

Growth to be pro-poor and sustainable needs to be pursued along with well thought-out distributive policies. Another SPDC study has shown that a one per cent decline in food prices lowers inequality by 0.089 per cent.

Raising direct tax revenues, investment, and development expenditure on social services by one per cent each is likely to reduce inequality by 0.024, 0.037 and 0.015 per cent respectively.

Further, improving agricultural terms of trade and agricultural wages are also likely to reduce inequality by 0.046 and 0.024 per cent respectively. So, there is a way to reduce inequality while growing faster.

If the prime minister and his team of economic experts were to sit with independent economic experts of proven abilities and discuss the linkages between growth, distributive justice and poverty, there is no doubt that the government would be able to come up with logical and effective policies that would accelerate growth while, at the same time, ensure distributive justice.

Education and health cover for all plus effective and economically justified land reforms would gradually bring the have-nots at par with the haves in terms of intellectual skills and physical assets from which flow incomes.

Editorial, Dawn, 5 January 2005
<http://www.dawn.com/2005/01/05/ed.htm> 

Rural Poverty Rose by 14pc: ADB Study

ISLAMABAD, Jan 11: Rural poverty rose from 25 per cent in 1990-91 to 39 per cent in 2000-01. According to a study conducted by the Asian Development Bank (ADB), urban poverty decreased from 27 per cent to 23 per cent over the same period.

The statistics compiled during the study were discussed in a workshop on the determinants and drivers of poverty reduction and the ADB's contribution, held here on Tuesday.

The study, launched in March 2004, was undertaken to examine the high levels of chronic and transitory rural poverty in Pakistan. It was aimed to help identify appropriate policy and implementation measures that could reduce poverty on sustained basis.

The analysis of diverse processes leading to poverty reduction would enable more focused thinking on policy priorities. Dr Emma Hooper, Poverty and Macro Economic Specialist for ADB in Pakistan, said an enhanced understanding of the dynamics of income and non-income poverty in rural areas was an essential component of Pakistan's efforts towards successful poverty reduction and moving towards meeting the Millennium Development Goals.

Dawn, 12 January 2005
<http://www.dawn.com/2005/01/12/nat15.htm> 

Refocusing on Poverty

There is now some talk in Pakistan about using the available fiscal space for alleviating poverty. This space has appeared as a result of the policies adopted in the last several years by the administration of President Pervez Musharraf and the availability of large amounts of external flows to the country following 9/11. …

The incidence of poverty around the globe has remained stubbornly at the same level for decades, at about a billion people. This number has remained more or less unchanged since Robert McNamara, the World Bank president for 13 years from 1968 to 1981, began publicizing it in his annual speeches.

Its distribution has changed. While parts of Asia - including China and India but, unfortunately, not Pakistan - have made impressive strides in reducing the levels of poverty, the situation in sub-Saharan Africa has continued to worsen. …

He [McNamara] was giving up on the idea of "trickle down" which was the main strategy that was then being pursued by the World Bank and most other development institutions.

According to this, all that needed to be done was to accelerate the pace of growth in the developing world. With growth, more resources would become available more or less automatically for the poor.

Pakistan's Mahbubul Haq had contributed to the promotion of this idea. In the late sixties, he took some time off from the Planning Commission to write a book on the strategy of development Pakistan had followed during the period of the Second Five Year Plan, 1960-65.

During this time, Pakistan had broken loose from most of the developing world by growing at a rate of close to 6.5 per cent a year. This was a remarkable performance; this is particularly so when viewed from the perspective of today's Pakistan.

Pakistan began to be talked about as a miracle economy and Mahbubul Haq correctly concluded that its performance needed to be explained to an admiring world. His book was well received in the development community. His thesis was simple. It had three parts.

One, Pakistan had succeeded by focusing its energy and the resources available to it on growth. Two, the state had a major role to play in directing the available resources towards the sectors and into the enterprises it determined as the leading sectors and leading enterprises for producing growth.

Three, there was no need to focus directly on the poor. They would automatically benefit from growth; resources would trickle down to them once growth got going. There were some problems with this thesis some of which Mahbubul Haq himself identified at a later date. However, the most important defect with this strategy of growth was its excessive reliance on external flows of capital.

One reason why Pakistan did so well was that Ayub Khan's foreign policy attracted a great deal of development assistance into the country, in particular from the United States.

Ayub's Pakistan had turned itself into an important link in the chain that President Dwight Eisenhower and Secretary of State John Foster Dulles were busy putting in place to contain the spread of communism to South and Southeast Asia.

Ayub Khan's willingness to have his country become such a link was handsomely rewarded by Washington with large amounts of military and economic aid. The same was to happen in the case of Ziaul Haq's Pakistan and the country under General Pervez Musharraf.

But I should return to the story of poverty. Mahbubul Haq had an agile mind. Not too long after his book was published, he turned his entire thesis on its head. In a famous speech delivered in Karachi as the government of Ayub Khan was heading towards a major political crisis, Haq told his surprised audience that trickle down had not worked in Pakistan.

It had not succeeded in addressing the problem of poverty and income inequality by giving so much attention to growth, he declared. The remarkable rate of GDP growth during the period of Ayub Khan, he maintained, had not helped the poor. It had only made the rich richer.

In fact, much of the benefit of growth had gone to some 22 families that had obtained a sizable proportion of incremental income and wealth produced during Ayub Khan's "decade of development."

The "22 family speech" electrified not only Pakistan but much of the development community around the globe. It laid the basis for the destructive nationalization of large-scale industry, finance and commerce by the administration of President/ Prime Minister Zulfikar Ali Bhutto that took office in December 1971, 21 months after the resignation of Ayub Khan.

But Mahbubul Haq's new thinking also had a positive impact. After giving the speech in Karachi, he joined the World Bank and became President McNamara's most influential adviser on development policy. From that vantage point, he was able to influence the thinking of the World Bank president.

The meaning of rural and urban development continued to evolve under President McNamara. The main element of this approach was that the poor should be provided with productive employment opportunities.

But the focus on employment generation in the sectors of the economy did not produce a dent in the incidence of poverty. Could it be that the poor did not have the wherewithal - education, skills and good health - to benefit from the attention they were receiving? Shouldn't the state also address the important question of improving the capacity of the poor to work productively?

With these two questions in the background, another twist was added to the strategy for alleviating poverty. In the late seventies, Mahbubul Haq and his associates, including myself, came up with what came to be called the "basic needs strategy."

It was concluded that the state had to be actively involved in helping the poor with the provision of five basic needs: food, basic education, primary heath care, water and sanitation and shelter. … 

Shahid Javed Burki, Dawn, 25 January 2005
<http://www.dawn.com/2005/01/25/op.htm> 

Reducing Inequalities

Recent research, not just in Pakistan but in many other countries has highlighted the importance of reducing inequality as a critical pre-requisite for alleviating poverty. The process of economic development in mixed economies invariably creates a certain degree of inequality, but the extent to which such inequality leads to serious social and political consequences depends not only on the initial distribution of land and other productive assets, but also on the nature and direction of fiscal and other policies that affect income distribution over time.

In Pakistan, the initial pattern of land distribution was very skewed, largely due to the allocation of large tracts of newly irrigated lands to loyal nawabs, sardars, khans and jagirdars by the British in pre-partition India. The land reforms carried out by Ayub Khan in the 1960s and then Zulfikar Ali Bhutto in the 1970s did resume about 10 to 15 per cent of the total land area for allotment to landless tenants, but that did not reduce the feudal stranglehold on the economic and political levers of the rural economy.

The pattern of income distribution is even worse in the industrial sector. The benefits of high growth of the 1960s were not distributed evenly and led to the large scale concentration of incomes, epitomized by the new infamous finding that 22 families controlled two-thirds of the country's industrial assets. In the 1970s, the growth of inequality was moderated to some extent, largely by the inflow of remittances from the Middle East, but the fiscal and other economic policies followed in the past two decades have accentuated inequalities in the urban sector.

The inequality in incomes and consumption can be redressed gradually, partly through fiscal policies and partly by diverting a larger share of credit and public services in education, health and housing to low income households, but this has not happened. The present structure of the Pakistan economy, as a result of the initial pattern of land distribution and compounded by the reckless pursuit of market-oriented policies in the recent past, is now so skewed that any growth in per capita incomes automatically leads to greater inequality.

Out of every increment of one rupee in the GDP, a recent SPDC study shows, 48 paisa accrues to the richest 20 per cent of the population and only seven per cent to the poorest 20 per cent. In the face of such glaring inequalities in incomes and in income-earning opportunities, a higher rate of economic growth, though necessary, will not be sufficient to reduce poverty in Pakistan.

The poverty reduction strategy formulated by Pakistan, for the period 2001-2007, is in fact focused on growth and macro-economic stability and does not include any policies or programmes to reduce inequality and promote greater equity in providing economic opportunities to the poor. Even the acceleration of economic growth is perceived largely through the prism of stabilization measures.

Seven out of 11 components of the first pillar of the PRSP (accelerating economic growth) correspond directly with the main elements of the IMF's structural adjustment programme and assume that macro-economic stability will automatically lead to accelerated growth, and that will somehow trickle down and reduce poverty and unemployment. But this is not likely to happen because the proportional benefits of growth for the poor will continue to be less than those that accrue to the rich.

The other three pillars of the PRSP (i) improved governance and devolution, (ii) investment in human capital and (iii) targeting the poor and the vulnerable, are statements of intent and not blueprints for policies or budgetary allocations. For example, despite the emphasis on education in the text, public spending on education, even if targets are realized, will increase from 2.2 per cent in 2003-2004 to only 2.5 per cent of the GDP by 2007-2008 (compared to Iran's 4.4 per cent, India's 4.1 per cent, and Nepal's 3.7 per cent and the Unesco target of 4 per cent).

Similarly the expenditure on health is projected to rise to only one per cent of the GDP "in the long run". The average for other developing countries is already 2 per cent and even some of the least developed countries like Nepal and Bangladesh are spending 1.6 and 1.5 per cent of the GDP respectively on health services.

Micro-credit is a very effective instrument of providing self-employment opportunities to the poor. Pakistan has two complementary micro-credit programmes through the Pakistan Poverty Alleviation Fund (PPAF) and the Khushali Bank (KB) but their scale of operation is relatively limited. PPAF has disbursed Rs4 billion in the past five years and KB Rs3 billion in three years.

Thus the annual rate of disbursement is Rs1.8 billion, reaching approximately 100,000 beneficiaries each year. That means only one per cent of the 10 million households categorized as extremely poor in Pakistan. A one-time loan of Rs20 or 30 thousand can provide only temporary relief but cannot lift a poor household out of the trap of chronic poverty.

Similarly, if all the new employment opportunities created through the public sector development projects are aggregated, they would not exceed 200,000 or two per cent of the target group. The number of unemployed has already increased from one million to four million in the past 10 years. The projected employment of 200,000, even if achieved, will re-employ only about five per cent of the pool of unemployed for a limited period.

The real challenge facing Pakistan is in scaling up useful initiatives like micro-credit or employment intensive infrastructure projects, and at the same time, evolving a series of policies that can reduce inequality and empower the poor to claim their due share in national resources.

In drawing up an alternative policy framework, it will be useful to look across our eastern borders where the platform of 'Shining India' supported by a growth of over six per cent over six years was not sufficient to guarantee the BJP's success in the 2004 elections. Congress which won the election largely by winning the votes of the rural poor, has now formulated several pro-poor policies and programmes including a Guaranteed Employment Programme, under which Rs45 billion (or $1 billion) will be allocated every year through 200,000 village level organizations (panchayats) for local infrastructure.

In this way substantial funds will flow regularly and directly to the poor and provide additional employment opportunities for 7.5 million households at a cost of Rs6000 per household. At the same time, elected institutions at the village level will be able to strengthen their capacity to prepare and implement projects and determine their priorities.

In Pakistan, on the other hand, the decentralization of development functions to district governments is not accompanied by the social mobilization of the poor or a substantial transfer of resources to the grassroots level. As a result only a small proportion of development benefits will accrue to the poor.

The in-depth analysis of the determinants of inequality and options for poverty reduction can lead to an alternative framework for poverty reduction with four main pillars: a) Accepting the principle of "right to food" for everyone; b) A pro-poor growth strategy with a focus on agriculture and other sectors which directly benefit the poor; c) Reducing inequality through redistribution of incomes and assets on a substantial scale; d) Sustained human and social development of the poor segments of the population.

The principle that everyone has a right to adequate food was formally adopted at the 1966 World Food Summit in 1996. An intergovernmental group set up by the FAO has adopted in September 2004, "voluntary guidelines to support the progressive realization of the Right to adequate food in the context of National Food Security."

Pakistan has to carefully study the conceptual, legal and political issues in implementing the principle of right to food through a comprehensive strategy for food security with a focus on three main elements: direct impact of agricultural growth on real farm incomes, off-farm employment opportunities and a policy of stable food prices.

The concept of pro-poor growth is no longer confined to academic discussions but has moved to a full-fledged strategy under which a favourable strategic framework consisting of pro-poor policies and pro-poor support organizations are given operational meaning through strategic interventions at national, state and local levels to ensure the participation and empowerment of the poor.

Under such a strategy, the process of growth gives special attention to sub-sectors on which the poor depend for their livelihood, namely crop agriculture, livestock, fisheries, forestry and small-scale rural industries. The infrastructure necessary for accelerated development is developed largely through a decentralized governing structure, but decentralization is accompanied by social mobilization of the poor, to ensure that decentralization does not end up creating opportunities for vested interests to monopolize power and resources for their own advantage.

Similarly, macro-economic stability, so necessary for accelerated development is achieved by cutting out non-essential current expenditures and not by reducing development expenditures that lead to employment and other benefits for the poor. The temptation to raise the cost of utilities and services for the poor is also curbed to the maximum possible extent.

Sartaj Aziz, Dawn, 13 February 2005

<http://www.dawn.com/2005/02/13/op.htm>

Serious About Poverty Alleviation?

It generally, is not realized that the culture of wastage and callousness in poverty-stricken communities contributes to poverty just as fatalism hinders the efforts to reduce it.

The World Bank's president James Wolfensohn did some plain talking last week, about Pakistan's economic situation and poverty. He praised the government for putting the economy on the path to economic growth - from 3.1 per cent in 2000-2001, to more than 7 per cent in 2004-2005 and appreciated the economic reforms introduced during the last five years. Generally, he handed the Pakistan Government a fair endorsement of its economic policies. But he also emphasized that the economic growth, though essential for reducing poverty, had not yet made the desired effect on poverty levels.

He stressed the need to pass on the benefits of this growth to the people, underscoring a basic problem facing Pakistani society right from the beginning - inequalities of income and the tendency to pay lip-service to poverty eradication. The other bane of the economic and social scenario in Pakistan is corruption, estimated at Rs.100 billion a year in 1999. Mr. Wolfensohn politely yet emphatically mentioned the scourge of corruption as an impediment to development and investment.

Perhaps he was aware of the official view in Pakistan that corruption has been eliminated at least at the highest levels. So he mentioned precise figures of slippage of Transparency International's Corruption Perception Index (CPI) from 2.6 in 2002 and 2.5 in 2003, to 2.1 in 2004. A CPI deterioration despite 'elimination of corruption at the highest level' can only mean an increase in corruption at the middle and lower levels! Mr. Wolfensohn as such concluded that the problem of corruption still exists in the system; probably the diplomatic under-statement of the year.

In the context of economic development, the real stress of the Bank seems to be on the development of social sectors and poverty alleviation. The President announced a financial package of one billion dollars a year for three years to support economic growth and the development of social sectors like education and health, which provide direct relief to the poor.        

The present government is strongly committed to poverty alleviation and higher outlays for the social sectors. Allocations for these programmes were raised to 4.7 per cent of the GDP in 2003-2004 from 3.8 per cent of the GDP in 2001-2002. The Bank's President pleaded for increased expenditure on these sectors, particularly education and rural development.

The World Bank President's overall emphasis seems to be on the need for decisive action to bring about basic changes in the system - translated operationally, the attitudes and practices prevalent in society. And that is where the main failing of this society lies. We, for decades, have been committed to equitable distribution of incomes, rural development, increased productivity and increased expenditure on the social sectors. But what we have actually accomplished is concentration of wealth in the hands of a few families; one of the lowest productivity levels; 52 million illiterates; one hospital bed for every 1531 people and around 4.8 children borne by a woman in her reproductive years.

These figures are some of the worst in this region. Figures for poverty tell a similar story. After declining to 17.32 in 1987-1988 from 40.24 in 1963-1964, the percentage of the population living below the poverty line has increased to 22.40 in 1992-1993 and 35.20 in 1998-1999; the present level is estimated to be around one-third of the population.

Not all governments have been sleeping over the issue: they have registered their commitment to poverty alleviation and the social sectors by appointing committees, fielding studies and creating departments to formulate plans and coordinate programmes. The result has been exactly what happens in undertakings financed by foreign grants. Anyone with even a remote relevance to poverty jumped on the bandwagon. Instead of developing a conceptual framework and demarking responsibilities, ongoing programmes and those in the pipeline were converted into poverty alleviation components. These people were unenthusiastic and did not allow their component to go under the control of the poverty alleviation outfit. As a result, poverty alleviation became a collection of projects conceived and developed by different departments of the government.

The research studies and surveys to measure the incidence of poverty and propose measures to tackle it, fell victim to academic controversies over the definition of poverty and methodologies. Vested interests within the government approved or disapproved the results safeguarding their own interests. The coordination function, on occasions, became so messy that officials and departments attached to poverty programmes were appointed, terminated or disbanded arbitrarily. Consequently, sometimes even innocent public documents were kept secret. Even today, myriad documents roam offices and research outfits which do not point to a single policy or strategy to eradicate poverty. A highly encouraging macro-picture of the economy should help to shed the verbiage and formulate a national policy on poverty alleviation -- even if it amounts to a complete re-hashing of the existing approach.

For poverty alleviation programmes to succeed, what's needed is not only a portfolio of projects in the field, but also a well thought out strategy to change people's attitudes -- not necessarily the community development approach. The culture of wastage and callousness in poverty-stricken communities contributes to poverty just as fatalism hinders the efforts to reduce it. No amount of material assistance will lessen the impact of poverty unless people learn to conserve their resources and cut wastage. This makes education, especially of women, the cornerstone of a poverty alleviation programme. For a programme of social change, the people will have to be made capable of determining the right priorities and take intelligent decisions. This cannot happen without education. Health is a part of the trio of change. Also, economic prosperity through the provision of employment opportunities and equipment will not be fully utilized unless there is the will to work for changing one's destiny -- generally taken to be pre-determined.

A well-integrated programme accommodating the aspirations of the people and aimed at bringing about social change should be the vehicle to pull people out of poverty. In the rural areas, a crucial input would be an arrangement to pay the lifelong debt maintained by landowners and the feudal system which is the main instrument of subjugating the rural population. As the first step, a villager has to be free to take independent decisions for his welfare.

It must be realized that the culture of wastage and callousness in poverty-stricken communities contributes to poverty, just as fatalism hinders the efforts to reduce it.

Dr M S Jillani,, The News, 17 February 2005- 

<http://www.jang.com.pk/thenews/feb2005-daily/17-02-2005/oped/o3.htm>

Fighting Poverty in Pakistan

Many Pakistanis have greatly improved their standard of living since their country gained its independence in 1947. Yet over 30 percent of them—around 42 million people—still live below the poverty line.  The gap between the rich and poor has widened in recent years, with some gaining financial comfort while others are finding it impossible to permanently escape from destitution.

During the 1990s, economic growth in Pakistan ranged from low to moderate, but was relatively steady.  However poverty rates stagnated. Indications are that economic growth was not strong enough, and its benefits distributed too narrowly to broadly reduce poverty.

            Poor people in Pakistan also typically fail to receive the kind of essential services they need to get ahead—credit so they can build a home or start a small business; clean water and sanitation to keep families healthy; decent schooling for their children; and electricity so they can do their homework at night.

            The current government of Pakistan has made concerted efforts to determine the cause of and solution to pervasive poverty.  It has improved survey methods and is working to increase the availability of services which are essential to helping people escape poverty. It has also put in place measures to strengthen economic growth and help spread its benefits to those who need them most.

The Challenge

Compared to other low-income countries, Pakistan has seen relatively high economic growth over the last decade, and its educated, urban elite enjoy a standard of living similar to their counterparts elsewhere.

            Other groups however, have remained trapped at or near the poverty line, with severely limited access to steady income, credit and public services.  Poverty levels are consistently higher in rural areas than in the cities.

            The incidence of rural poverty is highest among those who own no land—more than one half of the rural population.  Inequity in land ownership in Pakistan is responsible for agricultural yields which are below those of other countries at similar income levels.

            Female-headed households, tribal groups and those living at or below the subsistence level are particularly vulnerable. Poverty rates also vary significantly among provinces, from a low of 16 percent in the northeastern areas to 44 percent in the Northwest Frontier Province.

Extensive development research has shown a correlation between educational attainment and economic growth in developing countries.  Pakistan has increased school enrollment levels, however this progress stagnated in the mid 1990s.  The country still has a relatively low level of education, which has appeared to play a role in dampening economic growth.

Girls in Pakistan complete an average of  only two and a half years of education while boys complete five.  Only 44 percent of the population is literate, compared to 64 percent in countries with similar per capita incomes.  A  30 percent gap between female and male literacy has not decreased since 1970.

Economic status is a strong determinant of school enrollment.  Among the richest households in Pakistan, as measured by consumption, the gross primary school enrollment rate is 90 percent, whereas among the poorest households, it is 50 percent.

Lack of access to basic services impedes upward mobility.  Compared to countries with similar income levels, 23 percent fewer Pakistanis have access to sanitation.  Knowledge and ability to properly feed children is also insufficient in many poor households.  Child malnutrition in rural areas has not changed in severity in 15 years, and impedes the economic prospects of affected adults in their later lives. Furthermore, only around 52 percent of poor households are connected to electricity, compared to 76 percent of non-poor households.

Insufficient coverage of public services are due in large part to a “squeeze” on social spending in Pakistan.  For the past two decades, the increasing burden of paying the country’s growing debt, combined with continued substantial defense expenditure and stagnant revenues have reduced the resources committed to providing basic social services.  Until recently, for example, Pakistan had been allocating  42 percent less in health spending per capita than was allocated by other countries at its income level.  Much of the government’s debt is comprised of loans which were taken to finance short-term and unsustainable spurts in growth in the 1980s.

Making Progress

The new millennium has seen Pakistan shift emphasis to more sustainable economic growth and poverty reduction.  The current government has demonstrated a clear sense of direction, which is outlined in its Poverty Reduction Strategy—a plan devised after broad national consultations.

The strategy emphasizes tax reform to increase the government’s revenues and help it pay off its debt.  It focuses on improving the business climate to encourage investment and sets out plans for reforming institutions to cut waste and corruption and improve public service delivery.  Federal budget allocations for education and health programs have been nearly doubled.

The government has nearly completed the process of privatizing state-owned banks and is following suit with other state-owned enterprises.

Since Pakistan is still predominantly a rural country, agricultural growth is fundamental to economic growth and poverty reduction.  The government has liberalized agricultural trade and pricing regimes, removing distortions, and increasing incentives for farmers.

The government has also implemented a far-reaching devolution program which led to locally elected officials with the legitimacy and mandate to improve public service delivery.

The budget deficit has fallen and inflation has remained below 5 percent.  Exports have begun to grow after years of stagnation.  Public expenditure on development has begun to rise as a percentage of GDP, while spending on interest and defense has fallen.

The World Bank is the largest provider of development finance to Pakistan.  The Bank’s Country Assistance Strategy, which outline’s support for Pakistan through mid 2005, is designed to directly support the government’s poverty reduction strategy.  It focuses primarily on strengthening the basis for macroeconomic stability and government effectiveness; strengthening the investment climate; creating the conditions for accelerated, sustainable rural growth; and supporting policies which empower poor people and women.

Looking Ahead

Pakistan still faces many challenges and risks as it works to eradicate poverty and enjoy the kind of prosperity seen in so many other countries.

It is the private sector which will drive growth, and yet Pakistan is still an expensive country in which to do business both in terms of time and money.  Inefficient public providers mean the cost of services such as railroad transfers and electricity, are higher than necessary.  In addition, mock enforcement of un-needed rules and regulations plague small businesses in particular.

Public expenditure reforms are required.  Although the public debt has been reduced, it is still at unsustainable levels, yet will be challenging for Pakistan to increase revenues by broadening its tax base.  Meanwhile, spending on social services, while having increased, is still relatively low.

Pakistan has developed education and health reform strategies, however these need to be developed into action plans and implemented.  To succeed, these will require substantial improvements in governance and public administration, and will also need incremental funding increases in the future.

Social protection for those living near the poverty line is essential to help protect them from economic downturns and other shocks. These can take the form of social assistance, jobs on public works, and direct cash transfers.  Increasing access to credit will also help.  Since most of the country’s poor people live in rural areas, these measures would need to be part of a well-coordinated rural strategy.

Finally, there are always vested interests that are opposed to reforms and modernization for fear of losing political influence or financial benefits. Demand for change by civil society and reform-minded leaders will be essential to completing reforms and significantly improving the lives of the Pakistani people who have been left behind. 

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ADB Urges Minimum Wages Law 

ISLAMABAD, March 29: The Asian Development Bank (ADB) has recommended introduction of proper legislation to fix minimum wages for agricultural labourers and provide them fringe-benefits to reduce rural poverty in Pakistan.

The bank has also suggested to the government to revise its existing "interventionist pricing policies" for the agriculture sector to favour small farmers. "The government's pricing policies designed to favour small farmers have actually achieved the opposite|", the bank has observed.

The recommendations have been made in a working paper prepared by the bank's mission in Pakistan. According to the mission poverty reduction is linked to employment. However, exploitation of labour due to poor governance and thin and inadequate labour market is a major cause of increasing poverty in Pakistan.

The mission has found that wages in rural areas declined in Pakistan despite significant external and internal out-migration during the 1980s mainly due to unavailability of minimum wage protection in the rural sector.

"The legislative framework for protection of workers does not apply to the agriculture sector. Agriculture labour is thus deprived of benefits such as social security and old-age pension. Minimum-wage laws need to be set for the agriculture sector and all legislation and non-wage benefits, be made applicable to the agriculture sector", the mission observed.

The paper says that transitory poverty can be reduced through policy interventions while reduction in chronic poverty is possible through sustained growth in household incomes. Similarly, targeted public works programmes could help reduce chronic poverty, the paper suggests.

Agriculture growth without specific interventions targeting small farmers and rural non-farm household may not alleviate Poverty for much of the poor in rural Pakistan. An explicit strategy is needed for development of the rural non-agriculture sector 'currently lacking in the Government of Pakistan's Poverty Reduction Strategy Papers as well as in development plans', says the paper.

The mission has collected evidence which shows that increased resource-degradation in Pakistan had led to declining productivity in agriculture sector. A comparison of Indian and Pakistani Punjab shows that higher productivity has been achieved by India mainly due to greater efforts to tackle resource-degradation.

The bank has asked for greater efforts directed towards conservation of natural resources. "One measure in this regard would be to educate and encourage farmers through incentives to move to more sustainable practice", it recommended. Research on linkage between agricultural growth, rural development and Poverty reduction require more dis-aggregated data at various levels.  

Dawn, 30 March 2005

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nat16.htm+poverty&hl=en&ie=UTF-8> 

Poverty Reduction Strategy Paper Second Quarter
 Progress Report for the Year 2004-05

1 Introduction

1.1        Pakistan’s economic performance continues to be remarkable during the second quarter of the current fiscal year (FY05). The projected improvement in both manufacturing and agriculture, together with the expected above target performance by the services sector implies that the real GDP [Gross Domestic Product] growth during FY05 will be broad-based and likely to exceed the original target of 6.6 percent. Revised projections of the State Bank of Pakistan (SBP) indicate that real GDP growth rate is likely to fall in the range of 7.4 to 7.8 percent during FY05, exceeds the 7 percent level for the first time since FY96. Pakistan’s performance on fiscal front has been impressive.

1.2        The real challenge is how to direct the benefits of high economic growth to the poor. Several steps have been taken in this direction. The Federal Fiscal Responsibility Law, which brings the government under obligation for spending at least 4.5 percent of GDP on the pro-poor sectors, has been passed by the National Assembly. The Law will be effective after its approval from the Senate and then the President of Pakistan. The propoor expenditures as percentage of GDP have gradually increased. Direct benefits to the poor particularly through micro-finance have also increased over time. The total budgetary and non-budgetary pro-poor expenditures during the last five years (1999- 2004) stood at Rs. one thousand billion. The acceleration in the macro economy with the increased pro-poor expenditures appears to have contributed in employment generation in the country. The rising trends in unemployment have been arrested, particularly among female in rural as well as urban areas.

1.3        Poverty Reduction Strategy Paper (PRSP) has provided a strong base for policy makers and planners to develop future plans and set achievable economic and social targets conducive for the well-being of people, particularly the poor. Recently published Pakistan Millennium Development Goals (MDGs) Report 2004 has succinctly integrated the PRSP approach to set targets for the 2015 period. Both the PRSP and MDGs have also provided the long-term perspective within which the next Five Year Plan 2005-10 is also being prepared. National ownership of the process and product for monitoring progress towards MDGs helped align the long-term (2015) MDG targets with the 2005-06 targets of PRSP and the 2011 targets of the Ten Year Plan. All these efforts indicate the commitment and consistency in socio-economic policies to improve the well-being of people.

1.4        This report reviews the progress of poverty reduction strategy paper (PRSP) for the second quarter of FY05. In addition to analyzing the quarterly expenditure data, it has also discussed the employment situation as well as progress in the MDG indicators. It is the first PRSP report that has, though partially, included data on the governance indicators, such as number of cases pending and disposed of in superior and subordinate judiciary.

1.5        This report is divided into nine sections. An overview of macroeconomic indicators that are related to poverty reduction is discussed in section 2, followed by an analysis of budgetary and non-budgetary expenditures in sections 3 and 4, respectively. Progress in intermediate indicators is discussed in section 5. An overview of some output indicators including education and employment is given in section 6 while the MDG targets are discussed in section 7. A special brief report of Pakistan Baitul Mal is included in section 8, followed by the concluding remarks in the final section. …

2 An Overview of Macroeconomic Indicators

2.1        Pakistan’s economic performance during the first half (H1) of FY05 has been very impressive. With the upwards-revised cotton production figures, the value-addition by the kharif FY05 crop is now considerably higher than the initial estimates. Timely rains and snowfalls will help achieve rabi FY05 crop targets. During the first half of FY05 the large scale manufacturing grew by 16.1 percent YoY, well above the 12 percent annual growth target. The services sector is also expected to surpass its annual growth target of 6.2 percent. This means that the real GDP growth during FY05 will exceed the initial annual 6.6 percent target by substantial margin. There has also been a rise in credit to the private sector (see Table 1), strengthening domestic demand, resulting to massive increase in imports of non-food, non-oil items. The tax revenue collection grew by 7.4 percent during July-December FY05 compared to the same period in FY04. The actual fiscal deficit provisionally estimated at Rs. 80.2 billion or 1.3 percent of full year GDP during H1-FY05, was only 40.3% of the official annual target. The Karachi Electric Supply Corporation (KESC), the most complex and difficult public sector utility has been privatized. There has been successful launching of Islamic bond (SUKUK) for the first time in the country’s history to diversify investors’ base as well as promote Islamic banking within and outside Pakistan.

3 An Analysis of the Pro-poor Budgetary Expenditures

3.1        This section compares the PRSP budgetary expenditures during the first half (Ist and 2nd quarters) of FY05 with the corresponding period of FY04. PRSP expenditures by the federal and provincial governments stood at Rs. 125 billion during the first half of FY05. These expenditures are approximately 27 percent higher than the expenditures incurred during the same period of the last fiscal year (FY04). PRSP expenditures during the first half of FY05 were more than 2 percent of GDP as compared to 1.8 percent during the corresponding period of FY04. This shows the strong commitment of the government to support poverty reduction interventions in the country. The increase in pro-poor expenditure is likely to have improved the service delivery, particularly for the poor. …

3.2        Sector-wise situation of the PRSP expenditure is encouraging as well. All PRSP pro poor sectors, except, ‘food subsidies’, rural electrification and ‘natural calamities’, have witnessed an increase in the expenditure during the first half of FY05 as compared to the corresponding period of FY04. However, there is a large sector-wise variation. A strong growth in low cost housing is solely based on expenditures by the Punjab province, as remaining provinces made no expenditures in this sector in H1- FY05, as well as H1-FY04. Housing is one of the key sectors for poverty reduction. Shelter is one of the necessities of life. Moreover, development of this sector is labor intensive in nature, which creates employment opportunities for the poor, particularly semi and unskilled workers. Therefore Sindh, NWFP and Balochistan province need to invest on the low cost housing sector. …

3.3        A substantial increase in expenditure on education, health and population planning sectors were also witnessed during the first half of the current fiscal year as compared to last year corresponding period. These expenditures as percentage of GDP were also higher in FY05 than in FY04. This increase is crucial for supporting the efforts in improving the human capital and population stability in the country. Several MDG targets endorsed by the government of Pakistan and aligned with the PRSP are related to education, health and population. Increase in expenditure in these sectors is likely to help achieving the PRSP/MDGs targets. Keeping in view both the growth in population and targets to be achieved by 2015, required financial sources need to be precisely determined to identify the gaps and to ensure the availability of resources on time.

3.4        Roads and highways, irrigation, water supply and sanitation, social security, food support program, administration of justice and law order also witnessed a considerable increase in expenditures as compared to FY04 expenditure. Water supply and sanitation sector, which has been neglected previously, is now among the priority sectors. This priority may be continued since it has positive impact on health status of the population.

3.1 PRSP Expenditures on Sub-sector of Education and Health

3.6        … shows an overall decline of 5 percent in primary education sector. This decline is primarily due to decline in Punjab and Balochistan provinces. There was a considerable increase in primary sector education in NWFP while it was relatively modest in the case of Sindh and federal expenditure. During the first half of FY05, expenditure in secondary education increased by 17 percent as compared to the same period in FY04.

A decline was witnessed in federal and NWFP expenditure on college/university education. Federal expenditures in sub-sectors of technical education and training also declined in the first half of FY05 as compared to spending in the same quarter of FY04. …

3.7        Another important dimension of education and health expenditure is that the share of development component in total expenditure has been low. However, a considerable progress in increasing development expenditures in the health sector during the first half of the FY05 has been made, except Punjab and Sindh province. There is a need to prioritize the allocation of resources within the education and health sectors in the guidance of education and health policies.

3.2 Expenditures by Province and Sectors

            … shows regional variations in PRSP expenditures. In Balochistan, two important sectors, education and rural development witnessed a decline in expenditure during the first half of the current fiscal year as compared to expenditure during the same period in FY04. Rural development expenditures also declined in Sindh. There is a need to strengthen the monitoring system at the province level so the resources are allocated efficiently to achieve the targets. Sector-wise expenditure situation during the first half of the current fiscal year seems to be satisfactory in Punjab (except food subsidies). …

4 Non-Budgetary Transfers

4.1        The non-budgetary transfers, Zakat, EOBI, and Credit (PPAF and Khushali Bank) during the first half of the current fiscal are presented, which does not show a satisfactory situation. Overall a decline of 29 percent was observed in non-budgetary transfers. This decline was much higher, 41 percent, in terms of number of beneficiaries of these transfers. The amount of Zakat disbursed during the first half of the current fiscal year was approximately 60 percent lower than the zakat disbursed during the same period in FY04. Zakat is largely distributed in Ramadhan, which fell last year in the months of October and November. But it appears the volume of zakat distributed during the month of Ramadhan was relatively low. No doubt, there is a considerable leakage of Zakat to the non-poor segment of population, and the system is not functioning efficiently. But, Zakat has been a major source of income for many poorest of the poor households. Zakat system may be improved and more resources may be made available for the poor. It may also be distributed timely.

4.2        Disbursement through EOBI during the first half of the current fiscal year was almost equal to the corresponding disbursement in the last year (FY04).

4.3        Credit disbursed through the partner organizations of the PPAF declined during the first half of the current fiscal year. The total number of beneficiaries decreased from about 38,000 in FY04 to about 28,000 in FY05. The decline was primarily in female beneficiaries, since an increase of more than 50 percent was observed among the male beneficiaries. However, it is encouraging to see more than 3 times increase in total amount disbursed by the Khushali Bank; during the October-December 2003, 240 million rupees were disbursed by the Bank, and the amount increased to 832 million during the corresponding period of 2004. The number of female beneficiaries of the Khushali Bank increased more than four times, while a modest decline in male beneficiaries was observed. The bank credit policy is focusing more on the poor women. Credit is considered as the major source for self-employment. This policy is likely to have helped in providing employment opportunities for women. …

5.2 Education Sector

5.2        It has been noted in the earlier PRSP quarterly reports that the major emphasis in the education sector reforms program is on the rehabilitation of existing public primary- and middle-level schools. The purpose of this rehabilitation program is to make these schools functional, where students and teachers are present and learning takes place regularly. PRSP has identified five education sector intermediate indicators including ‘number of functional primary and middle schools’, ‘percentage of trained teachers in these schools’, ‘absenteeism of teachers’, ‘percentage of sanctioned staff strength filled’ and ‘percentage of schools with basic facilities such as drinking water’, ‘sanitation, ‘electricity and boundary wall’. However, the actual data on intermediate indicators are available for the FY03 and early years. Actual data on education sector is obtained from the education census, which is not available for FY04 or for first half of the current fiscal year. The relevant departments have provided the estimated figures for the recent period. Although the estimated data may not be accurate, it allows reviewing the progress in some indicators. The number of functioning primary schools has gradually increased from 133 thousand in 2001-02 to 137 thousand during the current fiscal year. The number of middle-level functional schools has increased from 12 thousand in 2001-02 to more than 14 thousand in FY05. The estimated data do not show any real progress during the last two years in the availability of safe drinking water and latrine facilities in primary- and middle-level schools. …

5.3 Health Sector

5.3        Data on four intermediate health indicators – average utilization rate of First Level Care Facilities (FLCF)/day, births attended by skilled birth attendants, FLCFs not experiencing stock-out, and availability of contraceptives at FLCFs - are reported in Table 7 for the second quarter of FY05. For the corresponding period of two earlier years, data on these indicators are also provided in this table. The utilization rate of FLCFs during the second quarter of the FY05 was lower than the same period of FY03 and FY04. The main reason for this lower rate is the non-availability of data for Punjab province, where the utilization rates of FLCFs are usually higher than the other provinces (Annex 2). No improvement could be witnessed in the number of births attended by skilled birth attendants. The performance of other two health indicators - ‘experiencing stock-out of key supplies at the FLCFs’, and ‘availability of contraceptives in FLCFs’- was also unsatisfactory. It is difficult to answer the question why the health indicators’ performance was in general unsatisfactory?

5.4        … presents data on TT-immunization coverage for pregnant women. The overall coverage during the second quarter of FY05 was similar to the coverage during the same period of FY04. There were large regional variations. For example, AJK not only witnessed an increase in the coverage of TT-immunization but also had an impressive rate of 74 percent for TT-I as well TT-II. In Punjab and Sindh, the coverage rate was more 40 percent, but it was very low in rest of the regions and provinces. As noted in the earlier PRSP reports, it is likely that some cultural norms particularly in traditional tribal communities inhibit the universal coverage of immunization of women. But efforts may be made to get the cooperation of local influential persons to enhance the TT coverage. …

5.5        … shows that in December 2004, about 82,000 LHWs were active in the field, and 6874 were under training (not shown in Table 9). The government seems to be very close to its target of recruiting 100,000 LHWs to provide basic health services to rural as well as poor urban population. Data also show that about 80 percent of all LHWs were deployed in rural areas.

5.6 Table 9 also presents data on population covered by LHWs in rural and urban areas. Out of the 151 million estimated population in 2003, 58 percent were covered by LHW program (Table 10). This coverage was higher in rural arrears, 66 percent, while in urban areas it was relatively low, 41 percent. The total targeted population was about 106 million and LHW program has covered 83 percent of the targeted population. …

5.4 Governance

5.7        Governance is one of the four pillars of the PRSP. Although governance is related to all sectors of the economy, for the monitoring purpose, the PRSP has focused only on the performance of judiciary in terms of number of cases instituted and disposed of during a given period of time. PRSP aims to monitor these indicators for the superior judiciary, Supreme Court of Pakistan and High Courts, and for subordinate judiciary including special courts. In the earlier quarterly reports of the PRSP, data on the governance indicators could not be discussed because of its non-availability. It is good news that for the last three years the required data for NWFP and Balochistan has been made available. It includes information on High Courts as well as subordinate courts. This section has used this provincial information.

5.8        … shows that in the district courts of NWFP province percentage of disposed cases increased to 72 percent in 2004, from 66 percent in 2002. In the Peshawar High court, the percentage of disposed cases declined to 54 percent in 2004, from 64 percent in 2002. ….

5.9        The subordinate judiciary in Balochistan, which shows an increase in the number of instituted cases but a decrease in number of disposed of cases in absolute as well as percentage terms. A close look at the data presented indicates that the total capacity of subordinate judiciary in Balochistan is to dispose of 21-22 thousand cases annually. In percentage terms, the subordinate judiciary in Balochistan province was able in 2004 to dispose of three-quarters of the cases with these courts. The number of cases disposed of by the High Court of Balochistan decreased from 6000 in 2002 to less than 3000 in 2004. An increase in number of disposed of cases was observed in the Sibi Circuit Bench between 2002 and 2003 period, but a decline was observed between 2003 and 2004 period. The number of cases pending with the accountability Court-II Quetta decreased considerably during the 2001 and 2004 period. …

5.5 Land Distribution

5.10      In October-December 2003 quarter, the land distribution took place only in Sindh where about three thousand and five hundred acres of land was distributed among the three hundred and ninety eight beneficiaries. No major land distribution took place during the first half of the current fiscal year, when only 22 acres of state owned land was distributed to 8 households in Punjab.

6.1 Employment

6.2        It is well recognized that employment plays a central role in poverty reduction. Open unemployment in Pakistan increased from 4.7 percent in 1992-93 to more than 8 percent in 2001-02. This is the period when overall poverty also increased. However, the impressive growth performance during the last two years is likely to have contributed in arresting the rising trends in unemployment as well as poverty. Results of the 2003-04 Labor Force Survey (LFS), the main data source for employment in Pakistan, have recently been published. These results show a modest decline in the unemployment rate between the 2001-02 and 2003-04 period. For the purpose of monitoring the progress in labor market indicators, PRSP has identified two indicators: ‘unemployment rate’ and ‘total employed labor force’. Besides a discussion on these two indicators, this section has used the 2003-04 LFS results to review briefly the role of informal sector in employment.

Employed Labor Force

6.3        The LFS computes the labor force by multiplying the crude activity rate with the total population. The former increased from 29.6 percent in 2001-02 to 30.4 percent in 2003- 04. During this period an increase has also been witnessed in total population of the country. The total labor force therefore increased from 43 million in 2001-02 to 45 million in 2003-04.       … shows that the number of employed persons has also increased from 38.88 million in 2001-02 to 41.75 million in 2003-04. This increase has been noted across the board irrespective of gender; area and province. The volume of unemployed has reduced from 3.51 million in 2001-02 to 3.48 million in 2003-04. …

Unemployment

6.4        Overall unemployment rate has decreased from 8.3 percent in 2001-02 to 7.7 percent in 2003-04, due, mainly, to steeper decline in women’s unemployment from 17 percent to 13 percent during the inter-survey period. Among male, this decline was nominal; from 6.7 percent to 6.6 percent. Change in the unemployment rates varies between rural and urban areas. Female unemployment rate declined in rural as well as urban areas while for male a modest decline was observed in only rural areas but in urban areas the rate in fact increased from 7.9 percent in 2001-02 to 8.4 percent in 2003-04. How these changes can be explained? First take the decline in female unemployment in both rural and urban areas. This decline could be due to two reasons; female were able to get job opportunities or they withdrew from the labor force mainly because of ‘discourage phenomenon’. But female participation in the labor force increased considerably between 2001-02 and 2003-04 in rural areas, and there was a modest decline of 0.6 percentage point in urban areas. It thus appears that female unemployment reduced primarily due to expansion in job opportunities for females. Micro-finance facilities focusing women particularly in rural areas could be the major contributing factor for reduction in female unemployment rate. The rise in male unemployment rate in urban areas is a serious concern.

6.5        … compare age-specific unemployment rates among male and female for 2001-02 and 2003-04 period. Women’s unemployment has consistently been on decline across the constituent age intervals. Men’s unemployment rate increased for youth, 20-24 years old, and for those aged 40 years and older. Men in these age groups may be particularly targeted for self-employment through micro-finance and skill training. …

Role of Informal Sector in Employment

6.6        With respect to employment, the role of informal sector has been discussed below briefly. Currently, informal sector accounts for 70 percent of the employment. Proportion of employed person involved in rural informal sector (73%) was higher compared to that of urban areas (67%). As expected, formal sector activities are more concentrated in urban areas (33%) as compared to rural areas (27%). Since informal activities are predominantly non-agrarian, male workers are relatively more concentrated in informal sector both in rural and urban areas of the country. Informal sector’s employment has surged by five percentage points from 65% in 2001-02 to 70% in 2003- 04. According to the labor force survey, the launch of consumer finance schemes by various financial institutions is one of the important reasons. …

7 Pakistan Millennium Development Goals Report 2004

7.1        A recent positive development in monitoring the progress in poverty reduction is the publication of the Pakistan MDG Report 2004 by the Planning Division and UNDP. For each indicator of the MDGs, this report has given a baseline data for 1990/91; with PRSP and MDGs targets for 2005-06 and 2015 respectively.

7.2        For some indicators, the MDG report has provided data for the 2002-03 period. Between the 2000-01 and 2003-04 period, an improvement has been observed in these indicators. For example, literacy rate has increased from 50.5 percent in 2000-01 to 54 percent in 2002-03. A two-percentage point decline in infant and child mortality has also been reported in the MDG report 2004. Child immunization rate has also increased, although there was no change in the proportion of underweight children. With the availability of the CWIQ [Core Welfare Indicators Questionnaire] survey results this year, it would be possible to update the data for the 2004.

7.3        One important contribution of the MDG report 2004 is that against each target, it has included two assessments; ‘the state of supportive environment’, and the possibility of ‘reaching the target’. With respect to supporting environment, the report has assessed that it is found to be ‘strong’ for achieving the target of halving poverty by 2015. In the case of many education and health indicators, this environment is assessed as ‘weak but improving’. For example, regarding the supportive environment for universal primary education, the MDG report 2004 says that budgetary allocation for education has remained under 2% of GDP4. About 90-95% of the current allocations are spent on meeting staff salaries and the remainder is insufficient for providing quality education. To achieve the ESR objective, national expenditure on education has been projected to increase to 2.15% of GDP by 2005-06. Thus the supportive environment for universal primary education is categorized as ‘weak but improving’.

7.4        For the possibility of achieving the MDG targets by 2015, four options have been given in the MDG report 2004: ‘probably’, ‘potentially’, ‘unlikely’, and ‘no data’. Not a single goal is included in the ‘probably’ category; most are considered as ‘potentially’ achievable. According to the report it is even ‘unlikely’ to achieve the target of ‘elimination of gender disparity in primary and secondary education by 2005 and to all levels of education no later than 2015’. One may differ with the assessment of the MDG report, but it does emphasizes that in order to materialize all the targets by 2015, there is a need to make more efforts in terms of availability of resources and monitoring the progress regularly. …

8 Pakistan Bait-ul-Mal: Programs, Projects and Schemes

8.1        Several programs targeting the poor are implemented through the Pakistan Bait-ul-Mal (BPM). It is thus making a significant contribution towards poverty reduction through its various poorest of the poor focused services providing assistance to destitute, widow, orphan, invalid, infirm and other needy persons irrespective of their gender, caste, creed and religion. The ongoing projects/schemes of the BPM are discussed in this section. …

Food Support Program (FSP)

8.2        The Food Support Program (FSP) is a social safety net program targeting poorest of the poor to provide relief due to increase in the wheat prices since year 2000. BPM administered FSP in collaboration with Pakistan Post Office and Provincial Governments. The scheme was launched in August 2000 with annual budget of Rs 2.5 billion. Initially the program was for two years, but it has been further extended because of its efficacy and appeal to target communities. At present the annual budget of FSP is Rs 3 billion. In FY2003-04, the Federal Government revised the ceiling from Rs. 2000/ to Rs 2400/ biannually. Since inception of FSP, Rs 10,877.588 billion have been paid in 9 installments.

Individual Financial Assistance (IFA)

8.3        Through Individual Financial Assistance (IFA) the poor, widows, destitute, women, orphans and disabled persons are supported through general assistance, education, medical treatment and rehabilitation. Currently PBM is addressing 21230 deserving beneficiaries throughout the country with budget of Rs. 200 million.

Institutional Rehabilitation

8.4        NGOs engaged in welfare projects are also being provided financial assistance through PBM. Since 1992 Rs. 364.40 (m) have been disbursed among 759 NGOs. During the preceding financial Rs. 48.72 (m) has been disbursed among various NGOs under different strategies such as (i) Institutional support to orphans disabled, abandoned and destitute women, aged, children of juvenile (ii) Institutional care of aged, with stress on eye care and (iii) Innovation Pilot Rehabilitation Project.

National Centre(s) for Rehabilitation of Child Labor (NCsRCL)

8.5        The International Labor Organization (ILO) through its International Program for Elimination of Child Labor (IPEC) conducted a survey in 1996, which indicated 3.3(m) children between the ages of 5-14 years who were engaged in hazardous child labor in Pakistan. Child labor is another issue where state intervention has become necessary in the context of the rights of the child. The National Policy and Plan of Action on Child Labor focus on the immediate elimination of worst and most hazardous forms of child labor. National Centre (s) for Rehabilitation of Child Labor has been established countrywide since 1995. Children between the age of 5-14 years are weaned away from hazardous labor and enrolled in these centers where there are provided free education, clothing, footwear and stipend to the children as well as parents. The current strength of NCRCL centers is 100. 10200 students are benefiting from primary education in these centers. (Punjab 40, Sindh 25, NWFP+FATA 19, Balochistan 10, ICT/AJK&N.A 06). One additional centre shall be set up by the end of June, 2005.

Vocational Training Institutes/Dastkari Schools (VTIs)

8.6        Vocational Dastkari schools have been established throughout the country including Azad Kashmir & Northern Areas since 1995. These schools are providing free training to widows, orphans & poor girls in different skills. Current strength of the schools is 53 (Punjab 22, Sindh 10, NWFP+FATA 9, Balochistan 5 &ICT/AJK/N. Areas 7). Low income group of women are trained in various skills in these centers in two shifts of 30 students bi-annually. Presently 3106 students benefit from training in these schools. During the financial year 2003-04 one school in each province has been diversified and Rs 3 (m) has been allocated for each school, where training in different skills according to the requirement of the area are provided. One each Vocational Dastkari school shall be opened in the remaining districts of the country during next five years. …

Vision 2010

8.10      The vision 2010 includes: 

•     BM, a vibrant national organization for dispensation to the poor.

•     Capable of discharging mega projects for poverty alleviation.

•     Strong and diversified institutional care and rehabilitation.

•     Rehabilitation instead of dole.

•     Use of NGO outlets to augment PBMs role in poverty reduction, through institutional rehabilitation.

•     Compute razed environment to facilitate interfacing with other poverty reduction programs. … 

9 Concluding Remarks

9.1        Poverty related expenditures have substantially increased over time; one thousand billion rupees has been spent on the pro-poor sectors during the last five years, reflecting the government commitment to poverty reduction. High economic growth with increase in pro-poor expenditure has contributed in reduction in unemployment rate through generation of additional employment opportunities. Under the PESRP, an improvement has observed in education related intermediate and output indicators. The MDG 2004 report has also indicated some improvement in health output indicators.

9.2        Despite reporting of these partial achievements in the social sector, monitoring system still appears to be inadequate to review the progress in MDG/PRSP indicators. The availability of the CWIQ will be a welcome addition in the monitoring system. The first CWIQ would be a great source for building the PRSP/MDG baseline data at the district level. Similarly the information systems developed by different departments and ministries may be strengthened to make the monitoring system more effective.

Annexures, tables and figures given in the report are not included and can be seen on the following website: 

March 2005     
<http://www.finance.gov.pk/poverty/home.html> 

New Report Calls for Urgent Action to Cut Global
 Poverty and Win Better Development Results for
Poor Countries 

WASHINGTON, April 12, 2005 — Bold and urgent action is needed to reduce extreme poverty and improve people's economic and social prospects in developing countries in keeping with a set of key development targets, called the Millennium Development Goals (MDGs), says a report released today by the World Bank and International Monetary Fund.

"The credibility of the entire development community is at stake as never before," said World Bank President, James Wolfensohn in introducing the second annual Global Monitoring Report: MDGs: From Consensus to Momentum. "Rich countries must now deliver on the promises they have made in terms of aid, trade and debt relief, and the developing countries - especially in Sub-Saharan Africa - need to aim higher and do better in terms of their own policies and governance and to make more effective use of aid."

The 2005 Global Monitoring Report is part of a five-year stocktaking effort to monitor progress towards achieving the Millennium Development Goals by 2015. More than 180 world leaders agreed unanimously to the development goals at the UN Millennial Summit in New York in September, 2000. The report will be discussed by finance ministers, central bankers, and development ministers in Washington at the spring meetings of the World Bank and IMF. It will also serve as an important input into the upcoming G8 heads of state meeting to be held in the UK in July and the UN Summit on the MDGs in September.

            With just a decade left to go, progress toward the MDGs has been slower and more uneven across regions than originally envisaged, with Sub-Saharan Africa falling far short. In calling for stepped-up action, the new report points to opportunities created by recently improved economic performance in many developing countries. It outlines a five-point agenda designed to accelerate progress: 

·         Ensure that development efforts are country-owned. Scale up development impact through country-owned and led poverty reduction strategies;

·         Improve the environment for private sector-led economic growth. Strengthen fiscal management and governance, ease the business environment, and invest in infrastructure;

·         Scale up delivery of basic human services. Rapidly increase the supply of health care workers and teachers, provide larger and more flexible and predictable financing for these recurrent cost-intensive services, and strengthen institutional capacity;

·         Dismantle barriers to trade. Through an ambitious Doha Round, including major reform of agricultural trade policies - and also increasing "aid for trade";

·         Double development aid in the next five years. In addition, improve the quality of aid, with faster progress on aid coordination and harmonization. 

"To achieve the goal of cutting poverty in half by 2015, Sub-Saharan Africa needs to substantially raise annual GDP growth rates - to approximately 7 percent over the next decade, roughly double the region's current growth rate," said Anne O. Krueger, the IMF's First Deputy Managing Director. "While the domestic agenda necessary for such a take-off is clearly country-specific, the broad priorities are sound macroeconomic management, an enabling climate for private sector led growth, and strong public sector governance."

Over the last five years, many countries have shown improvement in economic policies and governance. Surging world trade and dramatic reductions of poverty in some countries provide grounds for hope in others. China's growth between 1981 and 2001 has reduced the proportion of extremely poor from 64 percent to 17 percent of the population - 400 million people. Vietnam reduced extreme poverty from 51 percent in 1990 to 14 percent in 2002. The goal to halve poverty by 2015 will likely be met at the global level, but not in Sub-Saharan Africa unless progress there can be accelerated quickly.

But conditions for achieving better economic performance in Sub-Saharan Africa are improving: 12 African countries are currently experiencing growth spurts above the trends for the region - with average GDP growth over the last decade of 5.5 percent or more.

Prospects for achieving the MDGs are gravest in health. As it looks now, most countries cannot meet the goals to reduce child and maternal mortality and achieve universal education. Substantial increases in the supply of teachers, doctors, nurses and community health workers are needed. Africa, for example, needs to triple its health workforce - adding one million - by 2015.

"Behind cold data on the MDGs are real people and lack of progress has real and tragic consequences," said the World Bank's Zia Qureshi, the report's lead author. "Every week, 200,000 children under five die of disease. Every week 10,000 women die giving birth. In Sub-Saharan Africa alone this year, 2 million people will die of AIDS. Worldwide, more than 100 million children in developing countries are not in school."

The report says that meeting the MDGs will require a doubling of the amount of official development assistance (ODA) reaching the poorest countries. Wolfensohn urged donors to use this year of stocktaking to raise their commitments and signal that support for the MDGs is forthcoming. "At stake are not just the prospects for hundreds of millions of people to escape poverty, hunger, and disease, but also prospects for long-term security and peace which are intrinsically tied to development," he said.

While aid volumes have risen since the UN Financing for Development Conference in Monterrey in 2002, when donors pledged to significantly increase assistance to the poorest countries, debt relief and technical cooperation account for a full two-thirds of the increase. The need for aid is especially acute in Sub-Saharan Africa. Given reforms underway, many countries in the region could effectively use a doubling of aid over the next five years.

12 April 2005
<http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:20445449~
menuPK:336998~pagePK:64020865~piPK:149114~theSitePK:336992,00.html> 

Population and Poverty

The link between population growth and poverty in Pakistan has once again been highlighted, this time at a seminar in Dadu. Speakers took the view that poverty could not be eradicated unless there was a check on the rising population growth rate. Currently, official sources put the growth rate at 1.9 per cent but analysts say that this figure cannot be independently verified and fear that it is higher than what is officially quoted. Despite this, to the government’s credit, the population growth rate has been rising at a decreasing pace in the past 10 years or so. In 1981, for example, it stood at over three per cent. While this is an achievement in itself, the problem is that even at the present rate, there is a net addition of three million people annually to our total population of about 150 million. This is a very high number by any standard. At this rate, our population will reach 220 million within a decade. Given our limited resources, the country will find it hard to support such a large number of people even with our present GDP growth rate of over six per cent. Pakistan is the sixth most populous country in the world. It also enjoys the dubious distinction of having the largest number of people below the poverty line, estimated at over 50 million. Population growth directly affects the government’s ability to provide adequate basic services, particularly health and education. It also affects the country’s development prospects, as scarce resources have to be distributed among an increasingly large size of the population. With employment opportunities becoming scarcer as a consequence of the population hike, there is a rush from the villages to the cities by people in search of a livelihood. This puts additional strains on the urban infrastructure, services and living space. It is estimated that within the next 10 years, over 40 per cent of the total population will live in urban areas as compared to 33 per cent at present. This is being seen as a problem for the country’s agriculture sector, which produces cotton, wheat and sugarcane, the backbone of the economy. The reduction in the population growth rate notwithstanding, the government’s overall efforts in this area have not yielded the desired results. Government officials themselves concede that in the light of the success achieved in Iran and Bangladesh, the drive to reduce the population growth rate is no longer a religious issue. The problem has to do with converting people to the small family norm and providing the necessary counseling, services and facilities on an extensive scale. In this, it would make sense to involve even religious scholars as well as NGOs, who can help drive the message home. The role of the mass media in this respect is also very vital. The percentage of those living below the poverty line stands at over 34 per cent. If the government is serious about reducing poverty in the country, a more concerted attempt has to be made to reduce the population growth rate, preferably to about 1.3 per cent in the coming years. If this is achieved, the benefits of economic development in the country will begin to extend to the middle and lower middle classes, where they are most needed. 

Editorial, Dawn, 18 April 2005
<http://www.dawn.com/2005/04/18/ed.htm> 

New World Bank Book Explores How to Empower the
Poor 

WASHINGTON, DC, April 20 2005 - It is widely accepted that effective poverty reduction depends on the ability to empower poor people to move out of poverty, yet the concept of empowerment tends to be poorly understood in development circles.  A new book released today by the World Bank - Measuring Empowerment: Cross Disciplinary Perspectives - explores various aspects of empowerment and its relationship to poverty reduction.  

            The book brings together the research and experience of 27 development experts from different disciplines who were asked to address the question of how best to define and measure empowerment.  The book is edited by Deepa Narayan, editor of the powerful three-part series Voices of the Poor, which chronicled the first-hand accounts of poverty from 60,000 poor men and women from developing countries.

“We know that empowering the poor is essential to poverty reduction,” said Ms. Narayan. “But can a computer empower an illiterate farmer? This book seeks to answer the key questions of how poor people can be empowered to move out of poverty and how to measure whether these goals have been reached.”

            Studies in this book tackle a range of issues with great academic rigor, while maintaining the “real-world” relevance of each question addressed.  Building on the work of the 27 authors, the books presents three key ideas: 

·         Inequality in power is pervasive and embedded in institutions from the local to global levels. Therefore, changes in the opportunity structure dictated by formal and informal rules are critical.

·         Unlike the rich, poor people are less able to take action to bring about change on their own behalf.  As a result, organizations of the poor, as well as organizations and communication technologies that link poor people to resources outside their own groups, are critical.

·         Differences between social groups are often more relevant to development and empowerment questions than individual differences.  However, most research and measurement efforts focus on individuals.   

The book builds a framework to ensure that empowerment becomes part of the development agenda so that the poor are treated as invaluable partners in development, and are finally treated as a resource and not the problem.

“We hope that this book, with its focus on measuring empowerment, will help spread approaches to poverty reduction that empower poor people,” said World Bank President James D. Wolfensohn.  “Unless poor people are at the center of poverty reduction, policy making and program design will not benefit them.”

Empowerment in Action

A striking example of how technology can empower poor farmers in India:

Farmers in India, as in many other parts of the world, are isolated from urban markets and dependent on middlemen, who monopolize information, sale of inputs, and crop purchasing.  As a result of an innovative idea and funding from ITC, an Indian private sector company, which has a growing involvement in agribusiness trade, more than 2 million Indian farmers are now connecting to markets through village-based computer stations called e-choupals.

Choupal is the Hindi word for the village square, a place where elders meet. E-choupals use information technology to bring about virtual meetings between farmers, buyers, and suppliers. ITC installs each Internet access kiosk, powered by solar-charged batteries, in the house of a farmer who is trained to operate it. Local farmers use the computer to access information free of charge. After checking prices, they can choose to buy or sell through ITC or go to local markets instead. ITC pays the kiosk operator 5 rupees on each completed transaction, whether purchase of inputs or sale of produce. Efficiency improvements in buying and selling have led to increased revenues for both farmers and ITC.

By providing easy access to information and increasing transparency, e-choupals have helped to change the relationship between farmers and their buyers and suppliers from one of exploitation and dependence to one of respect, trust, fairness, and equity. The e-choupal system brings people together across social barriers for business, newspaper reading, or watching movies on farming techniques.

The results are impressive.  Within four years, the e-choupal network has spread to 30,000 villages and has 37 active partners, including companies, nongovernmental organizations, universities, and state governments. By 2004 ITC was adding 30 new villages a day. All this has been achieved without any change in government policy and or any attempt to create new farmers' organizations.

This experience shows how strategic changes in the institutional climate-that is, in the rules, resources, norms, behaviors, processes, and trust that govern the relationships between farmers and private companies-can quickly create incentives that lead to greater empowerment and increased incomes. These benefits can be achieved without changes in government rules and regulations, without direct intervention in longer-term processes of changing social and political structures, and without first increasing the collective and individual assets of poor people

20 April 2005

<http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:
20458052~pagePK:148956~piPK:216618~theSitePK:336992,00.html> 

Whither Poverty Reduction? 

THE Pakistan Development Forum meeting in Islamabad provided General Musharraf’s Prime Minister, Mr Shaukat Aziz, a major opportunity to outline the government’s thinking and plans relating to what is being labelled as the ‘second generation’ reforms for economic and social development. The ‘first generation’ reforms were marked by abject insensitivity to the plight of the poor and led to an unprecedented increase in unemployment, poverty and misery. During the brief period 1999-2001, seven million people were pushed below the poverty line. This represented the fastest growth in poverty in Pakistan’s history.

However, given the expectation that a degree of macroeconomic stabilization would have provided a measure of confidence to the economic managers, it was anticipated that there would be a perceptible tilt towards a decidedly pro-poor policy framework. Instead, what has been presented has created new grounds for alarm.

The most disturbing aspect of Mr Shaukat Aziz’z address is the virtual abandonment of poverty reduction as an objective in its own right. The five-point growth strategy for the future, i.e., water security, energy security, development of infrastructure and human capital, cannot be disputed from a growth perspective, but is a throw-back to the development mindset of the 1950’s.

By the 1990’s, it was acknowledged that growth alone does not reduce poverty and more direct approaches are necessary. The very purpose of embarking on the task of preparing poverty reduction strategy papers – the PRSPs – was to place poverty reduction at the centre of the development process and plan the physical aspects of economic growth around it. Pakistan too undertook an elaborate process of preparing its PRSP at the federal and provincial levels at a considerable investment of donor and national resources. However, the PRSP now appears to have been consigned to history.

Far more seriously, Mr. Shaukat Aziz’s statement – “the rigid top-down one-size-fits-all poverty reduction strategy is losing ground” – is revealing in the sense that poverty reduction is no longer considered a domain of macroeconomic policy. This is not only conceptually and theoretically flawed, but indicates that poverty reduction is no longer an important part of the Musharraf regime’s agenda. Of course, references to poverty reduction abound, but they continue to be relegated to the status of a by product of growth.

Empirical evidence that growth alone is insufficient for poverty reduction continues to be studiously ignored. The fact is that growth need not automatically create more jobs. If growth is achieved on account of enhanced efficiency obtained through increased capital intensity, employment opportunities are likely to actually decrease, at least in the short run. And if labour has been displaced by imported capital, then the employment multiplier will operate in the capital-exporting country rather than locally.

Recent official statistics confirm that employment growth has occurred only in the informal sectors rather than in the formal sectors of the economy. Given that the former is generally a low value-added, low wage sector, employment growth therein cannot be considered as contributing to poverty reduction.

Further, in the event that income is unequally distributed, as is seriously the case in Pakistan, additions to national income is more likely to make the rich richer and keep the poor in poverty. It has been shown that every rupee of increment in national income adds 34 paisas to the pockets of the rich and a mere 2.7 paisas to the pockets of the poor.

Mr. Shaukat Aziz has made a rather global reference to ensure that “all groups of people across geography, gender, class, caste, religion and any other divide are able to benefit from this growth.” However, there is no reference to the pervasive class and regional inequalities that exist and is growing. Otherwise too, there have been no efforts or even references at any governmental level to the need for any inequality reducing measure – introducing land reforms, rendering the tax regime progressive, or reallocating resources from non-productive heads of expenditure to social sectors.
            The issue that has currently keyed up the country’s economic managers is the prospect of seven per cent plus growth rate. A high growth rate is welcome, even if the employment elasticity of growth is low or even if the distribution of income is unequal. This is because, with a high growth rate, the absolute number of jobs created and the addition to the income of the poor is likely to be higher than with a low growth rate. There are, however, questions about the claimed growth rates and other statistics that are presented to support claims of ‘historic’ success or that Pakistan is poised to become one of the ten most dynamic economies in Asia!

That the economy has stepped out of the low 3-4 per cent growth path needs to be acknowledged. That the manufacturing sector – automobiles, cement, etc., — too is beginning to show some buoyancy also needs to be recognized. Yet the scale of this recovery remains uncertain. Questions arise on account of the tendency over the last five years to manipulate data and misrepresent facts. Suspicions are heightened on account of the failure to appoint a Director General of the Federal Bureau of Statistics since June 2003. Not surprisingly, fears exist about the statistical claims collapsing a la the stock market.

The year 2002-03 was the first time that the economic managers claimed that the GDP growth rate had risen and exceeded the 5-percentage point mark. Partly the higher GDP growth rate in 2002-03 was obtained by changing the base year figures, i.e., the preceding year. For example, the growth rate in the Public Administration & Defence sector in the preceding year – 2001-02 – was reported to be as high as 18.2 percent. This enabled the GDP growth rate in 2001-02 to be shown at 3.6 percent. In the subsequent year, the 2001-02, the Public Administration & Defence sector growth rate was revised downwards by about two-thirds to 6.5 percent.

The lower base year figure raised the Public Administration & Defence sector growth rate in 2002-03 to 5.2 percent and the GDP growth rate to 5.1 percent. If Public Administration & Defence sector growth at 6.5 percent in 2001-02 is accepted, then the claimed GDP growth rate in 2001-02 appears to be an over-estimate; conversely, if growth at 18.2 percent is accepted, then the claimed GDP growth rate of 5.1 percent in 2002-03 appears to be exaggerated. Either way, the credibility of official claims is rendered suspect.

The underlying concerns about the data, and the claims based thereon, are heightened by inconsistencies. For example, manufacturing value added in 2003-04 is shown to have increased by 13.4 percent despite a decrease in industrial consumption of electricity, gas and oil by 19.2, 13.8 and 20.7 percent, respectively. This implies an increase of energy use efficiency of between 24 to 29 per cent between 2002-03 and 2003-04. The sharp enhancement in energy use efficiency in the manufacturing sector over the period of just one year raises questions of plausibility. An explanation is called for.

Suspicion that a part of the data is ‘manufactured’ to support claims of success is provided by a number of instances. One such glaring case is growth in tax receipts. The customs duty data for 10 out of 13 commodity groups reported in the Budget documents for the years 2002-03, 2003-04 and 2004-5 show the same growth rate. For example, the growth in customs duty receipts is a uniform 3.1 percent, 9.7 per cent, and 27.0 per cent for all 10 commodity groups for three years, respectively. That customs duty receipts have been shown to increase at the same rate for different commodity groups demands an explanation. Clearly, the data appears to have been ‘created’ by applying a uniform growth rate for the 10 commodity groups.

Yet again, tax revenue targets for 2002-03 and 2003-04 were set at Rs460.6 billion and 510.0 billion respectively. Interestingly, actual receipts were also shown to be Rs460.6 billion and Rs510.0 billion for the two years. In 2003-04, targeted and actual receipts of direct and indirect taxes were also shown to be almost exactly the same at Rs161 and Rs348 billion, respectively. Such absoluteness exactness in achieving revenue targets – and that too two years in a row – is not feasible. Clearly, the data cannot be relied upon.

It may not be appropriate at the present moment of euphoria in official circles to sound anything but positive about the economy. General Musharraf’s economic managers may be supremely optimistic; however, the collapse of the stock market is a warning against building hopes based on contrived statistics. …

Kaiser Bengali, Dawn, 2 May 2005
<http://www.dawn.com/2005/05/02/ebr1.htm> 

Rising Inflation an Area of Concern: SBP 

KARACHI, May 23: Rising domestic inflationary pressures, growing imbalances in the external sector and re-emergence of rigidities in the debt servicing cost because of soaring interest rates are three ‘areas of concern’ noted in the third quarterly report for the year 2004-05 on the state of Pakistan’s economy released by the State Bank on Monday.

“The next few months will be critical to determine whether inflationary pressures are receding as a result of the measures taken to augment supplies of the critical food items and moderation in demand for bank credit by the private sector in response to rising interest rates,” the report says.

The SBP report notes with concern the deepening of the inflationary pressures in March this year “as all the three price indices (the WPI, CPI and the SPI) bounced back from their near term troughs in December 2004.” The Consumer Prices Index (CPI) after dropping to 7.4 per cent on a year-to-year basis in December 2004 climbed back to 10.3 per cent on year-to-year basis in March this year. It is a 90-month high and for the first time in more than seven years the CPI inflation reached a double-digit figure. Unexpected rises in international petroleum prices and higher food prices are being blamed for the rise in inflationary pressures.

The report attributes the high prices of wheat and cement to “institutional and regulatory weaknesses”. Anticipating that economic growth “may exceed eight per cent” in the current fiscal year, the highest in last 13 years, the SBP report notes a redeeming feature that “this growth is expected to be shared by all the major sectors of the economy”. While pointing out that the growth in agriculture, industry and services sectors is expected to be above targets, the report particularly mentions the sharp jump in the growth of “labour intensive agricultural sector” that amply suggests “employment generation and poverty reduction”.

“Historically, in Pakistan sustained economic growth of over six per cent has been correlated with a meaningful reduction in poverty levels,” the report says while drawing the attention of the policymakers towards the challenge “to sustain this growth momentum”. Without mincing words, the SBP report declares that inflationary pressures are clearly on the rise and warns that if these were left unaddressed these could have “serious repercussions on the long-term growth”.

While attributing the growing imbalance in the external sector during 2004-05 to a surge in imports, the State Bank calls it “less of a threat, but nonetheless a concern” and is confident of sustaining this small deficit in the short run. But then the report points out that large external deficits over a prolonged period are “clearly undesirable”.

The report notes with satisfaction the growth in the national economy to exceed the target for the third consecutive year during 2004-05. It stipulates 15 per cent growth in the large-scale manufacturing sector, agriculture to exceed target of four per cent, exports 14.6 per cent, imports 37.8 per cent, tax revenue 13.5 per cent, private sector credit 29 per cent and foreign exchange reserves close to $13 billion.

A noteworthy feature during 2004-05 has been a 30 per cent jump in banks’ credit to the private sector. The private sector got Rs362 billion credits by the third week of April as against Rs325 billion in the entire fiscal year of 2004. While this clearly aided the acceleration in many sectors of the economy, the resulting strength in demand, oil price hike and supply constraints in food inevitably contributed to price rise as well, it says.

The SBP now pursues a monetary tightening policy to counter the inflationary pressures after it has found the real GDP expected to exceed over eight per cent growth. “While this is not expected to subdue inflationary pressures immediately, the tightening will ensure that core inflation will gradually be contained at significantly lower levels”.

The report argues that the SBP consciously followed the expansionary and accommodative monetary policy to create and sustain the acceleration of the economy to levels necessary for meaningful employment generation and poverty reduction.

A recovery of Rs401 billion by the Central Board of Revenue in first nine months of the current fiscal looks quite impressive “at the first look” but a more detailed analysis, according to the SBP, reveals some points of disquiet. The SBP notes that tax collections are not compatible with the growth in the national economy. The sales tax collection also fails to remain in proportion with the growth in the imports.

Sabihuddin Ghausi, Dawn, 24 May 2005
<http://www.dawn.com/2005/05/24/top7.htm> 

Economic Survey of Pakistan 2004-2005  

Poverty

Although poverty is still pervasive in most developing countries particularly those in Sub-Sahran Africa and South Asian countries, a number of developing countries have made significant progress in reducing poverty. The past century has seen more advances in global prosperity and more people have come out of poverty than in all of human history. One of the reasons for this achievement is the integration of societies and economies around the world. Integration is the result of reduced cost of transportation, lower trade barriers, faster communication of ideas, rising capital flows, and intensifying pressure for migration. Integration or globalization has also generated anxieties about rising inequality and there is a widespread perception that globalization is having a detrimental impact on the poor. In spite of the intensive debate that is now underway, there is no precise or widely-accepted view of the adverse impact of global changes on poverty.

Nevertheless, evidence show the share of the population in poverty has declined for developing countries as a whole (from 28.3% in 1987 to 24% in 1998 based on $1/day and from 61% in 1987 to 56% in 1998 based on $2/day) and in all developing regions except Sub-Saharan Africa, Eastern Europe and Central Asia. Declines have been pronounced and sustained over a longer time period for the most populous developing countries. For example, the incidence of poverty in India measured by the official poverty line fell from 57% in 1973 to around 35% in 1998, whereas the incidence of poverty fell from 60% to 20% between 1985 and 1998 for Indonesia. Standards of living have also improved. Infant mortality rates globally have been cut in half during 1970-1997, from 107 to 56 per thousand; and life expectancy has risen from 55 years to 67 years.

It is often argued that economic integration or globalization has played an important role in reducing poverty in developing countries through its impact on growth. More open economies, and those who have been more successful in accelerating their pace of integration, have recorded the best growth performance, whereas developing countries with inward-oriented policies have suffered from poor growth rates. By stimulating higher growth, integration can have a strong positive impact on poverty reduction.

Like many other developing countries, Pakistan has also made significant efforts to integrate its economy with rest of the world through foreign trade and investment. The performance of the economy remained dismal in the 1990s for a variety of reasons which caused poverty to rise in the decade. However, realizing the rising trends in poverty during the 1990s, the Government of Pakistan adopted a strategy for poverty reduction in 2001. The poverty reduction strategy of the government focuses mainly on the five areas which include i) accelerating economic growth and maintaining macroeconomic stability; ii) investing in human capital; iii) augmenting targeted interventions; iv) expanding social safety nets and v) improving governance. This strategy has already started bearing its fruits. Economic growth has accelerated and the country has achieved the macroeconomic stability. The long term growth trajectory of 6 percent per annum that has reduced poverty over a longer period has already been achieved during the last fiscal year. More importantly, the real GDP grew by 8.4% during the current fiscal year which seems to have improved the living standards of the people and thus, may help reduce poverty among the lowest segment of population.

Although poverty encompasses various dimensions, such as income or consumption, lack of education or ill health and scarce job opportunities, the income or consumption is the most important determinant of welfare of an individual. According to the United Nations Millennium Development Goals (MDGs), Pakistan is required to reduce poverty by half by 2015 from the level of the 1990. The country is committed to pursue this target along other MDGs targets by means of the indicators defined under the Goal of the Millennium Declaration. Achieving MDG targets requires monitoring and analysis of poverty trends. To assess the state of poverty, Planning Commission, Government of Pakistan has already notified an official poverty line based on a caloric norm of 2350 calories per adult equivalence per day. This poverty line approximated to Rs.748.56 per month per adult equivalence in 2000-01.

To examine the impact of policies on poverty, the country-wide primary household data is essentially required. The Federal Bureau of Statistics (FBS) has been conducting household income-expenditure survey (HIES) over the last four decades. The last full HIES was conducted in 2000-01. In April 2004, the FBS had conducted a sample Survey of Household Consumption Expenditure (HCES) with the sample size of one-third of the full HIES with a view to gauging the impact of socio- economic and macroeconomic policies on the living conditions of the people of Pakistan. The findings of the Survey simply suggested that the rising trends in poverty have been arrested and that a reversal has begun to take shape. The results of the Survey also showed improvement in some key indicators of social sector since 2000-01.

The next HIES namely the Living Standards Measurement Survey (LSMS) is partly completed and partly nearing completion. This Survey, at the district and provincial level, covering 76,520 households [Core Welfare Indicators Questionnaire (CWIQ) approach] started in September 2004 and the field operation was completed in March 2005. The results of some of the key indicators pertaining to living conditions and social sector are reported in this Chapter. The detailed report has been finalized and will be released soon by the Federal Bureau of Statistics (FBS). The provincial level Survey, which is focusing on household consumption and expenditure, would be completed by end- June 2005 and its results would be available by December 2005. This Chapter would therefore report results pertaining to living conditions and social sector obtained from the PSLM Survey. Readers would have to wait till December 2005 to get estimates of poverty from the Provincial Level Survey of the PSLM which is focusing on household consumption and expenditure. This Chapter also discusses the poverty reduction strategy of the government and analyses the trends in poverty-related and social sector spending with a view to evaluating the impact of government policies and strategy to reduce poverty.

An Update on Social Indicators from PSLM Survey

Income and consumption based measures reflect only one dimension of poverty; lack of opportunities and capacity due to poor education, health and living conditions are some other dimensions in which poverty manifest and perpetuates itself in a society. The fiscal expenditure since 2000-01 under I-PRSP and PRSP are aimed at increasing access of the populace to social infrastructure and thereby enhancing the social capital of the nation and alleviate poverty by improving the living standards of the Pakistani society.

Before discussing the results obtained from the PSLM Survey it is pertinent to say a few words about the Survey itself. The Pakistan Social and Living Standards Measurement (PSLM) Survey is designed to provide social and economic (poverty) indicators in the alternate year at provincial and district levels for the assessment of development programs initiated by the government under Poverty Reduction Strategy Paper (PRSP). The first district level Survey, following the Core Welfare Indicators Questionnaire (CWIQ) approach, with a sample size of 76520 households (27144 urban and 49376 rural) from 5348 sample area, covering both urban and rural areas, has been conducted during the year 2004-05. The Survey was started in September 2004 and the entire field operations were completed in March 2005. The first report of the Survey covering national/ provincial level indicators has been finalized and will be released shortly by the Federal Bureau of Statistics (FBS). The remaining reports covering district level information will also be released soon by the FBS.

This Survey would provide information pertaining to demography, education, health, employment, household assets / amenities, population planning, water supply and sanitation, and satisfaction to services deliveries. These indicators will assist the government to have rapid assessment of development programs initiated under the PRSP. As stated earlier, the provincial level Survey of the PSLM, focusing on household consumption and expenditure will be completed by June 2005 and its report will be available in December 2005. The estimates of poverty for 2004-05 would then be available for all of us.

This Chapter, however, reports some of the key social sector and living standards indicators. Table 4.1 compares the living conditions as revealed in the census 1981, 1991 and the recently completed PSLM Survey 2004-05. Housing conditions as measured by the number of rooms has been improving consistently since the last two decades. The number of households living in one room homes show a significant decline and that of households living in 2 - 4 rooms has increased significantly. The table shows that 51.5 percent households were living in one room homes in 1981, declined to 38.1 percent in 1998 and further declined to 24.2 percent in 2004-05. On the contrary, percentage of households living in 2 – 4 rooms homes increased from 44.8 percent to 68.7 percent in the same period. Number of households living in 5 and more rooms almost doubled in the same period. This trend simply reflects the rising level of prosperity in the country. Another important finding, as documented in Table 4.1, is that almost 87 percent household in Pakistan owned housing units as apposed 81 percent in 1998 and 78.4 percent in 1981. Yet other indicators of the improvement in living conditions are the percentage of households using electricity as a source of lighting and gas as cooking fuel. Both indicators show marked improvement over the years. This also reflects the success of village electrification program and providing gas to the far flung areas of the country.  

The current position of selected social indicators as indicated in PSLM 2004-05 is compared with the status of corresponding indicators for 1998-99 and 2000-01 PIHS in Table 4.2. Most of the indicators like, major source of drinking water, the type of toilet used, and enrolment in various levels in schools show a significant improvement over the last 4 years.

The percentage of household using Tap water as major source of drinking water improved over the last four years – increasing from 25 percent to 39 percent. Gross enrolment at primary level, after stagnating at around 71/ 72 percent during 1998-99 and 2000-01, increased substantially to 86 percent in 2004-05. Net enrolment at primary level also increased by 10 percentage points (from 42% to 52%) in four years. This simply suggests that the drop out rate has declined and the cost effectiveness of educational expenditure has improved somewhat. Gross and net enrolment in middle and matric levels also show improvements during the last four years as against a total stagnation during 1998-99 and 2000-01. Notwithstanding these improvements, the pace of improvement needs to be enhanced by further raising the effectiveness of educational expenditure.

Table 4.3 profiles the trends in literacy rates of population 10 years and above and 15 years and above. In both indicators there is an improvement across gender as well as across urban and rural areas. 

After remaining almost stagnant during 1998-2001, literacy rate has registered 8 percentage points increase during the last four years. Both male and female literacy rates have shown 7 to 8 percentage points improvement during the period. On average, literacy rate has risen relatively at a faster pace in rural areas as well as in female. Adult literacy has also increased from 43 percent to 50 percent – 7 percentage points increase across urban and rural areas. These are good signs but more efforts are required to accelerate the pace of improvement.

Health conditions of the population have also improved significantly as shown in Table 4.4.

The proportion of children immunized in the 12-23 months bracket at national level has risen from 53 to 77 percent while in rural areas it has shown even a faster increase from 46 to 72 percent. The practice and source of treatment of diarrhoea in children under 5 years shows improvement. The percentages of cases where practioner was consulted went up from 81 percent to 90 percent, while the percentage of cases where ORS was administered went up from 52 to 78 percent in rural areas. The wide spread use of ORS suggests that media campaign by the relevant ministries are paying healthy returns in the form of increased awareness and timely action at the household level. This will directly contribute in reducing the under-5 mortality rate in the country.

Poverty Reduction Strategy

Pakistan’s commitment to reducing poverty in the medium term was first reflected in Poverty Reduction Strategy Paper (PRSP) finalized in December 2003. The Medium Term Development Framework 2005-10 (MTDF) carries this assurance forward in more than one ways. First, by aligning its terminal 2009-10 targets with longer term Millennium Development Goals (MDGs) it reinforces its objective and vision for improvement in the human development indicators and sustainable development of the country in the medium-term. Secondly, the MTDF’s strategic thrust of balanced growth that combines economic growth to progressively rise to 8 percent by 2009-10 with substantial rise in allocation to the social sector provides a credible basis to the sincere intentions of the planners and policy makers to be on a fast track in achieving the poverty reduction goal by the year 2015. The MTDF poverty reduction strategy is a continuation of the PRSP strategy. It consists of four basis themes: higher economic growth, social development, good governance and protection of vulnerable groups.

Over the past several decades, there has been increasing acceptance worldwide that rapid economic growth over a prolonged period is essential for poverty reduction. At the macro level, economic growth implies greater availability of public resources to improve the quantity and quality of education, health and other services. At the micro level, economic growth creates employment opportunities, increases the income of the people and therefore reduces poverty. Economic growth also benefits the poor. Evidence shows that the income of the poor tends to grow proportionately with mean per capita income growth. Therefore, rapid growth is vital, but it has to be sustained for a meaningful reduction in poverty. Many developing countries have succeeded in boosting growth for a short period. But only those that have achieved higher economic growth over a long period have seen a lasting reduction in poverty – East Asia is a classic example of lasting reduction in poverty. Growth, however, does not come automatically. It requires policies that will promote growth. Macroeconomic stability is therefore, key to a sustained high economic growth.

Pakistan’s growth performance over the last three years is enviable in many respects. Sound macroeconomic policies and implementation of structural reforms in almost all sectors of the economy have transformed Pakistan into a stable and resurgent economy in recent years.

Agriculture (agro-industry, agri-business and livestock), small and medium enterprises (SMEs) and housing & construction have been prioritized in accordance with their potential to provide employment to the poor segments of the society. In agriculture, the emphasis is in bringing additional land under cultivation through provision of adequate and efficiently managed water resources. The government’s investment in on-going water-related projects will bring an additional 2.88 million acres of land under irrigation and 4.44 million feet of additional water in the next 2-3 years. This will boost agriculture output, productivity and employment in rural areas in a sustained manner and will help reduce poverty, particularly in rural areas.

The housing and construction sector provide substantial additional employment opportunities as it contributes through a higher multiplier effect with a host of beneficial forward and backward linkages in the economy. The sector, through linkages effect with about 40 building material industries, supports investment and growth climate and help reduce poverty by generating income opportunities for poor households. During the last two years, the government has taken various budgetary and non-budgetary measures which are now yielding positive results. Construction activity in Pakistan is booming; demand for construction-related materials has surged. Many national and international real estate developers have launched or launching large construction projects in Pakistan which has further accelerated construction activity in the country.

The information technology and telecom sector is yet another sector which has enormous potential to create jobs for the educated unemployed youth in the country. This sector has witnessed unprecedented growth during the last five years. The extra-ordinary growth in the IT and telecom sector has created enormous employment opportunities, directly or indirectly, for educated unemployed youth in the wide range of areas like call centers, telecom engineering, telecom sales, customers’ services, finance, accounting and jobs through franchises of the telecom companies. This sector has created over 300 thousand direct and indirect jobs during the calendar year 2004. Two new cellular companies have entered the market recently and setting and expanding their operations in Pakistan, thereby creating more direct and indirect jobs for educated youth.

SMEs are an important conduit for labour absorption and thereby reducing unemployment and poverty. They are also better insulated from the external shocks, more resistant to the stresses, and more responsive to the demands of the fast-changing technology adoption, globalization and entrepreneurial development. A comprehensive package of venture capital, credit, liberalization of controls, technology, training, marketing and management measures will ensure expansion of this sector. The development of agro-processing sector (mainly for fruits, vegetables, dairy, and livestock) and initiatives for fair marketing, transportation, and handling of agricultural produce present wide range of opportunities for private sector growth in the agro-based rural economy. Rural based agribusiness SMEs are a natural source for exploiting these opportunities that will provide new avenues for employment and income generation for rural population. Under the poverty reduction strategy, SMEs are expected to play a crucial role in ensuring Pakistan’s international competitiveness, rapid assimilation of new technologies and creation of new jobs.

Microfinance plays a critical role in improving the lives of the poor people. The impact it produces, go beyond just business loans. The poor use financial services not only for business investment in their micro-enterprises but also to invest in health and education, to manage household emergencies, and to meet the wide variety of other cash needs that they encounter. Evidence from the millions of microfinance clients around the world demonstrate that access to financial services enables poor people to increase their household income, build assets and reduce their vulnerability to the crises that are so much a part of their daily lives. Access to financial services also translates into better nutrition and improved health outcomes, such as higher immunization rate. It allows poor people to plan for their future and send more of their children to school for a longer duration. It has made women clients more confident and thus better able to confront gender inequalities. Microfinance client manage their cash flows and apply them to whatever household priority they judge most important for their own welfare. Access to flexible, convenient and affordable financial services empowers and equips the poor to make their own choices and build their way out of poverty in a sustained and self determined way.

Realizing the importance of microfinance in improving the lives of the poor people, the government has established Khushhali Bank in 2000 – a microfinance institution – under a public-private partnership program. It has also encouraged private sector to setup microfinance banks in Pakistan. So far three microfinance banks have become operational during 2001-04. Two applications for setting up microfinance banks in private sector are under process for licensing. The outreach of these four institutions has increased to half a million households in just 4-5 years. In the next five years the outreach will increase to three million households. The Khushhali Bank alone has so far disbursed Rs.4.5 billion and nearly 33 percent of its clients are women. The services of these institutions will be the most effective instruments in improving the lives of the poor people in both urban and rural areas.

The government fully recognizes that sustained growth is critical for poverty reduction; focus on growth alone is however, not enough. A high and sustained economic growth policy must be accompanied by other poverty alleviation measures, such as, investment in human capital like education, health and other human development activities, integrated small public works programs in both urban and rural areas, and other social safety net measures.

Poverty and social sector related expenditures under the PRSP are the most important fiscal intervention to target the poor and vulnerable sections of the society. The trends in Table 4.5 indicate that they have increased over 120 percent in four years - from Rs.114 billion in 1999-00 to 254 billion in 2003-04. An amount of Rs. 278 billion, an increase of 9.5 percent over the previous year, is budgeted for the current year. During the first nine months (July – March) of the current fiscal year, the PRSP expenditure amounted to Rs.191 billion as against Rs.156 billion in the same period last year, thus registering a growth of 22 percent. This has been possible mainly due to government’s medium-term fiscal strategy aiming to create fiscal space for higher levels of social sector and poverty-related spending.

Sectoral and sub-sectoral pro-poor budgetary expenditures and their positive impact are discussed below.

Community Services Expenditures on roads and highways - the most labour-intensive area, constitute the major share in community services. They have grown less than three times in three years from Rs. 6.34 billion in 2001- 02 to Rs. 16.6 billion in 2004-05. This will contribute to mitigating transitory poverty in rural areas. However investment in water and sanitation remain almost flat from Rs.4.64 billion in 2001-02 to Rs.4.88 billion in 2004-05. Going forward, provision of safe drinking water will emerge as a priority sector. 

Human Development It is a widely recognized fact that investment in human development is the most potent public intervention to mitigate chronic and inter-generational poverty. As such, PRSP allocates over one-half of the total resources under PRSP expenditure to human development, of which, education and health receive the lion share. Education related expenditures have climbed steadily from Rs.66.29 billion in 2001-02 to Rs. 102.4 billion in 2004-05 -- an increase of 54.5 percent in three years. The government continues to assign highest priority to improving the cost effectiveness of education expenditures and therefore aims to reduce the drop-out rates, specifically among females. A higher literacy rate of women in the country is reliable guarantee for sustainable development of the nation. Providing access and affordable health care to its citizens is another dimension of human development to which the government is fully committed. These expenditures have already impacted social indicators which exhibited mark improvements in 2004-05 over 2000-01 and are documented in Tables 4.1 – 4.4.

Rural Development Rural development encompassing expenditures on irrigation and rural electrification remain the cornerstone of pro-poor expenditures to enhance the agriculture productivity and incomes of the rural poor. Expenditures under this head have increased from Rs.24.3 billion in 2001-02 to Rs. 43.0 billion in 2004-05. Going forward rural electrification and provisioning of gas in far flung areas will emerge as priority sectors.

Safety Nets The expenditures on food subsidies, food support program, Tawana Pakistan and low cost housing are aimed at the most vulnerable and poorest sections of the society. As compared to actual expenditure of Rs.11.46 billion in 2003-04 an amount of Rs.19.03 billion is budgeted under this head in the current fiscal year. Tawana Pakistan, a programme, specially targeted to improve the nutritional and attendance rates of females is being strengthened and its allocation is likely to rise further in coming years.

Good Governance Investing in improving governance, short as well long term have direct impact on reducing poverty. Access to justice facilitates in effective enforcement of property rights and overall improvement in law and order, encourages inflow of foreign and domestic investment, ultimately increasing job opportunities in the country. The expenditures on governance are projected to increase from actual Rs.42.44 billion in 2003-04 to Rs.46.80 billion in the current fiscal year.

<http://www.finance.gov.pk/survey/chapters/04-Poverty.PDF>