What is driving the surge in poverty in Pakistan?
A recent news item referred to the World Bank’s Poverty Outlook on Pakistan and said that there could be 39.2 percent population currently living below the lower middle income poverty line. This number stood at 35.7 percent in fiscal year 2019-20. The outlook also warns that there could be two million people who may have fallen below the poverty line including 40 percent of households suffering food insecurity in Pakistan.
A similar warning has also come in the Planning Commission’s Annual Plan 2021-22 which said that after incorporating the impact of COVID-19, there could be 25.4 percent people below poverty line using 2018-19 household income and expenditure survey. This assessment also indicates that Ehsaas led social protection initiatives may have reduced poverty by 2 percentage points, however the challenge is much bigger – COVID-19 and its impact was exacerbated by natural disasters such as locusts attack, crop failures, climatic effects in cotton sector, food and rural inflation.
This growth in poverty, in its various forms, is going to impact people’s abilities to invest in their health, education, and essential social services. Challenges in accessing or affording any of these services could easily put Pakistan’s efforts toward achieving Sustainable Development Goals (SDGs) in jeopardy.
A sustainable poverty reduction strategy will need to strengthen resilience at an individual level and at the same time empower the poor through the creation of assets.
Dr. Vaqar Ahmed
Currently, the federal government and provinces do not seem to have an integrated plan to battle increases in poverty. Any poverty reduction strategy will have job creation as the center piece.
However, employment creation may be essential to pull people out of poverty but it is certainly not enough to keep them there over the long term as future economic shocks occur.
A sustainable poverty reduction strategy will need to strengthen resilience at an individual level and at the same time empower the poor through the creation of assets — which could be used at the time of future economic shocks. Such an empowerment requires urgent public investment interventions.
We have noted that development budgets of federal and provincial governments faced efficiency issues including slow spending at a time when the poor needed relief the most. Even the budgets under emergency relief funds could not be fully utilized within the stipulated time period. These weaknesses to quickly process proceeds from public sector development program and annual development plans need to be urgently assessed.
While all governments touted the increase in minimum wage, however none have actually accepted during the budget proceedings their failure to implement these living standards. The Sustainable Development Policy Institute (SDPI) and Pakistan Institute of Labour Education & Research (PILER) has often argued that minimum wage doesn’t correctly represent the actual ‘living wage’ which could be at least double of what the governments often state in the annual budget speeches. Such phenomenon in the longer run lead to high household level indebtedness.
The government’s own revenue needs are increasing. This has put a lot of pressure on the Federal Board of Revenue (FBR) to set higher collection targets. Unfortunately, despite a reduction in withholding taxes, much of the increase in revenue will come during fiscal year 2021-22 through increased reliance on indirect taxes including sales tax. This is regressive with an unfavorable impact on the poorest segment of the population. It will be important now that Standing Committees on Finance and Revenue in the National Assembly and Senate invite the tax policy czars to present how incidence of such taxes will not be anti-poor?
In recent years, economists such as Paul Krugman have argued that the main cause of persistent poverty is high inequality. It is clear from the recent evidence on impacts of COVID-19 that inequality in various forms has widened. If policies in developing economies such as Pakistan were previously steered toward addressing inequalities in incomes and consumption, it will be timely to now address other forms of inequalities including in health, education, and gender spaces.
A few years back, we had never thought that reducing the gap between the ‘digital haves’ and ‘have-nots’ should be a priority. Only now we understand that access to digital services is the key during pandemic times for the poorest to keep receiving their social protection or cash flow for agricultural inputs.
Data deficiencies continue to pose challenges for targeting of poor. This can either delay or prevent handouts to reach genuine beneficiaries. Efforts by the federal government to updated national socio-economic registry or Sindh government to develop a dynamic poverty registry have been met with overwhelming challenges which require a whole-of-the-government approach – not being observed yet.
With 68 percent of Pakistan’s population under the age of 30, it is important that the youth should be part of the COVID-19 response. Child poverty needs an updated assessment. Children living in poverty are experiencing deprivation and their numbers are set to increase if they are not sent back to school or work as the economy fully recovers. Until that happens, a concerted effort is required to protect them from falling to social evils and crime.
- Dr. Vaqar Ahmed is joint executive director at the Sustainable Development Policy Institute (SDPI). He has served as an adviser to the UN Development Programme (UNDP) and has undertaken assignments with the Asian Development Bank, the World Bank, and the Finance, Planning, and Commerce Ministries in Pakistan.