Incidence of Poverty: Pakistan Economy

Incidence of Poverty
Table of Contents
Table of Contents....................................................................................................... 1
Introduction................................................................................................................ 2
Two main Elements of Poverty...................................................................................2
Three poverty measures.............................................................................................3
Current Economic Environment in Pakistan................................................................3
Rural-Urban Poverty................................................................................................... 3
Poverty Reduction Strategy........................................................................................5
Implementation of Poverty Alleviation Programs........................................................6
The Khushal Pakistan Program (Poverty Alleviation Program).................................6
Benazir Income Support Programme.......................................................................6
Reference...................................................................................................................8
Pakistan Economy Page 1

Introduction
Poverty is the lack of basic human needs, such as clean water, nutrition, health care,
education, clothing and shelter, because of the inability to afford them. The issue of poverty has
been in the agenda for the developing countries since its origin into the millennium development
goals (MDGs). In September 2000, all the 189 member countries of the United Nations signed
the MDGs and aimed at meeting these goals by 2015.
POVERTY IN PAKISTAN is a major economic issue. Nearly one-quarter of the
population is classified poor as of October 2006. The declining trend on poverty in the country
seen during the 1970s and 1980s was reversed in the 1990s by poor Federal policies and rampant
corruption.
Incidences of poverty in Pakistan rose from 22–26% in the Fiscal Year 1991 to 32–35%
in the Fiscal Year 1999. They have subsequently fallen to 25-28% according to the reports of the
World Bank and UN Development Program reports. These reports contradict the claims made by
the Government of Pakistan that the poverty rates are only 23.1%. The CIA fact book places the
2006 poverty rate at 24 percent.
For many people in developing countries, poverty means difficulty in living, as well as
lack of basic services in health and education. In Pakistan lack of access to credit, training to
income generating activities, basic social services and infrastructure are the critical factors
behind the persistence of substation poverty.
Poverty is widely spread in Pakistan and is pre dominating the rural phenomenon. Nearly
about two third of the population of Pakistan live in rural areas, in 1970’s to 1980’s the poverty
rate of Pakistan fell down but again in 1990’s it rose up
The incidence of poverty varies between rural to urban areas, and from one province to
the next. In many other mountainous parts of the country where communities are small, isolated
and where there are few major urban centers, poverty is widely and evenly disturbed.
Two main Elements of Poverty

Poverty essentially consists of two elements, a narrowly‐defined “income” poverty and a
broader concept of “human” poverty (referred to as the poverty of opportunities by late Dr.
Mahbub ul Haq).
Income poverty is defined as the lack of necessities for minimum material wellbeing
determined by the national poverty line. Human poverty means the denial of choices and
opportunities for a tolerable life in all economic and social aspects.
Three poverty measures

a) Head count ratio (HCR): the proportion of population below the national or international
poverty line as the case may be.
b) Poverty gap ratio; a measure of poverty obtained by multiplying the head count by the average
relative distance at which the poor are from the poverty line.
c) Severity of poverty measure; where the weight given to each poor person is proportional to the
square of the income shortfall of the poor from the poverty line.
Current Economic Environment in Pakistan

During the five years ending in FY 2006/07, Pakistan’s economy more than doubled in
size with an annual GDP growth rate averaging 7 percent. With relative price stability, the debt
burden had reduced to one-half, foreign exchange reserves were sufficient to provide import
cover for almost six months, stock market was one of the best performing in emerging markets;
foreign direct investment touched close to 6 percent of GDP, and Pakistan successfully launched
sovereign bonds of maturity ranging from 5-30 years in the international capital market with
manifold oversubscription reflecting strong vote of confidence of global investors. However, the
last fiscal year, i.e. 2007/08 has caused turmoil for Pakistan’s economy with several political and
economic events, both on domestic and external fronts, occurring unexpectedly. The country
suffered a series of shocks since the eruption of the judicial crisis in March, 2007. The then
government went into policy inaction, delaying important decisions that were needed to face
these challenges.
Rural-Urban Poverty
The percentage of population living below the poverty line in rural areas has declined
from 39.26 percent to 28.10 percent while those in urban areas, has declined from 22.69 percent
14.9 percent. In other words, rural poverty has declined by 11.16 percentage points and urban
poverty is reduced by 7.79 percentage points.

Although poverty in urban areas is substantial and increasing, global poverty is still
predominantly a rural phenomenon. Some 75 percent of the poor live in rural areas despite the
global trend toward urbanization. Even in 20 years, 60 percent of the poor are expected to live
outside of cities (IFAD 2001:15). Providing a route out of poverty for these rural residents will
remain a priority for national governments and the international community for decades to come
(Reed 2001:13; World Bank 2003:1).
Much urban poverty, for example, begins as rural poverty, exported from the countryside
through rural-to-urban migration. Working for a healthier rural economy thus helps address
urban poverty too, by lessening this migration. At the same time, the rural and urban economies
are deeply intertwined, particularly through the flow of remittances from the city back to family
members in the country.
Trends of Poverty in accordance with Provincial, Rural & Urban Areas of Pakistan:

Poverty Reduction Strategy

The Poverty Reduction Strategy therefore attempts to address the quality and governance
aspects, to improve service delivery of education and health with a special focus on reducing the
gender disparities.
According to the Government of Pakistan’s poverty reduction strategy papers, currently
about 10 percent of the population is chronically poor, but a much larger portion of the
population [for about 33 percent] is considered vulnerable and likely to sink in poverty.
The government of Pakistan has prepared an "Interim Poverty reduction Strategy Paper" that
suggest guidelines to reduce poverty in the country. According to the World Bank, the program
has tangible success, with the World Bank stating that poverty has fallen by 5 percent since
2000.
Policies regarding poverty reduction Marshalled by different government could not
calculate the desire results. I propose following measures for extermination of this menace;
 Promote industrialization
 Establishment of justice and equality
 Equal distribution of resources
 Elimination of discriminatory policies
 Controlling of inflation and other economic indicators and regulators.
 Developing investment friendly environment
 Prevalence of education
 Provision of job opportunities
 Maintaining law and order situation in order to protect economic activities
 Net of public oriented Development projects should be extended so that the respective
people could find jobs.
 Smuggling and other illegal economic activities should be dealt with iron hand.

Implementation of Poverty Alleviation Programs

The Khushal Pakistan Program (Poverty Alleviation
Program)
Due to the transitory nature of poverty the Khushal Pakistan Program is a social
intervention aimed at generating economic activity through public works. A sum of Rs.11.5
billion has been released under the Khushal Pakistan Program to the districts through provincial
governments; while the schemes under the program have been identified and selected at the
district level through active community participation. This program has created numerous
employment opportunities and is providing essential infrastructure in rural and low-income
urban areas.
The program has focused on the construction of farm to market roads, water supply
schemes, irrigation spurs and repair and operationalization of schools. Under the IT component
of the program, rural based vocational training in computers is being promoted. The Khushal
Pakistan Program depends on the functioning of district governments under the devolution
program for further importance and local ownership.
The cost of the schemes selected under Khushal Pakistan Program has been kept between
Rs 0.05 million to Rs 5.00 million per scheme, in rural areas and Rs 0.05 million and Rs 8.00
million in urban areas.
Benazir Income Support Programme

Benazir Income Support Programme (BISP) was initiated by Government of Pakistan
with initial allocation of Rs.34 billion (US $ 425 million approximately) for the financial year
2008-09.
In financial year 2007-08, the sharp rise in oil prices and primary products in the
international as well as domestic market resulted in double digit inflation, which almost halved
the purchasing power of the people. Hence, there was an urgent need for direct and speedy relief
to the underprivileged sections of the society and BISP is the response to the said compulsions.
The Programme aimed at covering 3.5 million families in the financial year 2008-2009.
The allocation for the last fiscal year was Rs. 70 billion to provide cash assistance to 5 million
families which constitutes almost 15% of the entire population. Thus the programme aims at

covering almost 40% of the population below the poverty line allocation for the CFY is 3.50
Billion.
The enrolled families are paid cash assistance of Rs.1000 per month at their doorsteps.
A monthly payment of Rs.1000/ per family would enhance the income of a family earning
Rs.5000 by 20%.
BISP is being implemented in all four provinces (Punjab, Sindh, Baluchistan and Khyber-
Pakhtoonkhwa) including Federally Administered Tribal Areas (FATA), Azad Jammu and
Kashmir (AJK) and Islamabad Capital Territory (ICT).

Reference
 http://www.pide.org.pk/pdf/PDR/1989/Volume4/831-850.pdf
 http://network.idrc.ca/uploads/user-S/10515385090pakistan-report5.pdf
 http://www.pide.org.pk/pdf/PDR/2000/Volume4/1089-1110.pdf
 http://qurratulain.wordpress.com/2006/09/02/poverty-in-pakistan/
 http://www.wri.org/publication/content/7969
 http://www.bisp.gov.pk/

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Incidence of Poverty

Two main Elements of Poverty...................................................................................2

Three poverty measures.............................................................................................3

Current Economic Environment in Pakistan................................................................3

Poverty Reduction Strategy........................................................................................5

Implementation of Poverty Alleviation Programs........................................................6

The Khushal Pakistan Program (Poverty Alleviation Program).................................6

Benazir Income Support Programme.......................................................................6

Pakistan Economy Page 1

Two main Elements of Poverty

Three poverty measures

Current Economic Environment in Pakistan

Pakistan Economy Page 3

Pakistan Economy Page 4

Poverty Reduction Strategy

Pakistan Economy Page 5

Implementation of Poverty Alleviation Programs

Benazir Income Support Programme

Pakistan Economy Page 6

Pakistan Economy Page 7

Pakistan Economy Page 8

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