Poverty Alleviation & Social Action Programme

If we are to discuss poverty alleviation in the context of the Social Action Programme. It appears difficult, however, to refrain from commenting briefly on some other aspects of poverty situation in Pakistan which are intimately linked with the subject.

Firstly, we need to see various poverty estimates, including those presented in the recent World Bank report [September 13, 1951 to enable an assessment of the trends in poverty and in income distribution. Secondly, factors arc to be identified that led to changes in poverty situation. We shall then discuss the role of Social Action Programme in the alleviation of poverty. To the Eton in which future research and policy efforts on poverty alleviation in Pakistan need to be focused.

The trends in income distribution as measured by gini-coefficient from 1963-64 to 1990-91 show that whereas personal income distribution, particularly rural income, generally improved between 1963-64 to 1970-71, it deteriorated sharply afterward till 1984-85. The gini-coefficient fell again from 1984-85 to 1987-88 to a level even below that in 1963-64. Interesting feature of in-come distribution in Pakistan is that urban inequality is generally higher than rural income inequality. That also has something to do with the source and nature of data. Anyhow, the movements in gini-coefficient in the two areas have not been uniform. While the rural income distribution improved markedly between 1963-64 to 1969-70. The urban income distribution did not improve much during the same period. The decline in urban gini-coefficient was much more moderate and increased during 1963-64 to 1966-67. The probable reasons for changes in income distribution in the rural areas during the three periods are different. During 1963-64 to 1969-70 the main reason for the decline in rural income inequalities seems to be the ‘green revolution.’ During the period 1971-72 to 1984-85, the rise in rural income inequality appears largely to be the result of adverse changes in agrarian structure, mainly because of resumption of self-cultivation by landlords and increasing mechanisation of agriculture. The increase in inequality during 1987-88 to 1991-92 is largely attributable to the Structural Adjustment Programmes (SAP) which included more realistic exchange rates and higher output prices for major crops and hence intended to benefit large farmers. The poor sections in the rural areas have, on the other hand, suffered because of increasing prices of food and other basic necessities as well as by continuing mechanisation and increase in landlessness. The evidence on rural poverty, however, shows movements somewhat contradictory to those for income distribution. Most studies point towards an increase in rural poverty between 1963-64 to 1969-70 rising the incidence from 40-50 percent of rural households to 50-60 percent [This was in spite of the low income inequalities, as indicated earlier]. From 1971-72 to 1978-79 we find decline in rural poverty from 40 to 45 percent (to 30 to 35 percent). The big drop in rural poverty levels in Pakistan, however, seems to have occured between 1978-79 to 1984-85 and the trend continued up to 1987-88. The poverty incidence in 1984-85, as reported in most studies, based on empirically derived poverty lines, was between 20 to 26 percent in 1984-85 and 16 to 17 percent in 1987-88. The World Bank study adopting normative rather than an empirically based poverty line, also shows decline in the 1980s but with much higher levels of headcount ratios than those based on empirically derived poverty lines. There is conflicting evidence whether the incidence of poverty in Pakistan has risen or declined since 1990. While the estimates based on empirically derived poverty line showed perceptible increase, those estimated by the World Bank show a continued decline. The estimates beyond 1990-91 are mere conjectures. Given the weaknesses in the available data and the varied definitions of poverty employed by different authors, it is difficult to consider that evidence on both income distribution and poverty incidence has been very precise. Rather, they should be seen as indicative trends which have to be considered in conjunction with other economic variables such as GDP and the sectoral growth rates. The explanations of divergent trends in income distribution, poverty and economic growth in various periods is a challenging task and requires research efforts rather casual speculation often motivated by political considerations. While me precise extent or sometimes even the direction change in the distribution of income or poverty incidence may debatable, there is generally more Firm evidence available out the direction and extent of growth in Pakistan’s economy. There is evidence to the effect that per capita growth rate in the Pakistani economy during the last three decades has been around 2 to 3 percent per year. The increase in growth of per capita incomes may not, however, necessarily be translated into either in reduction in income inequality or reduction in poverty incidence. It is possible for both inequality and poverty incidence to rise, fall simultaneously or separately. In case of Pakistan the changes in poverty incidence have been attributed largely to changes in growth rather than changes in income in-equality.

The growth in per capita income during the period 1968 to 1978 was 2.2 percent, 3.1 percent during 1978 to 1984, 2.6 during 1984-88 and 2,8 percent during 1988-91. The steep decline in poverty incidence during 1980s is a most impressive, even somewhat puzzling feature of Pakistan’s economic performance. In the absence of explicit anti-poverty programmes and given the general nature of development strategy, specially in the rural agricultural sector, it is difficult to identify the real sources of strong trickle-down effect of growth during the period, which is also the time of migration to the Middle East and remittances that it brought, which contributed to alleviate poverty. Very few attempts have, however, been made to quantify this effect. The expansion of the informal sector also seems to have been instrumental in poverty alleviation, but again not much of research has been directed to ascertain this.

Compared to other South Asian countries, Pakistan’s growth performance can be termed impressive and its record in poverty reduction is not unenviable. However, the quality of both these achievements has reflected in its human resource development profile, basic contours make it fair, rather worse, since some of these developed countries of Asia show definite downward trend. The record of Pakistan’s human resource development, which casts a long shadow on its prospects of development, has come under severe criticism in the recent years. Indeed most analysts seem to be in agreement that without substantial improvement in Pakistan’s social and human development indicators, it is unlikely for Pakistan to maintain the erstwhile pace of economic growth. While Pakistan’s human resource development record is weak in almost every respect, four areas need drastic improvement.

The first is poor record in achieving the demographic transition, Pakistan’s population growth rate of around 3 percent per annum has absorbed a major share of income growth and at the same time has put pressure on social infrastructure. It is difficult to over emphasise the strong adverse influence rapid population growth has exerted on Pakistan’s human resource development directly and indirectly. Not only it has reduced the availability of already scarce social infrastructure, facilities on per capita basis, it has also increased the supply of labour and reduced employment opportunities thereby reducing per capita income and the availability of investable resources. The inadequacy of the provision of essential social services such as education and health has also exacerbated gender-inequalities since preference is given to males when these resources are scarce.

The most important feature of Pakistan’s human resource development deficiency is the low rate of literacy  and poor educational development. Even 50 years after independence, two-third of the country’s population, remains illiterate. While there has been some acceleration in literacy rates during the 1980s, it is  still far short of the 56 percent average rate of the low-income countries, not to compare with about 75 percent of the average rate of the middle income countries. The main reason for low literacy rate in Pakistan has been the low participation rate at primary and secondary educational levels. While participation rates at both levels have increased considerably between 1983-84 to 1990-91. They are still short of average rate of the developing countries. Thus, the participation rate in the primary education, which rose from 52 to 71 percent between 1983-84 to 1990-91, was well below the average participation rate for the developing countries.

The third most significant feature of Pakistan’s human resource development problem is the extremely low status of women and their development. In some areas, like in the case of literacy, the gender disparities have increased instead of declining. Another striking measure of the neglect of women is provided by figures of life expectancy and the sex ratio in population which in most societies are weighted in favour of women. In Pakistan the life expectancy is 57 years both for males and females and the sex ratio was 1.1 in favour of males in 1981 census. The low ratio is a result both of possible high female mortality and the likely under nutrition of female babies which also reflect the low social esteem for women. Yet another factor is that as household head males are usually inclined to understate the number of female members.

The fourth feature is the low nutrition and consequent poor health. This factor is influenced both by the family income and accessibility of health services.

In order to overcome Pakistan’s deficiencies in social and human resource development as discussed, the government adopted a series of measures in recent years ranging from raising minimum wage, self-employment loans schemes to addressing social sector issues. The Social Action Programme is the main umbrella scheme for the social sector through which the government hopes to reduce deficiencies in the social sector. The programme was landed with the help of the donor agencies to eliminate imbalances that had been created in the economy since the 1960s.

Since its inception, the financing of SAP has been a major bone of contention between donors and the government, with the latter dragging its feet and the former constantly proding government for larger allocations. The donors have also tried to ensure that funds allocated for SAP are protected and do not get diverted to other purposes even within the social sector. The main achievement of SAP in terms if resource mobilisation in favour of social sector has been in effect to provide a surety that the governments spending commitment for the social sector is honoured. The SAP spending amounted to 1.2 percent of GDP in 1993-94 and is expected to rise to 1.33 percent of GDP in 1997-98, the last year of the 8th Plan period. A credible effort for remedying the deficiency in Pakistan’s social development would require at least two to three fold increase in the proportion of GDP expenditure on social sector. Although pending specifically on SAP has not yet affected the allocation of resources to non-SAP social sector programme, largely because of slow implementation of SAP in initial years, it is not unlikely that this could happen soon. Given the government’s inability to raise additional resources and its commitment to the donor to mobilise increasing resources for SAP, it seems inevitable that other sectors such as higher education, research, as well as secondary and vocational education will suffer. Even if it is conceded that the enrollments in the aforesaid domains are excessive or wasteful, the argument can hardly be left uncontested. The need for investments in these fields also has to improve. The quality of education research is obvious and self-evident. Similarly, while the emphasis on basic healthcare facilities which are intended to benefit largely the poor are extremely well-taken, the country can hardly afford to ignore the development of facilities for the treatment of diseases, whose occurrence is greater among the affluent but go largely undetected and untreated among the poor. The basic flaw in our social sector policy is that we have implicitly assumed that massive expenditures alone will produce the desired results. However, without the institutional mechanism for ensuring the targeted delivery of these services, a large part of social expenditures intended to enhance the capabilities of the poor are likely to end up into the hands of the unscrupulous contractors, local brokers, and the elite who are having access and close links with 3 delivery agencies, have since long blocked the poor and the needy to avail even services ostensibly designed for them.

The real expenditure of SAP spread over five-year duration of the 8th Five-Year Plan, is estimated to be $8 billion. Of this, about $2 billion are to be provided by the bilateral and multilateral donors. In the case of provinces the foreign donors have agreed to finance any increment in SAP category expenditures over and above the 1990-92 benchmark level, while the central and provincial governments will contribute 25 percent each for such incremental expenditures. It is clear that SAP is heavily predicted not only on donor prompting and proding but also on donor funding. This raises serious doubts not only about the programmes autonomy but also its financial stability. Keeping in view that the donor funds are subject to frequent changes and donor-fatigue steps in quickly for countries and programmes which do not yield quick results, it is difficult to be sangrin about the euphoria being generated for and the hopes that are being expressed about the SAP.

The fate of other donor-driven programmes in the past such as Village-Aid (late 1950s) and IRDP (early 1970s) should also serve as a useful reminder for the unsubstantiality of such programmes. Even with presently strong donor support the government has been forced to use an unprecedentedly larger dues from the proceedings of privatisation to finance SAP. About Rs 12 billion (or $ 0.4 billion) have been deployed from the privatization proceeds to raise SAP funding over 1995-96 to Rs 55 billion. If foreign funding and privatization proceeds are excluded from the financing of SAP, only a little over half of the SAP expenditures seems to be financed through the current revenue resource of the government. This is perhaps the lowest, ratio ever of government’s contribution to social expenditure from its own resources.

Since it is unlikely that the current high proportion of needed sources can be availed from abroad or from the continuing sale of “family silver” (privatisation), the needed additional investment for human resource development must come from put lie budgets at the central, provincial and local levels. Where should then these additional resources come from? Strange may seem, there have been little serious attempts to mobilise fiscal resources, specially for human resource development. In the mid-1980s, Dr. Mahbubul Haq, the then finance minister, introduced Iqra surcharge on imports with the view of mobilising funds for education. However, the surcharge receipts, which amounted to very substantial amount, was unfortunately not specifically earmarked for expenditures on education. The surcharge was later removed at the recommendation of the World Bank with a view to rationalise the tariff structure and to liberalise trade. No serious efforts have since been made to raise revenues for education from other sources. A possibility is to impose a surcharge on large agricultural loans for tractors and other purposes or on exports of cotton. This is suggested only because there is a need to tax the high incomes in the agriculture sector but also because the bulk of problems of illiteracy reside in the rural areas which suffer from extremely unequal distribution of income. Director taxation on the agriculture income will also help correct, to some extent, the feudal system which keeps common people illiterate and standing oblivious of their rights hinders the establishment of educational facilities in these areas.

Similarly, special tax may also be imposed on sectors and industries which employ children. The proceeds of these taxes cater for the educational needs of the working children. There are other possible ways of raising funds for human resource development and social sectors. For example, many East Asian countries have created public funds for HRD contributions, which are collected from industrial enterprises and grants made to training institutions importing specialised skills. If Pakistan wants to remain competitive in industrial growth and exports, its industrialists need willingly and enthusiastically contribute to such a fund. Another source of such funding which had been resorted to at on unprecedented level in the budget is the privatisation. During the Nawaz Sharif regime, Rs 500 million was given out of the privatisation funds to NRSP which is the key element in the government’s HRD and social sector plans as an endowment fund. In the current budget, as pointed out earlier, Rs. 12 billion has been allocated to SAP.

A major problem with the raising and utilisation of public funds for social sector is the question of credibility, responsibility and behaviour of the government. There is now enough awareness and realisation among people, including the lay-public, about the country’s poor image in terms of human resources and social development and specially among the affluent who wish to contribute towards improving this image. However, there is obvious concern about the government’s often allegedly profligate use of public funds, which inhibits people to support government’s fiscal efforts. In particular, the use of privatisation proceeds which many have argued, and the caretaker government of Mr. Moin Qureshi had clearly laid down as a cardinal principle, should be utilised exclusively for the purpose of retiring public debt. If at all an exception has to be made, it should be done with due care and not as an excuse for the government’s inability to raise adequate revenues, as seems to be the case in the last budget.

In order to inspire public confidence, government expenditure on social sector should be channelled through endowments to autonomous public institutions with independent governing votes.

In conclusion, it needs to be urged that the study of poverty in Pakistan be taken much more seriously. It deserves more attention then it has received so far. It should not merely become a focus of international seminars for recycling research in just expressing bias and intentions of the poor. Nor should it become a political play stuff to unsettle or perpetuate a given regime. What is needed is a comprehensive programme and research for monitoring poverty and  policy implementation and analysis of  poverty alleviation programmes on a continuing basis.

This needs to be done independently rather than under the auspices of the government or donor agencies, although their participation would be welcome.

Dr. S. M. Nasim

Source: Poverty Alleviation in Pakistan: Present Scenario and Future Strategy, Mohibul Haq Sahibzada. Republished with permission.