A NEW World Bank report makes grim reading for Pakistan: the pre-existing high levels of malnutrition have combined with high inflation to drive up the number of the poor. Unsurprising for anyone following the news recently, the real problem is what lies ahead.
The first step to improve the plight of Pakistan’s poor is to produce accurate, up-to-date and credible data on the country’s poor — a failure of all previous administrations. Even today the battle over the number of poor continues. A local newspaper has reported that a tussle between the Planning Commission (which has put the incidence of poverty at 35 per cent) and the finance ministry (which claims an incidence of poverty of 22.3 per cent) has jeopardised $500m of World Bank funding. Without consistent data on poverty there is little chance that any anti-poverty policy will succeed.
The second step is politically even more difficult: acknowledging that Pakistan is a poor country and has limited resources to help its poor. Given this reality the government must be extra vigilant in ensuring that the quantum of resources set aside for the poor are used as efficiently as possible. As blanket subsidies have fallen out of favour and targeted subsidies (such as the Benazir Income Support Programme) are ramped up the government must work to ensure the new programmes deliver transparent, politically blind aid to the poor. Under the old system, general subsidies came under fire for being over-inclusive: whether rich or poor you could purchase wheat flour, petroleum products, electricity and fertiliser at the same price as anyone else. Under the new system of targeted subsidies, the purchasing power of only those deemed to be poor will be increased. While the new system is theoretically preferable it is only good for those inside the net of such social protection schemes — the poor outside the net will inarguably be worse off. So the government must be vigilant to not create a new class division among the poor: the politically ‘correct’ poor and the politically ‘incorrect’ poor as decided by the government of the day.
Finally, poverty will remain a problem in Pakistan as long as the long-term macroeconomic policies continue to produce poverty. Against the near-unanimous opinion of local economists, the previous government embarked on a consumption-led growth spurt financed by inflows of money from abroad — an approach that left the country perilously exposed. Agriculture, which employs more than 40 per cent of the labour force, and manufacturing sectors that could take advantage of Pakistan’s low-skilled labour force were left to stagnate as the services sector was fawned over. A more cautious, thoughtful process of development is needed. In every crisis is an opportunity: the present government could build a lasting legacy if it opts for major economic surgery rather than the oft-used band-aids of the past.
The first step to improve the plight of Pakistan’s poor is to produce accurate, up-to-date and credible data on the country’s poor — a failure of all previous administrations. Even today the battle over the number of poor continues. A local newspaper has reported that a tussle between the Planning Commission (which has put the incidence of poverty at 35 per cent) and the finance ministry (which claims an incidence of poverty of 22.3 per cent) has jeopardised $500m of World Bank funding. Without consistent data on poverty there is little chance that any anti-poverty policy will succeed.
The second step is politically even more difficult: acknowledging that Pakistan is a poor country and has limited resources to help its poor. Given this reality the government must be extra vigilant in ensuring that the quantum of resources set aside for the poor are used as efficiently as possible. As blanket subsidies have fallen out of favour and targeted subsidies (such as the Benazir Income Support Programme) are ramped up the government must work to ensure the new programmes deliver transparent, politically blind aid to the poor. Under the old system, general subsidies came under fire for being over-inclusive: whether rich or poor you could purchase wheat flour, petroleum products, electricity and fertiliser at the same price as anyone else. Under the new system of targeted subsidies, the purchasing power of only those deemed to be poor will be increased. While the new system is theoretically preferable it is only good for those inside the net of such social protection schemes — the poor outside the net will inarguably be worse off. So the government must be vigilant to not create a new class division among the poor: the politically ‘correct’ poor and the politically ‘incorrect’ poor as decided by the government of the day.
Finally, poverty will remain a problem in Pakistan as long as the long-term macroeconomic policies continue to produce poverty. Against the near-unanimous opinion of local economists, the previous government embarked on a consumption-led growth spurt financed by inflows of money from abroad — an approach that left the country perilously exposed. Agriculture, which employs more than 40 per cent of the labour force, and manufacturing sectors that could take advantage of Pakistan’s low-skilled labour force were left to stagnate as the services sector was fawned over. A more cautious, thoughtful process of development is needed. In every crisis is an opportunity: the present government could build a lasting legacy if it opts for major economic surgery rather than the oft-used band-aids of the past.
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