Poor people reach to get free food in Karachi, Pakistan on Monday, Oct. 27, 2008. Pakistan's political and security problems are deterring foreign investment and exacerbating the country's economic problemsThe economic stabilization programme of the government is expected to send approximately 8 to 10 million more households below the poverty line with addition of 1 million to the number of unemployed in 2008-09.
A panel of Pakistan’s top economists in a report entitled ‘Economic Stabilisation with a Human Face’, said that poverty incidence increases, mainly due to high inflation and higher food prices in past years.
‘If we add the inflation and unemployment effects together, the preliminary estimate indicates an addition of 6 percentage points to poverty incidence since 2004-05’, the economists said.
Using either 2004-05 or 2005-06 poverty figures based on the Pakistan Social and Living Standards Measurement (PSLM), preliminary estimates are that roughly 15 million additional individual fell below the poverty line up to 2008-09.
This means approximately 8 to 10 million additional households below the poverty line in 2008-09. Increase in poverty headcount as a result of high inflation is expected to have increased faster since January 2008.
The economists said poverty incidence is expected to increase by 2.7 percent points in 2008-09 and by 2.0 per cent points in 2009-10. It is estimated from Integrated Social Policy and Macroeconomic Model (ISPMM) that poverty increased by 3.5 per cent points in 2007-08, due particularly to the explosion in food prices.
Therefore, by the end of the two-year stabilization programme the incidence of poverty in the country may have risen significantly, they added.
Unemployment increases to 6.5 percent in 2008-09 (from 5.3 percent in 2006-07) adding 1 million to the number of unemployed. However, employment is expected to grow cumulatively by about 3 percent over the two year period.
The labor force will expand by almost 3.3 per cent per annum. Consequently, the number of unemployed is projected to increase by about 1.8 million by 2009-10. This will imply an increase in the unemployment rate by over one-thirds.
The impact of the stabilization programme has been simulated with the help of an abridged version of the large, econometric ISPMM developed by the Social Policy and Development Centre (SPDC), Karachi.
The economists are of the opinion, the process of adjustment in the face of very large and unsustainable macroeconomic imbalances do impose high social costs, especially in terms of rising poverty and unemployment. But, as emphasized in the counter-factual scenario, when no significant attempt is made to stabilize the economy, the outcome could be much worse. Additionally, the stabilization programme will have to include a strong component of social safety nets to mitigate against the rise in unemployment and poverty.
The economists said it is essential that the highest priority for protection be afforded to the most vulnerable segments of the household economy where uncertainty can lead to irreversible damage – in the shape of high morbidity and mortality, decline in the nutritional status of children and women, and withdrawal from school.
The program announced by the government-Benazir Income Support and the Punjab Food Support program- cover about 5 million households. The programme will have to increase from Rs56 billion to about Rs84 billion to mitigate the impact of the stabilization programme and reduce the number of people below the poverty line.
In addition there is an urgent need to tackle the rise in unemployment. The proposal is to start employment intensive public work programs initially in districts with high poverty levels. Given resource constraints these need to be made part of the existing People Works Program in an operational way on which Rs28 billion have already been allocated.
The government may need to allocate initially around Rs10 billion from the PSDP for a national employment guarantee programs in poor districts at a wage below the market wage so as to target the poor.
Pilot school nutritional support programs can be initiated in districts/regions identified as being vulnerable to nutritional shock. This will require an adding Rs500 million, up from Rs100 million already allocated in the budget.
Incentives of microfinance and housing finance credit line, by commercial banks through a special tax credit on the quantum of annual lending. There is need on an urgent basis to build-up a National Social Policy Platform that must be used to implement targeted social protection measures.
A panel of Pakistan’s top economists in a report entitled ‘Economic Stabilisation with a Human Face’, said that poverty incidence increases, mainly due to high inflation and higher food prices in past years.
‘If we add the inflation and unemployment effects together, the preliminary estimate indicates an addition of 6 percentage points to poverty incidence since 2004-05’, the economists said.
Using either 2004-05 or 2005-06 poverty figures based on the Pakistan Social and Living Standards Measurement (PSLM), preliminary estimates are that roughly 15 million additional individual fell below the poverty line up to 2008-09.
This means approximately 8 to 10 million additional households below the poverty line in 2008-09. Increase in poverty headcount as a result of high inflation is expected to have increased faster since January 2008.
The economists said poverty incidence is expected to increase by 2.7 percent points in 2008-09 and by 2.0 per cent points in 2009-10. It is estimated from Integrated Social Policy and Macroeconomic Model (ISPMM) that poverty increased by 3.5 per cent points in 2007-08, due particularly to the explosion in food prices.
Therefore, by the end of the two-year stabilization programme the incidence of poverty in the country may have risen significantly, they added.
Unemployment increases to 6.5 percent in 2008-09 (from 5.3 percent in 2006-07) adding 1 million to the number of unemployed. However, employment is expected to grow cumulatively by about 3 percent over the two year period.
The labor force will expand by almost 3.3 per cent per annum. Consequently, the number of unemployed is projected to increase by about 1.8 million by 2009-10. This will imply an increase in the unemployment rate by over one-thirds.
The impact of the stabilization programme has been simulated with the help of an abridged version of the large, econometric ISPMM developed by the Social Policy and Development Centre (SPDC), Karachi.
The economists are of the opinion, the process of adjustment in the face of very large and unsustainable macroeconomic imbalances do impose high social costs, especially in terms of rising poverty and unemployment. But, as emphasized in the counter-factual scenario, when no significant attempt is made to stabilize the economy, the outcome could be much worse. Additionally, the stabilization programme will have to include a strong component of social safety nets to mitigate against the rise in unemployment and poverty.
The economists said it is essential that the highest priority for protection be afforded to the most vulnerable segments of the household economy where uncertainty can lead to irreversible damage – in the shape of high morbidity and mortality, decline in the nutritional status of children and women, and withdrawal from school.
The program announced by the government-Benazir Income Support and the Punjab Food Support program- cover about 5 million households. The programme will have to increase from Rs56 billion to about Rs84 billion to mitigate the impact of the stabilization programme and reduce the number of people below the poverty line.
In addition there is an urgent need to tackle the rise in unemployment. The proposal is to start employment intensive public work programs initially in districts with high poverty levels. Given resource constraints these need to be made part of the existing People Works Program in an operational way on which Rs28 billion have already been allocated.
The government may need to allocate initially around Rs10 billion from the PSDP for a national employment guarantee programs in poor districts at a wage below the market wage so as to target the poor.
Pilot school nutritional support programs can be initiated in districts/regions identified as being vulnerable to nutritional shock. This will require an adding Rs500 million, up from Rs100 million already allocated in the budget.
Incentives of microfinance and housing finance credit line, by commercial banks through a special tax credit on the quantum of annual lending. There is need on an urgent basis to build-up a National Social Policy Platform that must be used to implement targeted social protection measures.
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