Structural changes need of the hour

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There is no denying that corona pandemic has affected the world economies in a big way, but ours is a different case. Due to inept policies of the former government of PTI, we are entangled in a poverty trap in the post-pandemic scenario.

Policies like imbalanced taxation system, rupees’ unprecedented depreciation, sky-high price-hike, increasing prices of Pol Products and power utilities as also the food shortage have put the people in a situation in which they got stuck in a cyclical pattern of misery with no light at the end of tunnel. Economic experts say that unless drastic  economic policies are ensured and steps taken to change the situation, this cynical pattern cannot be done away with, leaving the coming generation as well  ‘trapped’ in a constant state of poverty. It may be recalled here that the World Bank (WB) has estimated that poverty in Pakistan has risen from 4.4 per cent to 5.4 per cent in the post pandemic scenario. To be very specific, over two million people have gone below the poverty line which speaks volume of the situation.

The WB experts, while adopting the lower-middle-income poverty rate, said that the ratio in our country is at 39.3 per cent in 2020-21 and  it is to remain at 39.2 per cent in current year. On the other hand, when we look at world’s statistics,  the WB annual report says that the share of people living in extreme poverty around the globe has declined, but it is falling at a slower pace in Sub-Saharan Africa due to certain acute challenges. The percentage of people living in extreme poverty fell to a new low of 10 percent in 2015 – the latest year for which the data was available – down from 11 percent in 2013, reflecting some progress.

Commenting on the development, World Bank Group President said “this is one of the greatest human achievements of our time” but the report shows that the rate of decline was slowing, especially in least developed countries. “If we are going to end poverty by 2030, we need much more investment, particularly in building human capital, to help promote the inclusive growth it will take to reach the remaining poor,” The data on poverty in Pakistan is, however, rather patchy and not in consonance with the international standards. The method to counter poverty is also direct and not in line with the international standards to reduce poverty through increased investment and creating more opportunities for employment. The statistics at our government level say atht proportion of population living below the national poverty line was 29.5 percent in 2014-15 which was targeted to be reduced to 9.0 percent by 2030 while proportion of resources allocated by the government directly for poverty reduction programmes was 42.2 percent in 2014-15 and projected to be enhanced to 43.5 percent by 2030. Social Safety Nets Programmes (SSNP) was the main vehicle to reach the poor and disadvantaged groups through redistribution of resources with basic objective of reducing poverty. Budgeted SSNP include BISP, Pakistan Bait-ul-Mal, Social Security and Zakat, EOBI, Workers’ Welfare Fund while Pakistan Poverty Alleviation Fund and Microfinance through specialized institutions were the non-budgetary parts of the programmes.

A National Framework was also devised for Sustainable Development Goals (SDGs) at district level and implementing the global agenda to ensure inclusivity and sustainability to achieve the SDG goals to join upper middle class countries by 2030. The World Bank report shows very clearly that though the progress on overall global poverty reduction has been commendable, this progress has been mainly limited to developed countries and emerging market economies including Pakistan.

The developing countries, particularly located in the Sub-Saharan region, have not been able to gain this advantage. This is obvious from the fact that while global poverty was 10 percent of the population, poverty in Sub-Saharan Africa was still as high as 41 percent. This uneven progress was a matter of great concern as more of the world’s poor become concentrated in a region beset by conflicts and the effects of climate change. Also, the Sub-Saharan countries have suffered more from a combination of lower growth and highly capital intensive industries that do not create much employment. Such a situation is a matter of great frustration and anxiety particularly at a time when about half of the world’s countries now have poverty rates below three percent and excellent support systems to protect the poor. Coming to Pakistan, the policymakers of the country have fixed very ambitious targets to reduce the poverty rate from about 30 percent to 9 percent in the next decade which is not likely to be achieved, given the poor saving and investment rate, political instability, aid fatigue in donor countries and a host of other inhibiting factors. Moreover, the method of tackling poverty in our country is flawed.

Instead of reducing poverty through increased economic activity and creation of more employment, the government seems to have relied mainly on direct grants like Zakat, Bait-ul-Mal etc for poverty reduction which could expand the class of hangers-on who will not be willing to work but will develop the habit of living on the dole. Lastly, Pakistan must stick to international definition of poverty. It is no use to underestimate the level of poverty when its signs are visible everywhere. Also, it is better to recognize the extent of the problem if we want to resolve it. Meanwhile analysts say that despite the fact that Pakistan has received a lot of money for fighting poverty from donor institutions; it hasn’t seen significant reduction in poverty levels.  This is especially true when comparison is made with India and China. Both of these economies have experienced steep fall in their poverty levels. Pakistan’s progress in this area has been sluggish as best. From 1951 till now, there hasn’t been a year when a government-led poverty reduction program wasn’t under way. The initial programmes were completely donor funded with focus on education and health of the rural economy. Overtime, some programmes under public-private partnership mode also started with a more varied focus like housing, roads, and sanitation. If Pakistan is to reduce poverty significantly, it must promote employment opportunities. The surest way to achieve that is by allowing businesses to employ more people. This can only be achieved if predatory redistributive policies are withdrawn. In this connection, we can also learn from China, which worked extensively for four decades to eradicate extreme poverty  and succeeded in achieving goal in December 2020 by alleviating its citizens out of the trap from 1981 to 2020. For this we will have to introduce continuous reforms and bring out structural changes on the lines of Chinese economy which shifted from agriculture to manufacturing services.