ISLAMABAD, Feb 6: The federal government on Tuesday conceded that income disparity ‘increased marginally’ during the past four years but, at the same time, claimed a substantial decline in poverty rates.

The annual report on the outcome of poverty reduction-related expenditures released by the ministry of finance suggested that about 20.5 per cent people in the country were vulnerable to seasonal shocks like droughts and said they could fall into the poverty trap ‘very quickly and with small changes in consumption pattern’.The report categorised about one per cent of the population as ‘extremely poor’ and 6.5 per cent as ‘ultra poor’. A total of 16.4 per cent people were termed poor and 35 per cent ‘quasi non-poor’. The number of ‘non-poor’ people was estimated to be 20.5 per cent.

It said the Gini coefficient results showed that “consumption inequality has increased in Pakistan between 2000-01 and 2004-05” by about three per cent. Although consumption inequality increased in urban and rural areas during the same period, the inequality in urban areas was higher than in rural areas.

The ratio of highest to lowest consumption quintile, another indicator measuring the gap between the rich and the poor had “increased overall marginally from 3.76 per cent in 2000-01 to 4.15 per cent in 2004-05”. But in urban areas, the rich-poor divide widened from 10.4 in 2000-01 to 12.02 in 2004-05, against rural areas, where the gap remained almost unchanged at 2.22 and 2.19 in 2000 and 2005, respectively.

The report explained that inequality reflected distortions in access to markets, in availability and quality of health, education and infrastructure services and in rural-urban distortions, all of which dampened growth and poverty reduction.

The government said expenditures on poverty reduction had increased from Rs37.6 billion in fiscal 2002 to Rs170.8 billion in fiscal 2006, recording an increase of 354 per cent. In terms of percentage of GDP, PRSP development expenditures increased from 0.86 per cent in 2002 to 2.21 per cent in 2006. PRSP current expenditures also increased from Rs129.6 billion in 2002 to Rs263.8 billion in 2006, registering an increase of little over 100 per cent.

However, as percentage of GDP, PRSP current expenditures showed mixed trends as they initially increased from 2.95 per cent in 2002 to 3.41 per cent in 2003 and then declined to 3.23 per cent in 2004 and further declined to 3.09 per cent in 2005 and then increased to 3.42 per cent in 2006.

The report also conceded that sectors like rural development, rural electrification and low-cost housing performed dismally and showed declining trends. These sectors have a direct bearing on people’s quality of life. The implementation of the ‘Tawana Pakistan’ project was slow against the envisaged targets and was hence suspended, the report said.

Zakat disbursement had declined by 12 percentage points to Rs3.2 billion in 2006 against Rs3.7 per cent in 2005, although the number of beneficiaries had increased by 18.7 per cent to 1.6 million which meant that the amount of disbursement per person had been reduced. Zakat disbursements were Rs8 billion in 2003. The amount disbursed by the Pakistan Baitul Maal increased by 17 per cent to Rs3.8 billion in 2006 over 2005, benefiting about three million households.