September 17, 2007	Monday	Ramazan 04, 1428

The government declared a reduction of 10.6 percentage points in the poverty incidence during 2001-05, based on the latest available household survey data. The Pakistan Economic Survey, 2005-06, states that poverty declined from 34.46 during 2001 to 23.94 per cent in 2005.

In the urban areas, the incidence of poverty reduced from about 22.69 in 2001 to 14.94 per cent in 2005. In rural areas, it declined to 28.1 in 2005 compared to 39.26 per cent in 2001. The survey report also says that the poverty line of 2004-05 is adjusted by the inflation rate (Consumer Price Index-CPI) during 2001-05.

On the contrary, the World Bank (WB) report poverty objects to using CPI for 2000-01 poverty line and instead suggests using the survey based prices index – Tornqvist Price Index (TPI). The report concludes; “In summary, we strongly recommend using the TPI based inflation to update the 00-01 poverty line for 04-05, which yields a poverty headcount of 29.2 per cent. This will imply a decline in poverty of 5.2 percentage points between 00-01 and 04-05.”

The previous WB Country Director to Pakistan says: “Under the CPI, poverty headcount dropped by 10.6 per cent, under the Survey Based Index (TPI) it dropped by five per cent. Those two estimates probably capture the extremes. A less flawed price index might well find a third estimate in between these extremes”.

In this backdrop and in the absence of any appropriate price index for inflating poverty line of 2000-01, it is perhaps logical to re-compute the poverty line from the latest survey (2005) to circumvent such significant differences.

Social Policy and Development Centre (SDPC) keeps track records of inter-temporal changes in poverty level by using the consistent methodology for defining and computing national and regional poverty lines and poverty incidences. Table 1 displays the estimated poverty figures from the latest household survey for the year 2004-05. According to our estimates, overall 30 per cent of the population was poor. The incidence and depth of rural poverty are high as compared to the urban areas, whereas urban poverty severity is high as compared to its rural counterpart.

Table 2 compares recent poverty estimates with 2000-01 figures. Our estimates show a decline of about 3.52 percentage points (as against the government’s claim of 10.6 percentage points) in poverty incidence during last three years. The incidence figures propose that about 46 million people were below the poverty line during 2004-05, as against 47 million during 2001-02.

Admitting disagreement between the government and the civil society over the official poverty figures, some plausible causes responsible for the decline in the poverty trend are highlighted here. Perhaps, the principal factor is the timing of both surveys. First, the FY2004-05, was exceptionally favourable in terms of growth and macroeconomic stability, including a remarkable growth of 7.5 per cent in agriculture. as against 0.1 per cent growth in FY02. Similarly, growth in the manufacturing sector was 12.5 as against 4.5 percent in FY02. Second, there was a significant increase in public spending over the past three years. However, rising trends in inflation (especially food prices), unemployment and in other inequality factors did not let poverty fall substantially.

From the Table 3, a few observations emerge. On an average, two per cent rise in annual growth in poverty incidence is estimated during 1987-88 and 2004-05. The table also indicates a relatively higher increase in urban poverty during this period. A comparison of 2001-02 and 2004-05, shows that the decline in urban poverty is relatively less than the rural poverty. Rural poverty in this period has dropped with an annual growth rate of four per cent, while the decline is about two per cent in the case of urban poverty incidence.

Another important finding of this research is that the national poverty incidence during 2004-05 is the same as the poverty incidence estimated during 1998-99. The regional composition has slightly altered and now urban poverty is more as compared with the poverty estimates for 1998-99 (28 v/s 25 per cent).

The writer is associated with SPDC