THE most recent budget attempts to make a break with the economic policy paradigm of austerity and fiscal consolidation. Earlier, in 2018, with the economy in dire straits, Pakistan approached the IMF for assistance. In exchange for $6 billion over a period of 39 months, the Fund had laid down strict conditions regarding fiscal consolidation. Economic devastation as Covid-19 raged forced a major rethink within economic policy circles. Where some economists have welcomed the break from swingeing austerity, a lot more work still needs to be done in addressing the rapidly rising poverty incidence in Pakistan.
A UNDP report indicates that while poverty declined to 24.3 per cent by 2015, Covid-19 will bring about sharp reversals with up to 40pc Pakistanis living in poverty. In a recent report, the World Bank showed that economic disruptions from Covid-19 would push an additional two million people below the international poverty line that stands at $1.90 (purchasing power parity) per day. The same report reveals that almost 40pc of households in Pakistan will also suffer moderate to severe food insecurity.
The definition of poverty goes beyond the lack of income.
Not only is the incidence of poverty increasing in Pakistan, it is also very hard to escape poverty as shown by the World Economic Forum’s report on global social mobility. In particular, Pakistan remained the worst performer on education quality and equity, indicating that Pakistan is almost at the bottom when it comes to the share of individuals who are more educated than their parents.
Amartya Sen, the famous economist and thinker, has powerfully argued that poverty should not be conceptualised as a mere lack of income. Rather, argues Sen, poverty should be seen as a complex, multidimensional phenomenon that leads to a lack of education, health, justice, credit and other opportunities and resources.
While poverty is certainly unpleasant at the individual level, there are multiple negative social impacts connected with it. For starters, poverty-related health problems ravage millions of lives as these diseases are contracted due to lack of access to proper healthcare. The top diseases linked to poverty are tuberculosis, malaria and HIV/AIDS. Pakistan ranks among the top five in the list of countries most burdened by tuberculosis. In the case of malaria, the World Health Organisation has grouped Pakistan with Afghanistan, Somalia, Sudan and Yemen since these countries account for 95pc of malaria cases in the region.
Poverty is also said to be a major reason behind rising crime rates. In a paper titled Hunger makes a thief of any man, Kostadis Papaioannou has documented the connection between food shortages, poverty, and crime in British colonial Asia by offering evidence that shows that the loss of agricultural income has remained the main causal channel leading to property crime. Even in the United States, which has the highest rate of incarceration in the world, multiple studies have found a positive relationship between poverty and crime.
There is also a strong correlation between poverty and illiteracy. Many young adults often have to leave school in order to find additional sources of income for their families. In poor countries, schools are far away making it difficult for students to attend classes. Even if schools happen to be near, they are ill-equipped in materials and resources to properly educate students in poor countries.
Given how rapidly poverty is increasing in Pakistan along with its attendant social challenges, the government ideally should have significantly enhanced both the amount of the stipend — to Rs2,500 per month — as well as extended the Benazir Income Support Programme (BISP)/Ehsaas Kafalat unconditional cash transfers to at least 10m households in this fiscal year. In terms of budget allocation, this translates into an annual allocation of Rs300bn as opposed to Rs168bn for 7m households right now.
By directly targeting poverty through enhancing social safety initiatives like BISP/Ehsaas Kafalat the government can not only prevent people from falling below the poverty line, but also achieve desired social outcomes like health and education. Higher allocations for BISP will create many positive feedbacks for economic growth and job creation as the linkages between better health and more literacy leading to higher economic growth have long been established. Finally, the additional amount allocated to poor citizens will also act as a much-needed fiscal stimulus that will serve to further spur economic growth and job creation.
Substantially increasing and widening the existing social safety initiatives is but one way of addressing the rising incidence of poverty in Pakistan. Regardless of which poverty alleviation policy is implemented, economic policymakers will have to sincerely focus on reducing poverty in the country.
The writer completed his doctorate on a Fulbright scholarship.
Published in Dawn, July 4th, 2021