The 2008-09 Economic Survey reveals that 18 per cent currency devaluation, high imported inflation, particularly in case of food and fuel, supplemented with monetary expansion were the main factors behind the rise in poverty levels in Pakistan.
Based on the current financial situation, it is clear that getting economic growth back on track and providing mechanisms for protecting the welfare of the poor and vulnerable are imperative. Projections of poverty, based on growth rate three percentage points slower than in the preceding year of 2006-07, could be a possible reason behind the worsening statistics.
Both the Planning Commission and Finance Ministry are at the loggerheads over poverty figures. According to Economic Survey, headcount ratio decreased marginally from 23.94 percent in 2004-05 to 22.32 percent in 2005-06. The Federal Bureau of Statistics (FBS) has already furnished the results of Pakistan Living Standards Measurement Survey (PSLM) 2007-08 to the Centre for Research on Poverty and Income Distribution (CRPRID) analysis, which will be available in due course, will determine the direction of change in poverty incidence, the quantum of change and quintile based consumption pattern.
Selected social indicators, based on PSLM 2007-08 registered an improvement in standard of living, which may serve as a proxy to a reduction in poverty. World food and non-food price rise spiral turned into reverse gear as did inflation influencing household real income in most countries. But in Pakistan the turnaround is slow, as the benefit of lower international prices could not be passed onto the consumers in its entirety because of limited fiscal space.
An efficient fiscal management is a pre-requisite for a desirable distribution of fiscal burden in the society; however, social safety nets have their immediate significance as well as efficacy for targeted poverty reduction.
During 2008-09, the government took various initiatives to combat poverty, which included Pakistan Poverty Alleviation Fund (PPLF), micro finance SME operations, Benazir Income Support Programme (BISP), Peoples Works Programme, Pakistan Bait-ul-Mal and the Punjab government's initiatives, including tractor subsidy, Sasti Roti and Punjab food support scheme.
These initiatives provided some support to the poor, enhanced absolute per capita income, net per capita income and widened the scope of earning livelihood.
Agriculture, services and manufacturing sectors each is among the largest source of employment for income generation. Although, agriculture, barring livestock, is expected to grow faster in 2008-09 than in 2007-08, the industry and services sector will register a declining growth rate with shifting pressure for employment on other sectors outside the organised sectors, acceptance of lower grade jobs, lower income and thus lower consumption.
Overseas migration and the resulting remittances have served dual objectives world-wide - easing pressure on employment market and providing foreign exchange for balance of payments as well as budgetary support. Remittances supplement the household income, uplift life standard and thus reduce absolute poverty. Remittances help the household to increase their consumption expenditure on food, develop expenditure on housing, skill development and establishment of small businesses, thus improving the scope for higher future income.
Remittances from expatriate Pakistanis are believed to have had a major impact on the reduction in the incidence of poverty. The total remittance inflows between 2001-02 and 2007-08 have amounted to 31 billion dollars, equivalent to 18.3 percent of the GDP.
In 2007-08, remittances reached a record level of 6.5 billion dollars. This massive inflow of foreign remittances, when translated into increased consumption expenditures and greater employment opportunities generated through greater investments in the construction industry, the SME sector and other businesses contributed to the decline in poverty in the country.
The record workers remittances (739.43 million dollars) in March 2009, could serve as a major source of satisfaction. It is also worrisome with the apprehension that big rise in remittances may indicate that those Pakistani workers abroad, who have lost work, are moving their capital back home. There are downside risks to remittances in the wake of ongoing recession in the source countries.
Almost all the Pakistan overseas workers destination countries are projected to grow at lower rate in 2008-09 as compared to 2007-08, which will influence overseas migration of Pakistan labour and thus lower remittances. All such factors are likely to serve as a stress on poverty reduction strategy and would necessitate further pro-growth strategic measures and further strengthening of social safety nets.
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