Poverty figures were not quantified in the Economic Survey 2010-11 as the results of the Household Income Expenditure Survey (HIES) would not be available till next year. Though Pakistan has made significant progress in human development and poverty reduction over the past three decades, it is considered relatively slow over a long horizon. Besides, the social and economic exclusion has resulted in multiple deprivations for more than 50 percent of Pakistan''s population.
The inadequacy of income to meet basic needs, low quality of life, denial of opportunities and choices basic to human development are different facets of poverty, the Survey notes. According to the Economic Survey, the government has prioritised 17 pro-poor sectors (only health and education are noted in the Survey) for budget intervention through the Medium Term Expenditure Framework (MTEF) from 2008-09 to 2010-11 in the Poverty Reduction Strategy Paper (PRSP-II).
During 2009-10, total federal and provincial budgetary expenditures in these sectors amounted to Rs 1110.8 billion representing 7.6 percent of the GDP against the projected target of Rs 660 billion. An amount of Rs 482.6 has been spent on these areas during July-December 2010 which is 15.8 percent higher than in the comparable period of last year.
According to the Economic Survey, the government initiated social safety nets to provide social protection to the poor and reduce the adverse effects of poverty. These include Benazir Income Support Programme (BISP). Under this programme, an amount of Rs 15.3 billion was disbursed during 2008-09 while Rs 32 billion was disbursed in 2009-10. An allocation of Rs 50 billion has been kept during the current financial year for this purpose.
The BISP envisages cash grants of Rs 1,000 every month to the females of each qualifying household having a monthly income of less than Rs 6,000 through banks/post offices with the aim to ameliorate the conditions of the poorest of the poor by directly accessing them and supplementing their income. In the short to medium term BISP will also serve as a platform for complementary social assistance programs, the main being health insurance for the poor and the vulnerable.
Waseela-e-Haq component of BISP was launched in October 2009. A total number of 750 registered beneficiaries of BISP under the current targeting mechanism are selected through a monthly draw. Each of them are provided with an interest-free loan worth Rs 0.3 million, repayable in instalments over a period of 15 years.
Similarly poor were being provided financial assistance under the Pakistan Bait-ul-Mal (PBM). A total of Rs 2,261 million was disbursed in 2009-10 against Rs 3,432 million in last 2008-09 (registering a decline of 34 percent in disbursements and increase in beneficiaries by 82 percent from 1.16 million to 2.11 million). The main reason behind this sharp decline in overall disbursement was the closure of PBM''s Food Support Programme (FSP) in 2009-10 as FSP was merged with Benazir Income Support Programme.
According to the survey, the government is also working on various microfinance initiatives in collaboration with State Bank of Pakistan (SBP) and multilateral institutions to generate employment and combat poverty. The micro credit demonstrated an upward trend both in terms of active borrowers, which increased by 11 percent and Gross Loan Portfolio (GLP), which recorded a growth rate of 23 percent during 2009- 10 as compared to the 2008-09. In terms of savings (both voluntary and compulsory programs), 32 percent growth was recorded compared to the previous fiscal year. As regards microfinance services, micro insurance grew upward significantly.
The SBP has launched three microfinance initiatives: the Microfinance Credit Guarantee Facility (MCGF), the Institutional Strengthening Fund (ISF) and Improving Access to Finance Services Fund (IAFS). The initiatives are part of the Financial Inclusion Program, a joint venture between SBP and the UK Department for International Development. The objective of the three microfinance initiatives is to provide liquidity to the microfinance providers in response to tighter liquidity conditions and spikes in inflation.
Microfinance Credit Guarantee Facility will provide incentives to banks and development financial institutions (DFIs) to provide funds to microfinance institutions which will then be used to provide credit to the MFIs borrowers. Lenders will lend to the MFIs at the SBP policy discount rate plus 2 percent. The incentives include a guarantee on repayment of 40 percent of the funds provided by banks and DFIs to MFIs. In addition to the guarantee, banks and DFIs may deduct the funds loaned to MFIs from their Poverty 173 demand and time liabilities when calculating their statutory liquidity and the cash reserve requirements for regulatory purposes.
Institutional Strengthening Fund is to increase the capacity of MFIs by providing grants for them to make advances in their human resources, management, governance, internal controls, business development, cost reduction mechanisms, product innovation, and technology implementation. With good performance and resubmission of their proposal, MFIs may be recipients of grants several years in a row. The fund will primarily focus on institutions that are already regulated, or are in the process of seeking a license, or have solid plans for restructuring in the near future.
IAFS is also designed to enhance the capacity of MFIs with the additional goal of promoting financial literacy. The fund was established with a $20 million endowment from the Asian Development Bank (ADB) supported Improving Access to Financial Services Program. In addition to promoting an increase in capacity in many of the same ways as the ISF, the IAFS places some added focus on increasing capacity in remittances and Islamic financial services. It will also train government and regulatory authorities on supporting the development of an inclusive financial system enabling financial services providers to launch financial and basic literacy programs for their clients.