Povert In Pakistan

POVERTY AND INCOME

DISTRIBUTION

The fight against poverty represents the greatest challenge of our times. Considerable progress has nevertheless

been made in different parts of the world in reducing poverty. The proportion of people living in extreme poverty on

global level fell from 28 percent in 1990 to 21 percent in 2001 (on the basis of $1 a day). In absolute numbers the

reduction during the period was 130 million with most of it coming from China. In Sub-Saharan Africa, the absolute

number of poor actually increased by 100 million during the period. The Central and Eastern Europe and the CIS also

witnessed a dramatic increase in poverty. While incidence of poverty declined in South Asia, Latin America and the

Middle East witnessed no change.

The recent trends in global and regional poverty clearly suggest one thing and that is, that rapid economic growth

over a prolonged period is essential for poverty reduction. At the macro level, economic growth implies greater

availability of public resources to improve the quantity and quality of education, health and other services. At the

micro level, economic growth creates employment opportunities, increases the income of the people and therefore

reduces poverty. Many developing countries have succeeded in boosting growth for a short period. But only those

that have achieved higher economic growth over a long period have seen a lasting reduction in poverty - East Asia

and China are classic examples of lasting reduction in poverty. One thing is also clear from the evidence of East Asia

and China that growth does not come automatically. It requires policies that will promote growth. Macroeconomic

stability is therefore, key to a sustained high economic growth. Although extreme poverty on global level has

declined, the gap between the rich and poor countries is increasing, even when developing countries are growing at

a faster pace than developed ones - perhaps due to the large income gaps at the initial level. In a world of six billion

people, one billion have 80 percent of the income and five billion have less than 20 percent. In the next 25 years, two

billion more people will be added in the world we live. All but 50 million of them will be in the developing countries. In

the year 2025, seven out of the eight billion people will be living in developing countries. This issue of global

imbalance is at the core of the challenge to scale up poverty reduction.

In Pakistan, Poverty Reduction Strategy was launched by the government in 2001 in response to the rising trend in

poverty during 1990s. It consisted of the following five elements:- (a) accelerating economic growth and maintaining

macroeconomic stability, (b) investing in human capital, (c) augmenting targeted interventions; (d) expanding social

safety nets and (e) improving governance. The net outcome of interactions among these five elements would be the

expected reduction in transitory and chronic poverty on a sustained basis. The reduction in poverty and improvement

in social indicators and living conditions of the society are being monitored frequently through large- scale household

surveys in order to gauge their progress in meeting the targets set by Pakistan for achieving the seven UN

Millennium Development Goals by 2015. Among them the most important is halving the population living below the

poverty line from 26% in 1990 to 13% by 2015. The improvement in household social indicators and living conditions

at the national level during 2001-05, based on information from 76520 households is documented in last year

Economic Survey. Preliminary findings of Pakistan Social and Living Standards Measurement Survey (PSLM 2004-

05) on poverty status were released in end February this fiscal year.

Pakistan's growth performance over the last four years is enviable in many respects. Sound macroeconomic policies

and implementation of structural reforms in almost all sectors of the economy have transformed Pakistan into a

stable and resurgent economy in recent years. The real GDP has grown at an average rate of over 7.5 percent per

annum during the last three years (2003/04 to 2005/06). With population growing at an average rate of 1.9 percent

Economic Survey 2005-06

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per annum, the real per capita income has grown at an average rate of 5.6 percent per annum.

The strong economic growth is bound to create employment opportunities and therefore reduced unemployment. The

evidence provided by the Labour Force Survey 2005 (First two quarters) clearly supports the fact that economic

growth has created employment opportunities. Since 2003-04 and until the first half of 2005-06, 5.82 million new jobs

have been created as against an average job creation of 1.0 - 1.2 million per annum. Consequently, unemployment

rate which stood at 8.3 percent in 2001-02 declined to 7.7 percent in 2003-04 and stood at 6.5 percent during July -

December 2005. The rising pace of job creation is bound to increase the income levels of the people. Agriculture,

housing and construction, IT and Telecom sector, and SME are the sectors which have created relatively more jobs.

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