Poverty Reduction Strategy of Pakistan

Poverty is a very serious global malaise affecting humanity. About half of the total population of the world is living on less than 2.5 dollar a day . Recognizing the importance of poverty reduction for mankind the United Nations Organization has included poverty reduction in the Millennium Development Goals. The first Millennium Development Goal envisages reducing the extreme poverty by a half up to the year 2015 . Other goals like promotion of education and eradication of disease etc also supplement the efforts to reduce poverty as education and health are potent means to eradicate poverty and empower the poor. In order to realize the goal the world body encourages the member countries to formulate their individual poverty reduction strategies.

Pakistan is a very poor member of the international community with 1049 dollars per capita income (IMF). About 51 % of 175.57 million population of the country lives below poverty line, less than two dollar a day . The country has, with the help of International Monetary Fund chalked out its national poverty reduction strategies enshrined in Interim Poverty Reduction Papers (2001-2003), Poverty Reduction Strategy Papers-1(2004-2006) and PRSP- 2 (2008-2010). Underlying approach in all the strategies is the neo-classical theory of reducing poverty through economic growth and its trickle down to the poor. Main pillars of the strategy are engendering and accelerating economic growth while maintaining macroeconomic stability, improving governance, investment in human capital and targeting the most vulnerable to reduce their vulnerability. To address common criticism against the neo-classical theories of trickle down the strategy provides for a robust program of direct cash grants. Funds worth billions of rupees are allocated for programs like Benazir Income Support Program , Pakistan Poverty Alleviation Fund, Zakat Fund and Pakistan Bait-ul -Maal to provide support to the poorest of poor. The strategy is comprehensive and in essence is similar to the strategies of countries which are successful in alleviating poverty.

But despite lapse of almost ten years, after the I-PRSP, the poverty in Pakistan is increasing. Three strategies the country has implemented so far have failed to achieve desired results. The number of poor below poverty line in 2000-2001 was 32.1 % (PRSP_1) which has risen to 51 %. Independent analysts and international institutions like the World Bank doubt the figures claimed by the government. Success achieved in early years of the strategy (2001-2006) is attributed to external factors as increased foreign remittances due to 9/11 and increased foreign aid due to war on terrorism. Critics believe that PRSP,s do not reflect plans to address the malaise of poverty but only have a showcase value to attract more funds from donors. PRSP, s based on trickle down policies have only increased inequalities which already are of extreme nature . The failure of poverty reduction mechanism is further accentuated by the fact that in Pakistan there is a robust formal and informal philanthropic system which also supplements the poverty reduction efforts by the state.

The key factors resulting in this failure has been lack of political will to implement professed policies. Governments have not only failed to exercise required financial discipline but also have failed to take bold policy measures to tap new resources. Unwillingness to tackle touchy economic issues has resulted in non-confidence of international financial institutions in Pakistani government. Successive IMF programs have been abolished due to this reason. Ratings by international institutions have direct bearing on foreign direct investment which has come to lowest level. Tax to GDP ratio in Pakistan is very low. According to Chairman Federal Board of Revenue, Ali Arshad Hakeem Pakistan has one of the lowest taxes to GDP ratios in the world as only 0.9 per cent of the population of the country pays income tax . International community has time and again pointed out towards this weakness. Voices to link international aid to Pakistan with domestic tax to GDP ratio are getting louder day by day. Budget deficit, unemployment and inflation are high. Successive governments have blatantly failed to provide enabling environment for economic development through provision of good governance. Pakistan’s performance on all the governance indicators developed by the World Bank is dismal. Due to political interference, nepotism, corruption and low service delivery of governmental organizations confidence of people in government is very low. According to Transparency International’s Corruption Perception Index (2012) Pakistan is one of the world’s most corrupt countries (ranked 139) .Total loss of revenue due to corrupt practices is estimated as 3.3 billion US dollars. According to Transparency International every household in Pakistan had to pay 10537 rupees per annum as a bribe in 2010. This means 223 billion rupees were paid by 169.50 million population of Pakistan in bribe. Almost every department of the country is facing the problem. Corruption has become so common that according to Professor Qua it has become part of Pakistani culture. Corruption has eroded almost every institution of the state. No poverty reduction strategy can be successful in this environment. Any future government will have to show strong resolve to take tough decisions to impose financial discipline. Comprehensive structural reforms will have to be taken to revive governmental institutions. Good governance is prerequisite for any poverty reduction strategy to succeed.