How Do the Poor Respond to Rising Prices?

Recent estimates show that after falling in the 1980s, poverty has made a comeback in Pakistan during the 1990s. The Government of Pakistan (GOP) estimate show an increase in caloric poverty headcount from 17 percent in 1987-88 to 33 percent in 1998-99 and also rising income inequality during the 1990s.1 In contrast preliminary estimates by the World Bank show that poverty may not have risen as rapidly during the 1990s and may even have stagnated.2 Slow down in economic growth, rising open unemployment, rising food and non-food prices, reduction in the fiscal space for pro-poor public programmes, poor governance hampering delivery of social services to the poor; are factors that have been attributed to the growing poverty and vulnerability of households in recent years. The Government has recently taken some important initiatives to deal with rising poverty. These include the Rs 21 billion Integrated Rural Urban Development public works programme, establishment of the Khushali Bank (Micro-Finance Bank) and the Food Support Programme for poor households with income less than Rs 2000/ PM. These programmes are in addition to the existing public social safety net programmes such as Zakat/Ushr and Pakistan Baitul Maal, and the Social Action Programme. The ongoing work on the Poverty Reduction Strategy Paper (PRSP) is a laudable effort by the government to take poverty issues seriously and to come up with a poverty reduction strategy in a consultative and participatory manner.