Prevalence of Relative Poverty in Pakistan

The conceptual basis of poverty in Pakistan remained limited to absolute notion of poverty which has been criticised on the grounds that it minimises the range and depth of human needs. The paper broadens the discussion on poverty and poverty measurement by examining the prevalence of relative poverty in Pakistan. Based on the moderate relative consumption poverty line of Rs 775 per capita per month, the prevalence of relative poverty was at 40.7 percent in 2001-02. On the other hand, half of the population was below the income-based moderate relative poverty line, implying that 77.5 million individuals were poor in Pakistan. At the province level, the results suggest the highest prevalence of urban poverty in the NWFP, followed by Sindh, Balochistan, and Punjab. On the other hand, rural Sindh was the poorest region in the country, followed by the NWFP and Balochistan. The trends implied by the concept of relative poverty suggest a more rapidly increasing trend in relative poverty because of rising income inequality. As a result, gains in income accrued to the richest at the expense of the poorest and the middle income groups, implying that the rich got richer and the poor got poorer over the last 15 year. These results suggest that adverse distributional outcome may be due to the pursuance of stabilisation and adjustment programmes within the framework of the “Washington Consensus” which put too much emphasis on removing macroeconomic imbalances and enhancing economic growth while giving no consideration to equity and poverty. While economic growth alone is not enough for poverty reduction, there is a need to raise PRSP spending in order to pursue an effective poverty reduction strategy with a focus on redistributive policies. While the country has already made a commitment to attain the Millennium Development Goals, economic policies need to be expansionary. Poverty reduction strategy should be based on the policies of building up the assets of the poor and increasing the demand for those assets. An expansion of health and education for the low-income households and measures that increase the relative prices of agricultural commodities and the wages of unskilled labour should be part of new poverty reduction strategy. Focusing on agrarian strategies, especially those also favouring rural industrialisation, can lead to more egalitarian growth. Rapid expansion of labour-intensive exports may contribute to faster growth in employment. Policies to support this should favour labour-intensive techniques, e.g., by not subsidising capital and by securing more credit for small enterprises.