[Pakistan] Increases poverty reduction expenditure

from The Financial Express

POVERTY reduction expenditure in Pakistan continued to increase rapidly in fiscal (FY-2005) as it soared to Rs 316.2 billion as compared to Rs 261.3 billion in FY2004 thus showing an increase of 4.7% of the GDP in the last year.

Over the last three years, the Pakistan government has consistently increased pro-poor public expenditure under its poverty reduction strategy initially spelled out in the Interim Poverty Reduction Strategy Paper (I-PRSP) released in February 2001 and later in the Full Poverty Reduction Strategy Paper (PRSP) issued in December 2003.

According to an Asian Development Band (ADB) report, PRSP has identified 17 sectors, expenditure on which has the greatest positive impact on poverty. Public expenditure on these sectors increased from 3.8 per cent of GDP in FY2002 to 4.4 per cent in FY2004.

However, as the government pursued an overall expansionary policy and total expenditure increased sharply, the share of poverty-related expenditure in total public expenditure declined from 27.3 per cent to 26.4 per cent.

Pro-poor expenditure has been grouped under the heads of improving access of the poor to market and community services, fostering human development, accelerating development of rural areas, improving governance, and providing safety nets.

Expenditures under all these heads, except safety nets, recorded increases in FY2005, with the sharpest increase being in expenditure on access to market and community services (46.3) per cent, followed by development of rural areas (34.4 per cent), and governance (20.7 per cent). Expenditure on human development increased by 18.2 percent. Expenditure on education, which accounts for 37.4 per cent of the total pro-poor expenditure, increased by 19.7 per cent to Rs 116.9 billion in FY2005.

Expenditure on health increased by 16.3 per cent to Rs 31.4 billion. The sharpest increase of 39.7 per cent was recorded in expenditure on preventive health care measures, which accounted for more than one-third of the increase in total expenditure on health.

The increase in expenditure on preventive health measures was mainly due to a more than four-fold increase in current expenditure and a 68.2 per cent increase in development expenditure by the Government of Sindh. It is encouraging to note that the current expenditure on rural water supply and sanitation, another very important service from the point of poverty reduction, recorded a sharp increase in FY2005.

Rural electrification plays an important role in boosting economy of rural areas where the bulk of the poor live. In the area of governance, expenditure on law and order increased by 20.3 per cent to Rs 47.4 billion and that on justice administration by 26.8 per cent to Rs 3.1 billion.

In addition to pro-poor budgetary expenditure, the government of Pakistan provides safety nets for the poor through transfers from the Zakat (an Islamic welfare fund) and Employees Old Age Benefits Institution (EOBI), as well ass microcredit disbursed by the Pakistan Poverty Alleviation Fund (PPAF) through non-government organisations (NGOs), Khushali Bank (KB), and Zarai Taraqqiati Bank Limited (ZTBL). The share of DB in microcredit disbursed in FY2005 was 40.0 per cent, while ZTBL accounted for only 1.0 per cent. The total number of beneficiaries of microcredit increased by 64.3 per cent to 470,000, and the average loan amount availed by them increased from Rs 10, 608 to Rs 12,185.

Meanwhile, Prime Minister of Pakistan, Shaukat Aziz, said last Monday the government is making efforts to improve and professionalize distribution and supply chain in Pakistan that will benefit consumers and open more opportunities for exports.

"We in Pakistan have an inefficient supply chain and we really want to professionalize distribution and supply systems here," he told reporters at a press conference organised by German-based Metro group to announce its plans to start operation in Pakistan.

Prime Minister Aziz expressed the hope that the Metro's introduction in Pakistan will help improve supply chain in the country.

An efficient supply system helps reduce cost of distribution and thus benefit consumers through less prices and quality products, he added.

Metro Cash & Carry is the international market leader in self-service wholesale and the largest division of Metro Group. With more than 500 stores and 83,000 employees in 28 countries, Metro Cash & Carry's sales reached a volume of more than 26 billion euros in 2004. Prime Minister Aziz described Metro's interest as an important event for Pakistan vis-a-vis attracting foreign direct investment (FDI) to the country.
Metro initially plans to open 10 outlets in all the major cities with an initial investment of 150 million euros and will also help create more job opportunities in the country.

Prime Minister Aziz referred to Pakistan's growing economy that posted 8.4 per cent growth in the last fiscal year, leading to raise in per capita income to 700 US dollars. He said rising income has created an emerging middle class in Pakistan, leading to growing demands and consumptions.

The government also had a programme to improve wholesale market, he said but added, that could best be done by bringing in the private sector.

Prime Minister of Pakistan Aziz, said a good supply chain like Metro can also help in promoting the host country's export. A way to promote exports is get into value chain and tap distribution networks of other countries, he added.

The government, he added, was trying to improve its supply chain as a good wholesale market can help promote a country's products worldwide.

He expressed the hope that Metro will influence the country's wholesale market that, in turn, will benefit the consumers. Highlighting foreign investment potential in Pakistan, Prime Minister Aziz said that Pakistan's economy was expanding and offer opportunities to both foreign and local investors.

He said despite October's earthquake, Pakistan was likely to achieve 7.0 per cent growth target set for the current fiscal year. Prime Minister Aziz said Pakistan offers level-playing field to all investors and many foreign companies are earning handsome profits and returns. He also thanked Metro, whose Chief Executive Officer, Dr. Hans-Joachim Koerber announced 100,000 euros for earthquake victims.

The Prime Minister said Pakistan takes pride in the fact that every country, NGOs, aid agencies contributed to Pakistan's relief efforts.

Welcoming Metro, he said Germany was a very important country and the biggest economy in Europe and more investment coming from that country was a good sign for Pakistan. He underlined the need for the country to adopt new technologies and improve efficiency, transparency and productivity.

Prime Minister Aziz said he was confident that Metro's investment would be a turning point for boosting economic ties between Pakistan and Germany.