[Pakistan] Policies needed to tackle poverty, unemployment: ADB

from The Daily Times

By Sajid Chaudhry

ISLAMABAD: An Asian Development Bank’s poverty literature review paper has highlighted that unemployment and poverty cannot be left to the market to resolve.

Rising trends in poverty can only be arrested if enough productive and remunerative jobs are created, and this will only be possible only if investment levels increase. The level of investment in Pakistan has stagnated at low levels, while public development expenditure has fallen, displaced by government commitments to reduce the fiscal deficit.

The focus of current policies to reduce rural poverty is the agriculture sector, despite the fact that a large number of poor rural households depend on non-agriculture sources for their livelihoods. Policies thus need to be designed to generate job opportunities in the rural non-farm sector as well, but without undermining the importance of agriculture.

Although the incidence of sharecropping has declined over time, a substantial proportion of rural households still operate as share-tenants. This represents the poorest group in the agriculture sector, and indicates a need to improve the land tenure system in Pakistan. Tenancy legislations have been promulgated over the last 50 years to improve tenants’ positions, but have yet to be implemented. Taking this step will help improve landlord-tenant relationships in favor of tenants.

The objectives of Poverty, Economic Growth, and Inequality: A Review of Pakistan’s Poverty Literature paper prepared by Ghulam Mohammad Arif of the Poverty Group Country Policy Operations Unit of the Asian Development Bank Pakistan Resident Mission was to review the poverty literature produced in the last decade, in order to understand the nature and causes of the rise in poverty that occurred in the 1990s.

In addition to examining trends and geographical variations and the dynamics of poverty, the paper reviews the relationship between poverty and economic growth, structural adjustment, population growth, employment, and foreign remittances. Rural poverty is also examined in terms of land distribution and tenure patterns, the role of the non-farm sector and rural power structures. Finally, the paper briefly discusses the poverty and human development nexus and micro- and macro-level responses to poverty.

It stated that the consensus among recent studies is that poverty declined in the 1970s and 1980s, but increased sharply in the 1990s. The analysis of poverty transition over the IFPRI survey years shows an increase in the probabilities of moving into poverty and a decline in that of escaping it. Moreover, the movement of the poorest households out of poverty was relatively higher in urban areas than in rural areas, indicating that limited economic opportunities for the poorest rural households prevent their transition from poor to nonpoor. Nonetheless, a substantial proportion of households close to the poverty line have been able to make this transition in urban and rural areas. The group of households just above the poverty line experienced a rapid decline in welfare, particularly those in rural areas. The large movement of rural households into poverty shows the inadequacy of existing policies in reducing rural poverty.

Economic growth in the past has not automatically trickled down to benefit the poor. Pakistan’s growth performance over the last three years indicates that the stage is probably set for high growth, which can be made pro-poor by creating additional jobs for the poor as well as enhancing their education and skill levels. In addition to explicit actions to ensure that this occurs, efforts should be made to ensure that growth does not inadvertently increase inequality. More resources need to be diverted to the education and health sectors for the benefit of the poor, and the quality of public sector education, particularly in rural areas, also needs to be improved.

Finally, the evidence on employment and poverty, as reviewed in this paper, reinforces the argument that unemployment and poverty cannot be left to the market to resolve. This sharp decline in development expenditures is a serious matter because it plays a complementary role in poverty reduction. Falling development expenditure reduces private investment and leads to slower economic growth while increasing unemployment and undermining the maintenance of services and capital stock. The reduction in debt servicing has already created fiscal space, although more fiscal space is likely to be required.