Poverty reduction a fallacy
03 July, 2006
By Raja Khalique
The government's claim of reduction in poverty and improvement in economic indicators are mere jugglery of words and manipulation of figures, as the ground reality shows no improvement in the lot of the masses living below poverty line.
Poverty has different meanings in different circumstances and hence defined arbitrarily. There can always be a debate on standards falling under the poverty line and that is why the term poverty reduction is always used instead of poverty alleviation. However, some parameters are set to compare the living standards of people over a given time.
Poverty number has always been a politically inspired number in Pakistan. The political gain starts with 32.1 per cent poverty rate in 2001. An additional secretary in charge of planning division, Mutawakkil Kazi, trying to become full secretary pulled out this magic number out of the hack despite written protests by the chief economist, Dr Pervez Tahir.
The Household Income and Expenditure Survey (HIES) of that year was never made public. The compilation work was done by an expert in nutrition Dr Mushtaq Ahmad. Poverty line was distorted to about Rs724 or 2,350 calories per day intake per adult so that fewer people can be shown below the poverty line.
For 2005 again, the Pakistan Social and Living Standards Measurement (PSLM) survey data was not given even to the Planning Commission for three months. This time another additional secretary in charge statistics division, Asad Elahi, was under pressure to perform and consequently rewarded with extension. With the help of a finance ministry expert known for intellectual dishonesty', this data was massaged and a poverty rate of 25.4 per cent was announced even before analysis by Centre for Research on Poverty Reduction and Income Distribution (CRPRID) and National Economic Council (NEC).
A committee was announced that included development partners and even a journalist. The committee met only once with lower level participation from donors. The chair of the committee was secretary planning (an officer of district management group), rather than the chief economist a professional for the job.
Annual Plan Coordination Committee (APCC) has always been the first stage to present the macroeconomic picture and poverty data. For the first time in the history of Planning Commission, there was no working paper on the economy in this year's APCC meeting. The newly restructured and high profile Planning Commission engineered by Engineer Akram Sheikh was reduced to a mere Public Sector Development Programme (PSDP) organization.
The prime minister himself was not in favour of the Planning Commission's reengineering. However, the deputy chairman mustered his support by upping the poverty number. To gain the support for the new structure of the Planning Commission, this time the deputy chairman was under pressure to show performance. Poverty had to decline at an accelerated rate. Thus the result of poverty rate fixed at 23.9 per cent within weeks of an earlier figure of 25.4 per cent.
There is no example in the world where poverty declined with such a fast pace in just four years. This was highest rate of poverty reduction ever experienced anywhere in the world within a period of four years. In the process, Mr Sheikh got rid of his chief economist for protesting over the poverty assessment process.
Without any subsequent meetings, the donors endorsed the methodology but not the data or the number. On the other hand, Prof Nanak Kakwani of the United Nations Development Programme (UNDP) who worked for 15 days with the Planning Commission did not endorse the methodology. What emerged next was even more interesting.
The World Bank and the United Nations Development Programme (UNDP) came in the open and publicly announced that they estimated poverty rate in Pakistan between 25.7 and 28.3 per cent as against the government's estimates of 23.9 per cent.
The two institutions also openly asked the government to improve the methodology of arriving at poverty estimates to depict a genuine picture of the overall condition and standard of living of people in the country. They also raised questions about poverty surveys that did not portray the condition of majority of rural people.
The government had announced early this month that 23.9 per cent people lived below the poverty line and that poverty rate had declined by about 10.6 per cent from 34.46 per cent in 2001. It said the estimates and methodology had been endorsed by development partners, like the World Bank, the DFID of the United Kingdom, the Asian Development Bank and UNDP's expert Prof Nanak Kakwani.
Prof Kakwani said that he had got the poverty estimates of 25.7 per cent in 2004-5 and 35.7 per cent in 2001-2 by using a refined methodology. "In my report, I also expressed the views that the CRPRID (Centre for Research on Poverty Reduction and Income Distribution) methodology could be improved considerably," he said.
He, however, confirmed that by adopting the poverty estimates and methodology used by the government's CRPRID, he arrived at the poverty estimates of 34.46 per cent in 2001-2 and 24 per cent in 2004-5. He said the earlier poverty figure of 32.1 per cent being used by the government for 2001-2 "cannot be justified by any methodology".
He said: "The new methodology which I am proposing brings greater dis-aggregation. It provides separate poverty lines for food and essential basic non-food items of consumption such as clothing, housing, education, health, transport and so on. It is more transparent and can identify the genuine poor."
The government itself distanced from 32.1 per cent poverty rate it had been claiming for the last four years and to show that poverty numbers reduced by a big margin as a result of its economic achievements it upped its 2001 rate to 34.46 per cent. This factor alone was enough to establish that either the 2001 figures were cooked up or the 2004-05 rate was not correct. After all what is the guarantee that the government would not change 2004-05 figures after two-three years to some other objective.
The World Bank put the situation in real perspective but said it endorsed government figures. Its explanation is again very interesting. The World Bank Country Director for Pakistan, John Wall, announced that his institution had no hesitation to endorse the numbers arrived at by the CRPRID to avoid confusion and it had adopted the government's definition of poverty line.
He, however, said that according to the World Bank's estimates based on the government's survey the poverty rate in the country was about 28.3 per cent in 2004-5, compared with 33.3 per cent in 2001, showing a decline of just five per cent and not 10.6 per cent as being claimed by the government.
He argued that the government used the consumer price index (CPI) to gauge the poverty rate from 2001 to 2005 but it did not adequately represent the price situation, particularly in rural areas, and that was why the government was now working on expanding the CPI coverage. He said there was a wide difference in prices situation indicated by the CPI and the Pakistan Social and Living Standards Measurement (PSLM) survey.
He said the CPI-based and survey-based poverty rate was put at 30 per cent in 1998-99 but the difference between the two methods was very big during the period between 2001 and 2005. He said the results of 2001 and 2005 were not comparable because 2001 was an acute drought year and 2005 emerged as a bumper crop year.
Interestingly, the poverty situation measured both by the CPI and the survey based prices stood at 30 per cent in 1998-99. The CPI-based poverty increased to 34.4 per cent and 33.3 per cent on survey basis by 2001, showing a difference of 1.1 per cent. In 2004-05, this difference increased to about 4.3 per cent as CPI-based poverty stood at 24 per cent and 28.3 per cent on the basis of survey prices.
According to the World Bank, if the poverty line is estimated on the basis of $1 (Rs60) per day, the poverty rate in Pakistan is estimated at 17 per cent. On the basis of $2 (Rs120) per day, the poverty rate in Pakistan is 73.6 per cent, which means that on average more than 73 percent adult population earns Rs120 per day.
The debate over poverty numbers apart, there is no denying the fact that a very large number of Pakistani populations lead their lives in poor condition. The ratio of poverty might have declined irrespective of the quantum, but this is also a fact that the gap between the rich and poor is growing with each passing day and improvement in the lives of rich is much higher than poor.
It is time the government should start targeted interventions in the fields of health, nutrition, education, and clean drinking water and so to improve the lives of the people instead of misleading the people through jugglery of words and arithmetic technicalities