The latest World Bank report on Pakistan’s poverty plight reads like a dirge, evoking a picture of a stampede for wheat flour, hollow-eyed labourers trapped in an unending cycle of poverty, and opportunistic human traffickers exploiting the vulnerabilities of countless hopeful migrants. This heartrending scenario unfolds throughout our fractured nation, while those in privileged positions choose to ignore it. Inflation mercilessly erodes household budgets, causing entire populations to sink deeper into the abyss of poverty. The World Bank’s prognosis could not be clearer: without urgent intervention, Pakistan will fail to meet the global Sustainable Development Goal of ending poverty by 2030.
With growth slowing and inflation running high, the World Bank projects the lower middle-income poverty rate could rise to 37.2 per cent in FY2023. This rise in poverty is estimated to push an additional 3.9 million people below the poverty line compared to the previous fiscal year. The severity and depth of poverty have also intensified, with families exhausting savings just to survive. The impact of food inflation is particularly severe on the poor, as the poorest individuals spend an average of 49.2 per cent of their income on food.
Looking ahead, Inflation is anticipated to reach its peak in the fiscal year 2023 and remain elevated in fiscal years 2024 and 2025. The World Food Programme has predicted that the number of severely hungry Pakistanis will reach 5.1 million by mid-2023, representing an increase of 1.1 million people from the previous quarter. Given the sluggish economic growth and high inflation, the World Bank sees limited poverty reduction over the next few years, with only a slight dip to 36.6 per cent by FY2025, barring further instability.
The severity and depth of poverty have intensified, with families exhausting savings just to survive.
While the International Monetary Fund (IMF) programme has become a temporary solution for Pakistan’s broken political economy, the country is already veering off track towards achieving the United Nations’ Sustainable Development Goal of ending poverty by 2030. This emphasises the urgent need for structural changes that reshape the social contract between the government and its citizens. It is a moral outrage that we cannot ignore. To address this situation, it is crucial to strengthen the social safety architecture and expand initiatives like the Benazir Income Support Programme (BISP), while also implementing a comprehensive conditional cash transfer program similar to Mexico’s Prospera. The program has developed an integrated social information system to identify who the poor are, where they are, and what they need.
However, cash hand-outs alone cannot eliminate poverty if the economy itself is not creating equitable opportunities. Short-sighted IMF bailout programs have shored up macroeconomic stability at the cost of hollowed-out microeconomic foundations.
First and foremost, the government must put politics aside and complete the IMF program. There is no alternative. Though the IMF Executive Board Approves a US$3 billion Stand-By Arrangement for Pakistan which aims to support immediate efforts to stabilize the economy and guard against shocks while creating space for social and development spending there is a wider gap to fill. Without the restoration of external financing and macroeconomic stability, Pakistan’s economy will continue to crumble, plunging more households into hardship.
Secondly, the government needs to massively expand social protection programs and focus on macroeconomic stabilisation. Pakistan can learn from Brazil which has taken inclusive growth reforms under IMF programs in the 2000s. The Social assistance program of Brazil known as Bolsa Familia focused on helping families invest in their children, thus breaking the cycle of intergenerational transmission and reducing future poverty.
Thirdly, Structural transformation is the need of the hour. The government must mobilise adequate investment and technical know-how to develop high-productivity, job-rich sectors like manufacturing, IT and modern services. Pakistan’s youth population in particular needs avenues to apply their energy and enterprise fruitfully. Creating an enabling ecosystem for technology and innovation will open new vistas of opportunity. Channelling credit and skills training towards small-scale enterprises can spur bottom-up development.
Fourthly, No nation has lifted itself out of poverty without educating its people. Depriving children of quality schooling results in low learning levels which leads to low lifetime earnings and underdevelopment traps. Pakistan’s public spending on education is estimated at 1.7 per cent, and radically hiking public spending on education to at least 4 per cent of GDP is imperative for elevating poverty.
Lastly, Pakistan can learn from China’s two-pillar approach to poverty alleviation, which focuses on both rural and urban poverty separately. Tailor-made policies can be implemented in urban areas to yield quick results. Furthermore, targeted interventions that address specific needs and challenges should be emphasised. By tailoring poverty reduction strategies to the unique circumstances of different regions and communities, the government can maximise the effectiveness of its efforts.
The World Bank’s assessment of rising poverty is alarming. However, Pakistan has the choice to take a different path-one that leads to prosperity, equity, and dignity for all citizens. In short, overcoming poverty requires a fundamental transformation of the Pakistani state’s internal operations. With strong political will and properly designed pro-poor policies focused on human capital development and inclusive growth, Pakistan can make substantive progress in reducing multidimensional poverty. But deep reform, not superficial tweaks, will be the key.
The writer is a researcher at the Centre for Aerospace and Security Studies (CASS), Lahore, Pakistan. She may be reached at [email protected]