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Reducing Poverty in Pakistan Through Government Aid

Poverty in Pakistan
In early April of this year, an important step was taken to reduce poverty in Pakistan. The Pakistani government made the decision to re-evaluate its poverty threshold or an individual’s estimated monthly income that would place them above or below the poverty line in that particular country.

The government ultimately decided to raise its poverty threshold, increasing the number of citizens eligible for government-sponsored aid and development policies.

Based on census data between 2013 and 2014, the Pakistani government raised the poverty threshold for working adults’ incomes to 3,030 rupees per month, or about $29.

The new criteria means that roughly 60 million total citizens are classified as falling below the poverty line as opposed to a much smaller number of citizens who fell under the old poverty line, which was based on 2001 data.

What consequences does this new, expanded recognition of impoverished citizens carry?

For starters, a higher poverty threshold typically means that there are fewer people living in poverty. The World Bank issued a report estimating that, if applied in 2001, the new data would qualify 64 percent of the population as impoverished, rather than the 34.5 percent of citizens classified as such under the old data.

Currently, the number of citizens living below the new poverty line rests at 29.5 percent, a sharp decrease from 2001. In simplified terms, this means that the overall rate of poverty in Pakistan has fallen by over one third in the past fifteen years.

It also shows that the government-sponsored aid programs and pro-poor development policies implemented over the past 15 years have worked and have the capacity to help even more citizens. The Benazir Income Support Program (BISP) in particular has been effective at providing economic assistance.

Provided with significant support by USAID, the World Bank, DFID, and the Asian Development Bank, BISP has taken the lead in establishing “cash transfer” programs, which provide the financial support families need to meet educational, health and livelihood requirements.

Tangible effects of this assistance can be found when examining such variables as the number of poor households with access to personal transportation (up to 18 percent compared to the two percent of 15 years ago) and the number of households with access to a toilet (up to 60 percent as compared to 30 percent in 2001).

The greater levels of income provided by BISP are improving the overall financial condition of Pakistan as well, allowing the country’s “formal banking sector to reach to the untapped market segment” of poverty in Pakistan.

The continued success that Pakistan has achieved by investing in its impoverished citizens has inspired programs similar to BISP in countries such as India, Ghana, Mongolia, Cambodia and Nepal.

– Will Clifft

Photo: Flickr

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Asian Development Fund Provides Support to Pakistan

Asian Development Fund

Poor countries need more assistance. In hopes of sustaining economic growth and reducing poverty, the Asian Development Bank approved a merger between the Asian Development Fund and its ordinary capital resources.

The Asian Development Bank (ADB), a regional development bank located in Manila, Philippines, is determined to reduce poverty in Asia and the Pacific. It focuses on sustaining economic growth, environmental stability and regional integration.

Chinese Finance Minister Lou Jiwei announced recently that China would donate $100 million U.S. dollars to the Asian Development Fund (ADF). This donation will greatly assist members of the ADB in reducing poverty in Pakistan. Jiwei wants to use the initiative to boost the flexibility and resilience of the economies of poor countries.

Pakistan, along with 28 other countries, receives ADF funding from the ADB. Between 2013 and 2014, Pakistan received $511 million U.S. dollars. The ADB works with the government of Pakistan to sustain economic growth and boost spending on poverty reduction programs.

According to the ADB website, “ADF bridges the development gap in Asia and the Pacific, home to both the world’s fast-rising and most vulnerable economies.” The fund provides loans at low-interest rates to partners with high poverty rates with the intention of poverty alleviation.

The negotiations between ADF recipient countries and ADF donor countries began in 2013 and were concluded in 2015. ADB President Takehiko Nakao announced that it is a remarkable milestone for ADB and the merger will increase the lending capacity to the poor. ADF will merge with its ordinary capital resources (OCR) balance sheet boosting its annual lending to over 50 percent the current level. Therefore, assistance to poor countries will increase by 70 percent.

In Pakistan specifically, ADB will improve the quality of public sector projects, as well as create stronger partnerships. One public sector project that will be addressed is the M4 highway project in the Punjab province.

Some ADF donors include the U.S., the U.K., Germany, France and Australia.

– Kimber Kraus

Photo: Flickr

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Poverty in Lahore, Pakistan

Poverty-in-Lahore-Pakistan
Pakistan is among the nations in the developing world that has made substantial progress in poverty reduction. The amount of people living in extreme poverty has gone down considerably over the years and continues to decrease today. What drives poverty reduction in Pakistan, especially in large areas such as Lahore, is income growth. Through a combination of support programs and reforms, as well as income equality, Pakistan was able to translate income growth to poverty reduction.

According to the World Bank Group, there are over 50 million less people living in poverty in present day Pakistan than there were in 1991. Additionally, the percent of people living on less than a dollar and a quarter a day fell from 66.5 percent to 12.7 percent. However, although extreme poverty in the region has been reduced, there is still over half of the population living under two dollars a day. Despite progress made in Pakistan, there still remains a high number of Pakistanis in poverty and many more who are vulnerable to falling back into poverty, especially in large cities such as Lahore.

Lahore, a large region in Pakistan, is considered to be one of the most populated urban areas in the world and is one of the largest cities in the Islamic world. According to Index Mundi, as of January 2015, Lahore has an estimated 10 million people living in the region. The size of the region poses a bilateral problem; on the one hand, Lahore’s population and size contributes to its wealth and prosperity, while on the other hand, with a large city comes overpopulation and underdevelopment. Large cities such as Lahore often have another side to their urban development: the underdevelopment of parts of the region called the slums. Similar to the slums in various parts of India, Indonesia and Kenya, slums in Lahore are densely populated with areas lacking in basic necessities such as clean water, electricity, security and health care.

In Lahore, 30 percent of the region is considered to fall into the category of slums; however, the percentage does not take into account the amount of unregistered slum neighborhoods in the city. These slums are formed by low income communities that do not have the means to live in proper housing in the city, and they are a byproduct of over population, economic, political and social inequalities as well government intervention. Slums in Lahore are also a consequence of people moving from rural areas around Pakistan to the city in hopes of attaining a better life. The reality, however, reveals that many who move into the city have a difficult time securing employment, and eventually settle in the slum communities as a result. Health care, education, and basics such as sanitation and electricity, are extremely limited in the slums of Lahore and further contribute to low living conditions.

A solution that can bring poverty rates down in Lahore is to have more government involvement through political laws and reforms that pay special attention to these areas. More government interference and aid to counteract inequalities can be the beginning of reducing poverty in the slums of Lahore.

– Nada Sewidan

Sources: The World Bank, TribuneAcademia.edu
Photo: Pakistan Defence