Poverty in Pakistan
Founded during the partition of India and located in South Asia, the Islamic Republic of Pakistan has the fifth-largest population in the world, with a population of more than 220 million. Cornerstones of Pakistani culture include incredible cuisine, iconic architecture and the popular game of cricket. However, like so many nations across the globe, Pakistani citizens must confront the harsh reality of extreme poverty. Here are ten facts about poverty in Pakistan.

10 Facts About Poverty in Pakistan

  1. As of 2015, approximately 24% of Pakistani citizens lived below the national poverty line. This is more than twice the global percentage of people living in extreme poverty and amounts to more than 50 million people in Pakistan living in poverty.
  2. Nearly 4% of Pakistan lives below $1.90 a day. As a result, nearly 9 million Pakistani citizens live in extreme poverty. This puts them below the Purchasing Power Parity (PPP) outlined in the U.N.’s Sustainable Development Goals (SDGs).
  3. As of 2018, almost 7% of babies died before their fifth birthday. Life in poverty makes it extremely difficult to have access to proper housing, nutrition and medication.
  4. The adult illiteracy rate in Pakistan is around 35%. Unequal access to proper and requisite education is inseparable from the reality of poverty.
  5. Pakistan also faces a severe overpopulation problem. While the nation has the fifth-highest population in the world, it takes up less than a percent of this planet’s surface. Overpopulation and unequal access to education amplify problems caused by poverty.
  6. Pakistan has a Human Development Index (HDI) of 0.560. The nation ranks 152nd out of 189 countries and territories. In the last three decades, Pakistan’s HDI has increased by nearly 40%.
  7. Approximately 38% of Pakistani citizens are living in multidimensional poverty. Another 13% are vulnerable to this status. From 2004 to 2015, the multidimensional poverty rate has dropped from 55% to its current rate at 38%.
  8. Poverty levels in Pakistan fluctuate throughout regions. In urban areas, poverty rates are around 9%, while in rural areas poverty rates rise all the way to 55%. One can see this disparity among provinces in the Republic as well.
  9. About 25 million Pakistani families rely on wage workers. They have unfortunately become vulnerable due to the current COVID-19 pandemic. The Prime Minister has said that the pandemic is harder to deal with in countries facing the challenges of poverty.
  10. The Pakistani government hopes to receive $5 billion in financial aid. This would come from outside sources and countries, along with the $1.3 billion it has already received from the IMF.

With continued efforts, poverty in Pakistan will hopefully decrease. The Citizens Foundation is one of many nonprofits that have been working to improve the quality of life for underprivileged Pakistani citizens. In 25 years, the Citizens Foundation has created 1,652 schools, providing proper education to more than 266,000 children who would not have had it otherwise. These schools also combat gender inequality in Pakistan, as they have all-female faculty and a 50% student gender ratio.

However, there is still work that is necessary to combat poverty in Pakistan. In Pakistan, gender disparities compound the unjust realities of poverty. Poverty rates in rural areas are more than five times higher than those in urban areas. Yet, similar to global trends, the amount of people living in poverty in Pakistan has clearly been decreasing in recent years. This is in large part due to individuals and organizations dedicating themselves to the cause of ending poverty. These continued efforts will help fight and eventually end poverty in Pakistan, and in turn, will make the Republic a more just and equal country for all those who call it home.

Ehran Hodes
Photo: Flickr

Poverty Level
The word poverty is common in discussions of politics, global issues, health and education around the world. Although many organizations are working to put an end to poverty, the general public often has many questions surrounding this prevalent topic. What does it mean to be in poverty and what is the poverty level?

The most recent poverty level set in 2015 stated that an adult making less than $1.90 a day is in poverty. People could questions surrounding the poverty level from a variety of perspectives. Politicians often use it around the globe to allot aid and develop economic policy, but mathematicians can also use it to compare the rates of poverty among countries and solution-oriented NGOs can use it to understand the root causes of poverty. In today’s era, one hefty debate revolves around the impacts of globalization on poverty-ridden countries. This is just one context in which the poverty level is a useful tool in decision making and analysis.

Who Determines the Poverty Level?

The World Bank sets the international poverty line and it fluctuates over time based on how the cost of living changes around the world. To calculate a shared poverty level internationally, the World Bank takes the poverty threshold from each country and converts it into a common currency. It does this using Purchasing Power Parity (PPP), which creates equilibrium among currencies so that the same basket of goods in two different countries will receive the same pricing in each country. PPP is an economic theory that allows the World Bank to put each country’s income and consumption data in globally-comparable terms to ensure that the same quantity of goods and services receive equitable pricing across countries.

Why is it Important to Measure Poverty Levels?

Developed nations, such as the U.K., debate the costs of living and raises in income. In low-income countries, analyzing poverty levels is important for targeting development initiatives and evaluating economic progress over time. For instance, The Rural Support Programmes in Pakistan work to identify needs in rural communities and improve the delivery of basic goods and services in these areas. These programs use poverty levels to evaluate their work and support development initiatives in the area.

Who Lives in Poverty?

The U.N. estimates more than 700 million people live in extreme poverty around the world, struggling to fulfill the basic necessities of life. About 70 percent of these people live in Southern Asia and sub-Saharan Africa, however, these issues affect developed countries as well. Estimates determine that there are 30 million children growing up near or below the poverty line in the world’s richest countries.

What are the Causes of Poverty?

The causes of poverty are diverse and far-reaching, but they often include unemployment, social exclusion, conflict, natural disasters, disease and other phenomena that prevent them from accessing the resources they need to be productive and make a living.

With an estimated four million people living in extreme poverty, the Democratic Republic of the Congo currently has one of the highest poverty rates in the world. Although the country has access to many natural resources, political unrest has plagued it in recent years. The Democratic Republic of Congo has suffered through continual corruption of political officials that has stifled development so that it remains nearly impossible to easily access or extract any of the country’s natural resources. Therefore, it remains difficult to make a living, or even have access to the basic necessities of food and water.

Despite the dismal numbers, some organizations are making huge strides in overcoming global poverty. Organizations like Oxfam International have made it their objective to reduce worldwide poverty. Working in over 90 countries and directly reaching millions of people each year, Oxfam primarily tackles issues of inequality and discrimination. It also provides direct aid in times of crisis and educates the world’s poor in an effort to impact the root causes of poverty at the political level.

Groups like Oxfam often utilize the international poverty level to assess and direct their efforts. Unfortunately, there is no magic solution to such a widespread problem. In order to solve the issue, though, everyone must first understand its causes. By implementing the poverty level system, the world should be on the right track to eradicate extreme poverty.

– GiGi Hogan
Photo: Flickr

The Russian Ruble vs. The American Dollar
There is a commonly understood equation that all world travelers parse out during their adventures to foreign countries: “How much will (x) of my currency buy (y) of their currency?” If an American travels to any of the 27 European nations, they will need to exchange a large portion of U.S. dollars into the EU’s respective currency, the Euro (€). Similarly, if Russians travel to the United States, they will need to buy American dollars ($) with their Russian Rubles (₽).

Purchasing Power Parity

The relative worth of one holder’s currency pegged to another’s in consideration of the purchase of the same basket of goods and services is referred to among economists as the purchasing power parity (PPP). The parity is a theory that suggests “exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries” (University of British Colombia School of Business).

The basis of PPP is the law of one price across nations; however, in the world of global economies and integrated wealth and trade, $10 spent in Russia gets one more goods and services than $10 spent in the United States. This is the economic disparity that leaves Russian consumers worse off in both their own country and the U.S.A.

Experimental Practicality

In order to better understand the purchasing power parity and how it adversely affects the Russian middle class, the following example will better illustrate its practicality:

Consider the two experimental countries, Russia and the U.S. A tall-sized latte from Starbucks costs approximately 255 ₽ or an American equivalent of $4.50; however, in the U.S., an identical product costs $2.95. The PPP between Russian and the U.S.A. for a tall-sized latte from Starbucks is the price paid in Russia in U.S. dollars ($4.50) divided by the price paid in the United States in U.S. dollars ($2.95).

Simple arithmetic leads to the conclusion that for this item, the PPP between Russia and the U.S. is approximately 1.52, which means the consumers pay $1.52 to make a purchase in Russia that would cost $1.00 in the United States. Alternatively, Russian consumers are using their weaker national currency to pay a 50 percent premium on a tall-sized latte from Starbucks. Apply this to the purchase of a flat, college education or vehicle, and the numbers and basic economic principle alone illustrates how worse-off the Russian middle class is than that of its western counterpart.

Poverty in Russia

The PPP between Russia and the U.S. and any other first-world country is relevant to the overarching issue of poverty in Russia because of relative wealth distribution and purchasing power. Russia’s geography necessitates a strong import business relationship with the world’s leading trading partners, including and especially the United States where embargoes do not apply. For Russian consumers, this means higher prices for finished goods and services that are not justifiably priced in the Russian Ruble (₽).

When Russian consumers want to spend on big-ticket items, they have to work harder and longer, save more and manage their money better than consumers in the U.S. Economics and the PPP explain why Russians often work abroad and repatriate foreign currencies with higher PPP than the Ruble so to afford goods and services in Russia. This consumption strategy tightens the labor market for Russians; however, in the long run, this is not an economically viable alternative to internal market corrections.

Creating Middle-Class Improvement

How can the rest of the world equal the playing field for Russia? The answer is difficult. First, the law of incentives must be prioritized in Russia’s labor environment to keep skilled and unskilled labor in Russia and reduce currency repatriation. Secondly, Russia needs to begin to play by the rules set by developing countries if the country wants to reduce its PPP relative to trade nations. Last but not least, these prior measures will work to benefit Russian importers, businesses, and most importantly, Russian consumers. It is time to bring more power back to the Russian Ruble for the middle class of Russia.

– Nicholas Maldarelli
Photo: Flickr

Poorest Countries in the World
The poorest countries in the world are places where the GDP per capita (meaning GDP divided by the number of people in a country) is the lowest. GDP per capita is a better measure than GDP, because GDP does not account for each individual in a country; rather, GDP accounts for a country as a whole. GDP per capita creates a better image of what each individual in a given country is worth.

There are three reputable institutions that measure GDP per capita: The International Monetary Fund, The Central Intelligence Agency and The World Bank. The conclusions these organizations find are similar. A deviation that exists is which one takes Purchasing Power Parity (PPP) into account, as this is a measure of GDP per capita that takes costs of living and inflation rates into consideration.

The CIA list is going to be the most accurate, as it includes the highest number of known countries out of the three, whilst taking into consideration GDP per capita influenced by PPP. All of the estimates of GDP per capita influenced by PPP are as of 2017.

10: South Sudan (GDP Per Capita + PPP = $1500)

Since the creation of South Sudan, a Central-Eastern landlocked country,  in 2011, its GDP per capita has been on a non-linear decline. What largely accounts for this trend is an ongoing civil war which started in 2013.

As a result of this civil war, millions have been declared displaced and as refugees, and famine has ravished several parts of the country. Also, on top of this, both sides of the civil war have both committed a wide range of human rights violations on the citizens of South Sudan.

The conditions of civil war set the stage for poverty. Eighty percent of people living in Sudan are defined as “income poor” and live on less than $1 a day. Eighty-five percent of the population is engaged in non-wage work and one third of the population does not have access to a secure amount of food.

9: Eritrea (GDP Per Capita + PPP = $1400)

Eritrea is a very small country in Africa. Despite being the 9th poorest country in the world, the nation has made vast improvements. GDP per capita in 1992 was under $800, and is now $1400. This is still a staggeringly low GDP per capita for a country that has a population of a little over 5 million people.

The cause of such severe poverty is multifaceted. Environmentally, Eritrea has always faced droughts, and with 80 percent of the population engaged in subsistence agriculture, this makes for very low productivity of food for 80 percent of the people living in Eritrea. There is also a general lack of financial resources in Eritrea, thus leading to a lack of large private enterprises and a very low industrial production growth rate of 5.4 percent.

The government of Eritrea is very unhelpful here, too, as they have been preoccupied with military spending and attempting to figure out how to obtain a coherent policy of a national hard currency.  

8: Mozambique (GDP Per Capita + PPP = $1,250)

The South-Eastern African Country Mozambique has always had a low GDP per capita. Even when it gained independence in 1975, the nation was considered one of the world’s poorest countries. Since its independence, socialist policies and general economic mismanagement have further impoverished the country. Nearly 50 percent of Mozambique’s population lives in poverty.

This has been exacerbated by lack of effort and results in poverty reduction, and slow economic growth of which does not benefit all Mozambique citizens equally, keeping the poor, poor. Potential for improvement in Mozambique is in agriculture, as most of Mozambique’s population works in this field. Also, innovations in tech and other lacking inputs would greatly benefit these workers.

7: Niger (GDP Per Capita + PPP = $1,200)

Forty percent of what constitutes Niger’s GDP is agriculture. Agriculture also provides 80 percent of Niger’s population livelihood. Like all of the countries on this list, Niger’s poverty is accounted for by various factors: increase in population, lack of food security and low levels of educational quality.

Another large sector of Niger’s economy is uranium. This sector has been interrupted in recent years by terrorist activity that has also increased Niger’s government expenditure on security. These issues increased Niger’s reliance on foreign aid as a result.

It is also the case that families in Niger are large (6 per household on average), so what constitutes 80 percent of the livelihood of Niger across generations must be distributed between more and more people. The GDP per capita in Niger is on the rise, but ongoing conflict and rapid population growth makes the economic situation in Niger a difficult hurdle to overcome.

6: Malawi (GDP Per Capita + PPP = $1,168)

Malawi is a landlocked African country that depends heavily on external donors for subpar economic stability. In fact, GDP per capita growth has decreased in Malawi since 1961. Given that Malawi’s domestic economy is dependent upon primarily rain-requiring agricultural, and the geography of Malawi is prone to droughts this makes sense.

Climate change and growing population rates threaten to exacerbate this problem which has caused an increase in food shortages in recent years. However, government corruption is incredibly common in Malawi, which has very frequently led donors to withdraw funds. Amidst the turmoil, child and maternal health have made large strides in improvement. This is due to increases in prenatal care, vaccinations and skilled birth assistance.

5: Somalia (GDP Per Capita + PPP = Unknown)

Somalia is in the middle of this list because the data on their economy is very vague. The GDP per capita is $500 without PPP according to the World Bank. What is known about Somalia is that there is a perverse lack of educational opportunities (less than half of Somali children are in school) and job opportunities (paired with strict-conservative religious influence in Somali culture inclines younger people to turn to extremist groups).

With a rapidly growing population, improvements in recent years are mainly in infrastructure — something which Somalia lacked prior to the 1991 collapse of central authority. Such improvements are peculiar to Mogadishu, Somalia’s capital, an indication that rural areas are still in need of improvement.

4: Liberia (GDP Per Capita + PPP = $900)

A large role in how Liberia became such a poor country has been civil war and economic mismanagement by the Liberian government. Post-civil war Liberia (2010-13) seemed to be making an economic comeback, until the 2014 Ebola outbreak which put Liberia back several years. Export prices have yet to return to pre-ebola levels.

Liberia suffers from one of the world’s worst maternal mortality rates (7th in the world) and female death rates are amongst the highest in the world due to a high frequency of female genital mutilation (this effects two-thirds of Liberian women/girls.) According to CIA data, “Significant progress has been made in preventing child deaths, despite a lack of health care workers and infrastructure. Infant and child mortality have dropped nearly 70 percent since 1990; the annual reduction rate of about 5.4 percent is the highest in Africa.”  

3: Democratic Republic of The Congo (GDP Per Capita + PPP = $800)

The Congo’s ongoing conflict makes ongoing economic instability inevitable. Such conflict has decreased output, increased conflict expenditure, increased external debt and has left the inhabitants of the Congo in very poor conditions. Such conditions include chronic food/resource mismanagement, chronic malnourishment, low rates of vaccinations, low availability of adequate drinking water, and very low quality public services (education, police etc.).

It is difficult to measure how improvements are occuring due to obscure data which is accounted for the majority of the DPC’s economy occurring outside of formal/traditional economic sectors (black markets).

2: Burundi (GDP Per Capita + PPP = $770)

In the past 27 years, the GDP per capita in Burundi has changed very little. Burundi, a landlocked African nation, has very little in terms of quality natural resources and manufacturing. Ninety percent of its population is in agriculture, which makes up 40 percent of its GDP.  

Almost half of Burundi’s income is derived from foreign aid and the majority of the rest is dependent upon coffee and tea exports. Production of these goods relies on weather and global coffee and tea prices, which are not constant variables.

Burundi suffers from massive food shortages and lack of clean water, which has resulted in a 60 percent child malnutrition rate. The government has established Vision 2025 in cooperation with the United Nations Development Programme and the African Future Institute as it seeks to reduce poverty to 33 percent by 2025.

1: Central African Republic (GDP Per Capita + PPP =$700)

Conflict has caused international donors to withdraw financial support of the Central African Republic (CAR). Ongoing humanitarian crises have created “CAR’s high mortality rate and low life expectancy, elevated rates of preventable and treatable diseases (including malaria and malnutrition), an inadequate health care system, precarious food security, and armed conflict.”

Schools are closed. There is also an ongoing refugee crisis inside and out (mostly to Chad) due to the ongoing conflict which started in the 2012 coup. CAR has one of the most unequal wealth distributions in the world on top of a lacking economy. This is due to various geographical and agricultural reasons, poor economic management, an unskilled workforc  and a poor transportation system that hinders trade.

Aid For The Poorest Countries in the World

Some of the conflict is also over “blood” diamonds. Efforts are being made to make said diamonds no longer of value, by lifting bans on their exports, as a means to reduce conflict and ultimately reduce poverty, by increasing government revenue.

It is clear that all of the poorest countries in the world list are in dire need of help, especially from the international community. Budget cuts threaten current national levels of foreign aid, and this is why supporting efforts like The Borgen Project is important. This organization amongst others actively opposes such budget cuts by calling, emailing and lobbying congress to oppose them. With support like this, powerful change can happen in the ten poorest countries in the world.

– Daniel Lehewych
Photo: Flickr

For as long as long as macroeconomics has been a practiced social science, individuals and groups have aggregated data on consumer habits and the cost of living. Development economists routinely index economic data by looking at gross domestic product, gross national income, the consumer price index and purchasing power parity.

Each dataset offers insight into the inner workings of a given economy, helping policymakers and investors understand how money flows in economic sectors. Purchasing power parity data is a unique way to look at the cost of living in a given country by comparing what it costs to feed and house a household in one country to how much it costs to feed and house a household in another country.

Economists examine the cost of doing business and maintaining government in a country by showing price relatives based on a common currency (in practice, the U.S. dollar). Put simply, PPP data gives economists an idea of how much the price of a burger costs in local terms and then compares it to an international standard in order to approximate how much cheaper or more expensive a product or service costs.

The process is extremely complex and PPP data is at best an academic estimate. Back in 2008, for example, the World Bank revised its PPP data on China and found that prices were 40 percent higher in previous predictions. The data revealed that while China still has a significant share of the world’s poor, it has reduced poverty to a greater extent than previously thought, demonstrating the degree of poverty reduction the government helped produce.

Right now, the World Bank is revising the PPP index and the definition of the poverty line, according to the Business Standard. It’s newest formula, applied to India, indicates that India may actually have 75 percent fewer impoverished individuals living on less than $1.25 a day than the 2005 PPP dataset indicated. This means that the World Bank has a clearer picture of what poverty looks like in India, and can therefore better understand poverty’s causes and solutions.

The new PPP data that the World Bank is currently producing is hugely important for clarifying who is actually in poverty, and it can help legislators craft smarter policy decisions as a result. Economic analyses of the cost of living may never be 100 percent accurate, but revising the data helps everyone see a clearer picture of poverty.

– Joseph McAdams

Sources: IMF, NDN, OECD, Site Resources, World Bank
Photo: MBA Mondays Illustrated