Rising poverty in Pakistan

According to a report, due to the PTI government’s concretionary economic policies and double digit food inflation, the national poverty ratio, which was 31.3% in June 2018, may rise to over 40% by June 2020.

In absolute terms, people living in poverty will increase from 69 million in June 2018 to 87 million by June 2020, indicating 26% increase in poverty or an addition of 18 million people in first two years of the PTI government. As per economic experts’ calculation, eight million people have already been added to the ranks of the poor by the end of the first year of the PTI government. It is now projected that 10 million more people will slip below the poverty line by the end of the current fiscal year.

One of the factors behind this dismal prognosis is that the economic growth rate is close to the population growth rate and an abnormal increase in prices of perishable food items. Experts have arrived at these figures on the basis of a cost-based methodology. On the other hand, the latest official poverty statistics are not available. The government’s policies are compounding the situation. As we all know, the government’s decision to simultaneously increase taxes, energy tariffs and devaluation of currency have hugely contributed to the increase in poverty. The Pakistan Muslim League-Nawaz government’s decision to keep the rupee-dollar parity stable kept the inflation under check.

But the PTI government is implementing the toughest International Monetary Fund (IMF) programme of the country’s history aimed at meeting fiscal and external accounts challenges. It is estimated that by June next year, four out of every ten Pakistanis will be poor. At the end of the PML-N government, three out of ten Pakistanis were living in poverty when the poverty ratio had been estimated at 31.3%. A year ago, experts had estimated that the national poverty ratio would increase to over 37%. But this figure has gone up in the aftermath of a surge in food inflation. The food inflation was recorded at 16.6% in cities and 19.3% in rural areas in November over a year ago, according to the Pakistan Bureau of Statistics.

Strangely, the official poverty figures have not been disclosed since 2014-15– a year after the start of the last IMF programme. Available figures show that the incidence of poverty fell from 36.8% in 2015 to 31.3% in 2017-18. The decline of 5.5 percentage points implied that almost six million people were taken out of poverty in these three years. The year 2018-19 has, unfortunately, witnessed a change in the trend. The per capita income growth was only 0.9% and more recent estimates indicated that it may have been even lower. There was an increase in the incidence of poverty by 3.7 percentage points, from 31.3% in 2017-18 to 35% in 2018-19. This implies that almost eight million people fell below the poverty line in 2018-19.

In 2019-20, the GDP growth rate is expected to be close to 2.4%; therefore there will be no increase in per capita income. What is worse, the incidence of poverty could increase by almost 5 percentage points from the level of 35% in 2018-19. Therefore, by the end of 2019-20, the level of poverty in Pakistan could once again approach 40%. This is a challenging situation but there are no signs as yet of the government taking any remedial measures. It is time the government reviewed its economic policies to bring some relief to the people.

 

Muhammad Jahangir

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