The latest World Bank report on rising poverty in Pakistan has not shocked anybody in the country. Millions of people have lost their jobs as a consequence of national and international reasons. Prices of edibles and other essentials have reached unprecedented levels. In this situation, millions of people have slipped below the poverty line.
Poverty in Pakistan is a complex issue that requires a comprehensive approach to address. This includes investing in education, creating job opportunities, and improving governance and infrastructure. However, successive governments have ignored the pressing needs of the people and the result is that they still lack basic amenities. According to the World Bank, poverty in Pakistan will inevitably increase with pressures from weak labour markets and high inflation, warning that further delays in external financing, policy slippages, and political uncertainty pose significant risks to the macro poverty outlook for the country.
The bank, in its report “Macro Poverty Outlook for Pakistan: April 2023,” noted that in the absence of higher social spending, the lower middle-income poverty rate is expected to increase to 37.2pc in the fiscal year 2023. “Given poor households’ dependency on agriculture and small-scale manufacturing and construction activity, they remain vulnerable to economic and climate shocks. The lower activity is expected to spill over to the wholesale and transportation services sectors, weighing on services output growth. With dampened imports, the current account deficit is projected to narrow to 2pc of GDP in the fiscal year 2023 but widen to 2.2pc of GDP in the fiscal year 2025 as import controls ease, ,” the report added.
The World Bank has also estimated a decline in GDP per capita income for Pakistan, ie, from $1,613.8 in 2021-22 to $1,399.1 in 2022-23. It noted that GDP per capita growth is estimated at -1.5pc in 2022-23 compared to 4.2pc in 2021-22. The unemployment rate is estimated to increase to 10.2pc in 2022-23 compared to 10.1pc in 2021-22. “In the absence of higher social spending, the lower middle-income poverty rate is expected to increase to 37.2pc in FY23. Given poor households’ dependency on agriculture, and small-scale manufacturing and construction activity, they remain vulnerable to economic and climate shocks. Gross investment is estimated to decline to 106pc in 2022-23 against 13.3pc in 2021-22.”
It said real GDP growth was expected to “slow sharply to 0.4pc” in the fiscal year 2023 reflecting corrective tighter fiscal policy, flood impacts, high inflation, high energy prices and import controls. It added that agricultural output was also expected to contract for the “first time in more than 20 years” due to last year’s catastrophic floods. “Industry output is also expected to shrink with supply chain disruptions, weakened confidence and higher borrowing costs and fuel prices. The lower activity is expected to spill over to the wholesale and transportation services sectors, weighing on services output growth,” the report adds.
With high public consumption, economic growth increased substantively above potential in the fiscal year 2022 at the cost of growing imbalances that led to pressures on domestic prices, external and fiscal sectors, the exchange rate, and foreign reserves, the World Bank observed. The report says Pakistan’s economy is under stress with low foreign reserves and high inflation. Activity has fallen with policy tightening, flood impacts, import controls, high borrowing and fuel costs, low confidence, and protracted policy and political uncertainty. Despite some projected recovery, growth is expected to remain below potential in the medium term. Key risks to the outlook are the non-completion of the IMF programme due to policy slippages and the non-materialisation of expected financing. Other risks include political instability, deterioration of domestic security and external economic conditions and financial sector risks associated with revaluation losses, liquidity shortages, and high sovereign exposure.
There are several reasons behind the rising poverty in Pakistan. Inflation is one of the major reasons for rising poverty in Pakistan. The increase in the cost of living has made it difficult for people to afford basic necessities such as food, housing, and healthcare. High levels of unemployment in Pakistan have resulted in many people struggling to make ends meet. Lack of job opportunities, particularly for the youth, has resulted in a significant portion of the population being unable to support themselves and their families. The government’s contractionary policy has also slowed down the economy, paving the way for millions of people losing their jobs.
Pakistan has a low literacy rate, with many people lacking the necessary skills to secure well-paying jobs. This makes it difficult for them to escape poverty. Corruption is a major problem in Pakistan, with many government officials involved in embezzlement and bribery. This has resulted in limited resources being allocated to development projects and social welfare programs that could help alleviate poverty.
Weak governance in Pakistan has led to a lack of investment in public infrastructure, education, and healthcare. This has resulted in limited access to basic services for many people, particularly those in rural areas. Natural disasters such as floods and earthquakes have a significant impact on the economy and can push many people into poverty.
It is painful to see people who have lost jobs and are facing the worst inflation in the history of the country. The performance of a government in the world is assessed by the cost of living and job opportunities it creates. The coalition government is the biggest failure in Pakistan’s history if judged by international standards. However, it is hoped that the situation will improve in the coming months.