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Poverty Reduction in Pakistan October 2015 Case Study Summary Material wellbeing • Pakistan appears to have reduced poverty remarkably. The share of people PROGRESS UNDER SCRUTINY living on less than US$1.25 a day is estimated to have fallen from 64.7% in Poverty reduction in Pakistan 1990 to 12.7% in 2010 and, based on Amina Khan, Arif Naveed, Emma Samman, Moizza Binat Sarwar the official national poverty line, from and Chris Hoy 25.5% in 1992 to 12.4% in 2010. • Yet major doubts are raised over the veracity of the official figures. A significant number of stakeholders in the policy arena disagree with the official view that poverty has reduced. • They cite declining rates of growth in real GDP per capita, an increase in child stunting and wasting, and data that suggests over half the households in Pakistan were food insecure in 2011. • Has progress in reducing poverty in Pakistan been real? Why are the official data and the mainstream narrative so contested? This and other Development Progress materials are available at developmentprogress.org Development Progress is an ODI project that aims to measure, understand and communicate where and how progress has been made in development. ODI is the UK’s leading independent think tank on international development and humanitarian issues. Further ODI materials are available at odi.org.uk Women and children riding the Lahore Bus Rapid Transit. Photo: © Asian Development Bank. developmentprogress.org Why explore poverty reduction in Pakistan? Pakistan appears to have reduced poverty remarkably. The ‘In all these controversies, share of people living on less than US$1.25 a day (2005 we lose sight of what’s really purchasing power parity) is estimated to have fallen from 64.7% in 1990 to 12.7% in 2010 (World Bank, 2015a) at stake – the poor people of and, based on the official national poverty line, from 25.5% in 19921 (Cheema, 2005) to 12.4%2 in 2010 (GoP, 2014). Pakistan’ – Former government Yet major doubts are raised over the veracity of the official figures. A significant number of stakeholders in the official policy arena (that we interviewed for the study) disagree with the official view that poverty has reduced. Oxford Poverty & Human Development Initiative (OPHI). To many stakeholders, the official national poverty SPDC shows that the proportion of people identified as line is fraught with complexity that is both technical and multidimensionally poor fell marginally from 49.4% in political in nature. According to them, the purported 2005 to 48.1% in 2011 (Jamal, 2012) while OPHI figures progress is incommensurate with wider macroeconomic suggest a slightly more substantial fall from 49.4% in 2007 and political conditions in the country as well as with to 45.2% in 2013 (OPHI, 2015). trends in other dimensions of wellbeing. The drivers of In addition, the Pakistan Rural Household Survey progress, from their perspective, have also not favoured the (renamed the Pakistan Panel Household Survey to reflect poor (key informant interviews, 2015). the inclusion of urban areas since 2010) has tracked the It is against this backdrop that we explore in this case same households over time to assess their movements study whether progress in reducing poverty in Pakistan has into and out of poverty. Survey results show a decline in been real, and why the official data and the mainstream rural poverty from 27.5% in 2001 to 22.4% in 2010, and narrative on poverty reduction are so contested. that more rural poverty households moved out of poverty (15.9%) than into poverty (13.3%) in this time period (Arif and Farooq, 2012). On the face of it, the evidence to indicate that poverty Evaluating progress has reduced is very compelling. Estimates produced by 1. Evidence that poverty has reduced the government, the World Bank and the panel data Gauging from the 2010 official estimate, Pakistan has all demonstrate a reduction in consumption-based achieved one of its localised targets under Millennium poverty, complemented by the multidimensional poverty Development Goal (MDG) 1: to halve, between 1990 and assessments. Yet, the evidence is partial at best. This is 2015, the proportion of people below the national poverty partly because there are flaws in the official evidence base line. Other official data is congruent with the claim that (which we highlight), and partly because other sources of poverty has fallen. For instance, public spending on 17 pro- evidence – both quantitative as well as qualitative – raise poor sectors has increased (GoP, 2013a). A major boost to doubts over the stated reduction in poverty. safety-net spending since 2007 and to the Benazir Income Support Programme (BISP) in particular has facilitated poverty reduction in recent years (GoP, 2014). 2. Evidence that raises doubts The World Bank also finds that poverty in Pakistan has In this sub-section, we examine the quality of the official fallen faster than its South Asian counterparts, but that evidence base beginning first with technical flaws in the decline has been inconsistent. For most of the 1990s household surveys (mainly in the consumption module and poverty fell until a drought in 1998 raised the number of the sampling frame) as well as technical flaws in the official people in extreme poverty from 40 million in 1998 to 53 measurement of poverty in particular the adjustment of million in 2001. Since then, poverty has declined steadily (World Bank, 2015). In absolute terms, 22 million people were poor in Pakistan in 2010 compared to 72 million ‘One doubts the poverty figures people in 1990, despite the population increasing from 108 million to 170 million during this time (UNDESA, 2015). when they don’t correspond with Multidimensional poverty statistics, however, reveal a different picture, in part because the indicators to compute everyday observations’ – Head these are not based on consumption, but on other indicators of wellbeing. Multidimensional poverty has been calculated of an international humanitarian within Pakistan by the Social Policy Development Centre agency (SPDC) (Jamal, 2012), as well as internationally by the 1 Oddly, many government and donor documents cite a figure of 26.1% as the national poverty headcount ratio for the year 1990, however this figure is not based on the official methodology to estimate poverty and is therefore not comparable to figures from 1992 and 2010 that are. 2 This figure is cited by the government as an ‘interim’ indication of poverty. 2 Development Progress Case Study Summary the official national poverty line using the Consumer Price estimated the food share to be 37% in urban areas and Index (CPI). We also present other contrasting quantitative 51% in rural areas. Higher expenditure on food in rural and qualitative evidence. areas, combined with low weighting given to the food Prior to 1998, the Household Integrated Expenditure share in the CPI in high food-price periods, are likely to Survey (HIES) – which provides data on household underestimate rural poverty in Pakistan. consumption – was conducted on its own. In 1998, it was The decline in real GDP growth per capita also raises merged with the Pakistan Integrated Household Survey doubts over the apparent fall in poverty. Average real (PIHS) to consolidate the collection of socio-economic GDP growth per capita declined from 1.9% in the early data. This combined survey had a consumption module 1990s to 0.9% in the late 2000s. The country’s economic that tried to retain the earlier HIES format. The module history has been turbulent, with repeated cycles of growth underwent two specific changes. First, expenditures in followed by stagnation (World Bank, 2010). the combined survey’s module were recorded in less Moreover, the national level data on malnutrition, detail. Second, the reference period of consumption hunger and food insecurity do not illustrate a positive was changed. Whereas previous HIES data documented picture. Between two rounds of the National Nutrition monthly consumption, the combined survey’s module Survey (NNS) in 2001 and 2011, the percentage of children relied on fortnightly consumption for a majority of food under the age of five who experienced stunting and wasting items. Both the World Bank (2002) and Arif (2006) note increased from 41.6% to 43.7% and from 14.3% to that these changes are likely to affect the comparability of 15.1% respectively (GoP, 2011). consumption data since 1998 with earlier HIES data. According to the NNS 2011, 58% of households in To illustrate the impact these changes are likely to Pakistan are food insecure. Of these 28% are food insecure have we examined other country experiences. In India, without hunger, 20% are food insecure with moderate for instance, the National Sample Survey Organisation hunger and 10% are food insecure with severe hunger. experimented with recall periods of 30 days and 7 days, Around 52% of urban households and 61% of rural and found that the latter led to estimates of consumption households are food insecure (GoP, 2011). that were 23% higher (Deaton and Kozel, 2004). A study The evidence cited above raises reasonable doubts over by Beegle et al. (2010) in Tanzania found that reducing the stated reduction in poverty. Qualitative evidence of the recall period from 14 to 7 days increased the poverty three types – participatory poverty assessments (PPAs), headcount by 8 percentage points, while using this recall individual and group-based interviews, and household period as well as a highly collapsed list of items led to perceptions about their economic situation – also estimates that were 20 percentage points higher. reinforces doubts. Pakistan has also not had a national census since 1998. Between Hope and Despair was a nationally The sampling frame of the household survey is therefore representative PPA that was conducted between 2001 old and produces biased poverty headcount ratios.
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