Poverty in Pakistan: Issues, Priorities and Policy Options A Concept Note OBJECTIVE –Build a sound knowledge base to develop a framework for poverty reduction –Translate this framework into action on the ground

Why Now ? Inform and shape key reforms, including a far- reaching devolution plan, envisaged for the country Coordinate with and inform Interim-PRSP and PRSP efforts of the government Extend the coverage of previous PA to track the evolution of poverty for the entire 1990s Formulate strategy on the basis of the three pillars suggested by WDR-2001: opportunity, security, and empowerment

Incidence of Poverty In Pakistan

New Themes of the Report Expand conventional poverty profiles to reflect non- income/consumption dimensions of poverty Explore the role of macroeconomic policy to promote long term pro-poor growth Examine the relationship between poverty and vulnerability, and the need for explicit risk management strategies to reduce vulnerability Explore how governance issues, including lack of access to institutions and lack of protection of the rights of the poor, affect poverty

Macroeconomic Environment for Poverty Reduction The PA will explore the link between growth and poverty in Pakistan — On preliminary evidence, stagnant growth is associated with stalled poverty reduction Examine how Pakistan’s necessary fiscal adjustment can be made pro-growth and pro-poor Explore the virtuous circle in fiscal adjustment and growth -- fiscal adjustment can promote growth, and higher growth rate in turn makes a given debt to GDP ratio more sustainable

Promoting Pro-Poor Growth By tracking a few key indicators, the PA will analyze the composition of fiscal adjustment and track the effects of its changes In addition to macroeconomic environment, a number of micro factors are critical to pro-poor growth –Unequal distribution of land and other assets, and the role of land reform in correcting that –Lack of access of the poor to market opportunities, including credit and insurance –The role of institutions and governance

Vulnerability and Poverty-- Key Issues What is vulnerability and how do we measure it –Income and non-income dimensions Does vulnerability cause chronic poverty –May depend on type of shock : transient or persistent What are the indicators that help predict vulnerability –Critical for policy analysis

Re-survey the IFPRI panel –Questionnaire to be extended to incorporate questions on mechanisms to cope with risk Develop a qualitative survey instrument to assess type, frequency, intensity and impact of shocks –Broaden coverage to include urban slums and provinces not covered by the IFPRI panel Survey expected to be implemented by February 2001 Analyzing Vulnerability-- Methodology

Analyzing Vulnerability-- Policy Implications If shocks lead to temporary or persistent poverty, then –Social protection should be an integral part of a long-term poverty reduction strategy –Improve instruments for risk diversification and coping; examples are credit and insurance, pensions, social security If transitory poverty is found to be high, then it may be efficient to gear anti-poverty programs toward increasing exits from and reducing entry into poverty

Governance : Access of the Poor to Institutions -- Hypothesis Service delivery in Pakistan is inadequate The deficiency in service delivery arises from the poor having little influence over decisions Why do the poor have little influence on decisions –The poor are uninformed about decision making –They are intimidated against seeking hearings –They vote only if persuaded to do so by the local elite

Governance : Access of the Poor to Institutions -- Methodology In-depth interviews and focus groups with selected villages, selected according to distance from major cities, province, income, etc. Interviews with (former) politicians, perhaps undertaken by journalists who covered them

Governance : Access of the Poor to Institutions -- Policy Implications If the evidence reveals that the poor lack access to decision making channels, this reinforces the need to –Change decision making channels such that the poor have greater access –Modify decentralization proposals to ensure that current obstacles confronting the poor in participating in federal and provincial decisions are not replicated in decentralization

Governance : Rule of Law-- Hypothesis Rule of law problems discourage investment, and also constitute significant obstacles to emergence from poverty The following hypotheses are supported by anecdotal evidence : –The poor confront extra-legal pressure to agree to unfavorable contract terms –The poor suffer income shocks due to expropriation by public authorities

Governance : Rule of Law-- Methodology In-depth interviews and focus groups with selected villages, selected according to distance from major cities, province, income, etc. Analyzing existing, somewhat sparse data on rule of law problems

Governance : Rule of Law-- Policy Implications If the evidence reveals that rule of law problems create significant obstacles to surmounting poverty, this underlines the need to : –Deregulate documentary requirements for access to services –Crack down on corruption: as a poverty alleviation strategy, as well as an investment promotion strategy –Suggest reforms in law and order enforcement

Evaluating Targeted Programs The Poverty Assessment will also evaluate targeted poverty reduction programs in the country, with the following objectives: –to explore how various indicators of poverty and human development derived in the report are related to the performance of actual programs on the ground –to derive ideas on best practices, which will inform policy strategy –to identify directions for extensions and improvements of existing programs

Towards an Integrated Poverty Strategy The report will derive key policy priorities, drawing on poverty profile findings, the new work on governance and vulnerability, and experiences with programs in the past Five critical themes for a strategy will be articulated — Creating productive opportunities — Empowering the poor — Improving public sector governance — Reaching the ultra-poor — Incorporating risk management