Poverty in Pakistan: Issues, Priorities and Policy Options A Concept Note

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

2. 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

3. Incidence of Poverty In Pakistan

4. 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

5. 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

6. 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

7. 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

8. Analyzing Vulnerability-- Methodology • 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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