How to come out of poverty trap?

THE lack of effective political and economic governance is adversely hampering efforts to cut rising poverty in spite of a hefty increase in pro-poor expenditure over the last several years, argues a new report, ‘Human Development in South Asia 2012’ advocating ‘Governance for People’s Empowerment.’
Poverty in Pakistan is a multifaceted problem – deeply rooted in its socio-political and economic structure of governance, asserts the annual report of the Mahbub ul Haq Centre launched in Lahore last week.
The centre’s ‘Poverty of Opportunity Index’ estimates that 29.2 per cent of the country’s total population, or more than 52.5 million people out of 180 million, live in poverty. The index goes beyond the traditional measure of incidence of poverty ( calorie-based income poverty) followed by the government and also takes into account multiple deprivations — such as lack of access to education, health, electricity, drinking water, sanitation etc — suffered by the poor.
“The actual poverty is much higher than 22.6 per cent income poverty. It means that individuals living above income poverty line of $1.25 per person per day may still suffer deprivations in education, health and other services,” the report argues.
The index shows countries like India, performing better with respect to poverty of education opportunities, have a lower incidence of poverty (27.8 per cent) as measured by poverty of opportunity index in spite of suffering from a greater incidence of calorie-based income poverty.
Out of the four South Asian countries ranked in the index, only Bangladesh fares worse than Pakistan with its 35.2 per cent population living in poverty. Sri Lanka has a remarkably low incidence of poverty of 7.8 per cent, indicating its commendable performance with respect to provision of education, health and income opportunities to its people.
The centre’s estimates for poverty are based on the more than six-year old official data. Hence, the report says, actual extent of poverty, at present, may be much higher.
The last official estimates for poverty were released in 2005, showing a significant decline in the calorie-based income poverty from 34.5 per cent in 2001 to 22.3 per cent in 2005. The methodology used by the government to estimate the number of those living in poverty was challenged even then by global donors and the independent bodies assessed the figure in the range of 25.7-28.3 per cent.
Analysts agree that poverty has since escalated substantially because of slowing economy, rising food and energy prices, growing power and gas shortages and increasing militancy and violent conflicts as resources were diverted from development to non-development purposes.
The earthquake of 2005 and the floods of 2010 and 2011 have contributed to further exacerbate the poverty situation, the report says.
The report notes that some estimates based on Asian Development Bank and World Bank data suggest that poverty has increased by an additional 18.9 percentage points since the government’s last estimation. According to these independent estimates, total poverty may be as high as 41.2 per cent, with more than 74 million people living below the poverty line.
The possible political fallout of deterioration in poverty numbers, say officials, is keeping the government from sharing with public new estimates.
The report highlights “governance deficit” across the board – in education, health, water, sanitation and electricity sectors — the costs of which are largely borne by the poor and the marginalised. The burden of governance deficit falls heavily on the people through increasing out-of-pocket expense for health and education, rising absenteeism rates among teachers and health professionals and unequal access to water, sanitation and electricity.”
“Public service delivery institutions are increasingly prohibitive, leaving little room for people to exercise their ‘voice’ and ‘choice’.
Even when access is granted, services are low in quantity and quality; in other words, they are inadequate and unresponsive to the needs of the people.
Services suffer a great deal because of minimal accountability offered by the state and demanded by the people. This stems mainly because public sector employment is bloated and captive to patronage while discretionary and arbitrary practices are overlooked , and bureaucracies are politicised.
Public sector performance in service provision is not open to close scrutiny, nor is it subject to rigorous answerability and enforceability mechanisms,” says the report.
In the light of its findings, the report calls for making the public service delivery system more accessible, affordable, effective and equitable in addition to being more responsive and outcome-oriented through effective governance and accountability.
Total federal and provincial pro-poor expenditure on 17 sectors clubbed together as community services (roads, highways, bridges, water supply and sanitation), human development (education, health, population planning, social security and welfare and natural calamities), rural development (agriculture, land reclamation and rural development), safety nets (subsidies, low cost housing and food support
programme) and governance (law and order and administration of justice) rose from Rs572.62 billion or 5.57 per cent of GDP (gross domestic product) in 2007/08 to Rs1.245 trillion or 6.9 per cent of GDP in 2010/11.
Official data of PRSP expenditure for the first three quarters of the last fiscal to March shows a spending of Rs1.295 trillion, or slightly more than the preceding years.
“The Human Development in South Asia report has rightly focused on poor governance as a major factor contributing to rapidly rising
poverty in the country,” says a Pakistan Institute of Development Economists (PIDE) requesting anonymity because he is working with the federal government.
“Lack of political and economic governance is responsible for the hefty rise in the incidence of poverty in spite of substantial increase in pro-poor expenditure over the last four years. Both the urban and rural poor continue to suffer multiple deprivations because of corruption, inefficiencies and misplaced priorities,” he insists.
Elaborating his point, he says, a major chunk of pro-poor expenditure every year goes into providing un-targeted energy and food subsidies.
“Only a fraction of over Rs495 billion spent by the government in energy, fertiliser and food subsidies in the first nine months of the last fiscal reached the poor. These subsidies were actually used by the wealthier segments of society because the government did not have enough political will or power to eliminate them and divert the funds to increase cash transfers to the poor of the poorest or projects that could help reduce their non-income deprivations,” he argues.
“You cannot expect to cut poverty just by handing out cash to the poor.
This requires investment in job-generating sectors and improvement in public service delivery to eliminate deprivations to provide the poor
equal opportunity to compete and get out of the poverty trap.”