Poverty alleviation

Like every budget before it, Finance Minister Ishaq Dar too talked of poverty alleviation when delivering the 2016-17 budget. Understood to be one of the key priorities for the last seven decades, no government has been able to deliver on the promise of taking the country’s population out of the crippling poverty that plagues it. The statistics provided by Dar in the budget speech were rather damning, even if taken at face value. The percentage of people that remains under poverty is at least 29 percent. This figure comes after the government boldly shifted to the Social and Living Standards Model for calculating poverty, instead of the earlier model which only focused on the ability to afford food. But Dar’s claim that poverty will now stand at only 9.5 percent under this food consumption model is hard to digest. In the last 15 years, average income has not increased in line with the increase in food prices. This is why the budget allocation of Rs122 billion for poverty alleviation will be insufficient to bring about a significant decrease in poverty. It also explains why the government never announces a poverty reduction target alongside its growth target each year. Any decrease in poverty statistics is a bonus, not a clear policy objective. This is not to say nothing has been done.

Over the last four years, the PML-N government has increased funding for the Benazir Income Support Programme (BISP) from Rs40 billion to Rs115 billion. The number of families receiving a Rs18,880 annual stipend will be 5.6 million next year. The BISP certainly offers a financial cushion to some of the most impoverished families in the country, but it is not enough. The government aims to supplement it through the Prime Minister’s Health Insurance fund of Rs22 billion. The same money, though, could be spent on improving the ailing public health sector in the country instead. Additionally, Rs4 billion has also been allocated to the Baitul Maal, which suggests that the government’s strategy for dealing with poverty focuses on cash handouts, instead of structural reform. Dar himself pointed to the BISP cash transfers as one of the key reasons for poverty having been reduced last year. The new minimum wage of Rs14,000 per month is nowhere near enough for families, which is compounded by the fact that no government has ever seriously tried to enforce the minimum wage standard it sets. While we would not advocate cutting down on the BISP, cash transfers are an easy way to avoid the structural changes needed to alleviate poverty. These include enforcement of minimum wage, price controls, improving the quality of public sector health and educational institutions, and the provision of affordable housing. The government’s priority is to reduce the budget deficit, not improve living standards. Poverty reduction is not possible with such a budget.