Monday September 26, 2022

How does poverty alleviation work?

May 25, 2019

Poverty alleviation programmes in Pakistan have failed to achieve the desired outcomes over the years. When we look at the state of multidimensional poverty in the South Asian context, Pakistan is among the worst performing countries in terms of human development.

The worsening human development indicators coincide with Pakistan having one of the best poverty alleviation programmes in the region during the last two decades. Institutional decay, weakening political accountability, lack of distributive justice, dwindling writ of the state and de-industrialization are some of the key factors to neutralize the impact of poverty alleviation programmes over the years.

UNDP reports show that inequality in Pakistan has grown despite the fact that consumption-based poverty has dropped from 57.9 percent to 29.5 percent between 1998-99 and 2013-14, and multidimensional poverty – which includes health, education and living standards – has also fallen from 55.2 percent to 38.8 percent between 2004-5 and 2014-15. However, there is a sharp increase of 5 percent in both income and consumption poverty over the last eight months in Pakistan. This increase is caused by huge economic mismanagement, lack of direction and the spill-over effect of cumulative losses of revenue due to the lowering purchasing power.

From 1999 to 2018, income inequality and overall economic disparity in the country increased from 30.5 to 41.1 on the Gini Index, which measures income inequality. Income disparity has aggravated since 2000 with multiplying adverse impact on the socioeconomic and cultural fabric of society. Macroeconomic and structural impediments to development have undermined the transformational processes which were envisaged in the policy of poverty alleviation. Amidst disturbing scenes of increasing deprivation, the question arises: do we need to invest in poverty programmes anymore?

Against the backdrop of ever-increasing economic disparity and income inequality, the net impact of poverty alleviation programmes has been equal to naught. In some instances, the impact of poverty alleviation programmes on the overall economic health has been negative. Donor-funded poverty alleviation programmes are politically damaging because they absolve the state of its responsibilities towards its people. It is the primary responsibility of the state to provide basic services and to uplift the poor through an inclusive and irreversible socioeconomic graduation programme. When the state is unwilling to reduce its non-development expenditures, tax the rich and provide relief to the poor, it is no more an economic issue but a political question. The state uses donor funds as a political instrument to neutralize the debate on political and economic reforms.

The Pakistan Poverty Alleviation Fund (PPAF) was established by the government in 1998 as an apex institution for wholesale funding for local partner organizations to address multidimensional poverty across Pakistan. The World Bank funded poverty alleviation programme was a soft loan extended to the government of Pakistan under a contractual obligation with the International Development Assistance (IDA). The funding was provided in three phases known as PPAF I, II and III from 2000 to 2015 with a combined worth of almost $1 billion as poverty alleviation grants and microfinance support. The soft loan was extended by the government of Pakistan to the PPAF as grant to help achieve the government’s commitments to meet the target of halving poverty by 2015 under the Millennium Development Goals (MDGs).

In addition to the regular funding in the three phases, the World Bank also extended another soft loan facility of $75 million for social mobilization in 2009. The Social Mobilization Project was part of the exit strategy which was aimed at investing in community-based local institutions in 29 poorest districts of Pakistan. These 29 poorest districts were identified in the Mid-Term Development Framework (MTDF) as key candidates for investing in social mobilization funding.

The PPAF has faced a variety of management issues, lack of quality assurance and weak monitoring of its development assistance as well as decreasing funding support to rural support programmes. A detailed critical analysis of PPAF programmes, issues of management and governance will be discussed in my next article in this series.

From the broader policy perspective, poverty has three key dimensions which affect the ways the policymakers view poverty alleviation initiatives. The first dimension is household poverty which can be addressed by devising a locally viable and need-based supply chain of essential private goods and services at the household level. This dimension of poverty has been addressed through rural support programmes in Pakistan and across South Asia.

Household poverty, however, is not only about the provision of consumption-based goods and services; it is about establishing sustainable and inclusive local institutional structures governed by the poor. At the household level, the poor need not only a basket of goods and some tailor-made services but a whole gamut of enabling structures and venues of income diversification. The provision of subsistence support will not work well without building the functional capabilities of the poor so that they can participate meaningfully in economic and political life. The participatory development paradigm of Rural Development Programmes (RSPs) has worked well as a universal principle to address the multifaceted household poverty across South Asia. This needs continuous support from the government so that the participatory development model is taken to the national scale.

The second dimension of poverty is socio-political, embedded in social and political structures of exclusion. The impact of development interventions at the household level will be minuscule without reforming the social and political structures of inequality and exclusion. In a feudal rural structure like Pakistan, household poverty is only an offshoot of the political and social system of control and subjugation. The power relations of subjugation can be reversed through investing in the community institutions of the poor. The community institutions created through RSPs will wither away if the government does not invest in them.

The third dimension of poverty is the impact of globalization and neoliberalism imposed through international financial institutions. If the first and second dimensions of poverty are addressed, the impact of the third dimension on the poorest segments of society can be minimized.

Pakistan’s economy needs drastic structural reforms as a prerequisite to attain sustainable and consistent growth. It needs industrialization, investment in renewable efficient energy, productive sectors, workforce capacity, science and technology and rural development programmes. Pakistan must also introduce land reforms, progressive taxation and economic protectionism to help grow indigenous industry to reduce reliance on imports. For all of these reforms to take place there has to be a strong system of political accountability to force the state to prioritize the welfare of its citizens through equitable allocation of resources.

The launch of the Ehsaas programme by Prime Minster Imran Khan is an empathy move but in practice it will not work unless the burden of economic meltdown is shifted on to the rich and affluent classes as well as big corporations. Pakistan is one of the worst ranked countries in the world on the Gini Index – it is one of those countries that have the highest income disparity between the rich and the poor. Pakistan has so far availed 13 IMF bailout programmes to finance its non-development expenditures in 90 percent of cases.

The forthcoming IMF programme will have serious political and economic implications for the government if timely actions are not taken to reduce the burden on the poor. The PPAF could not help address multidimensional poverty, and it is likely that the Ehsaas initiative will not work too. The efficient and effective way for the government will be to invest directly in rural support programmes rather than creating an additional institutional layer for poverty alleviation.

The writer is a social development and policy adviser, and a freelance columnist based in Islamabad.


Twitter: @AmirHussain76