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Poverty alleviation: the recipe and dilemma
M. Sharif
On 26 August, the Asian Development Bank's (ADB) Country Director in Pakistan unveiled a $2.4 billion aid programme for Pakistan for the next three years, from 2003 to 2005. The programme is part of CSP (Country Strategy Programme). It is already in vogue and spread over from 2002 to 2006. ADB's programme envisages annual disbursement of $800 million over the next three years. The loan is primarily meant to address the most persistent problem of poverty alleviation in the country. The poverty reduction package is to be utilised for improving and developing governance, agriculture, energy, transport, finance; including micro-finance, health, education, water supply and sanitation in rural and urban areas. 60 per cent of the proposed allocation is specifically for poverty alleviation projects in the country, followed by 27 per cent for social sector, 22 per cent for governance and finance, while the remaining 13 per cent is for agricultural and rural development.
Inflow of loan by the ADB, specific to poverty alleviation projects and for development of other sectors is a welcome measure. But, in case its implication are ascertained critically, a number of questions pertaining to addressing issues related to poverty alleviation and other sectors' development remain un-answered.
The programme spelled out by the ADB in subtle ways runs contrary to the conventional economic wisdom i.e., in order to alleviate poverty, enhance economic growth rate with fast trickle down effect, execute policies that bridge income inequalities and discourage concentration of wealth in a fewer hands. The most crucial questions that need to be probed into are: will it be possible to contain poverty with $800 million assistance, if other factors such as growth rate, exports, revenue collection do not pick up during the next three years? What if the political government is constrained on public demand to deviate from the existing economic policies pursued thus far, in public interest? Those, the much hyped devolution plans, that are to play a crucial role in the alleviation of poverty, as asserted by the ADB Country Director, get mismanaged because of political ineptness and confrontation that might ensue between a weak political government and a powerful president.
Extent of poverty at present:
The figures about poverty are more in abundance in print and even in electronic media, the IMF, WB, ADB and the Federal Ministry of Finance's official documents, than poverty itself. They are alarming. Everyone who is concerned about national economy, social change and economic plight of common citizens of Pakistan either because of official appointment or for personal reasons, knows that during the decade of the 90s, poverty increased from 18 per cent to 33 per cent by 1999. It was certainly horrifying when the figures were first released by the WB and the IMF. The WB, whose recipe of economic recovery executed during past one and half a decade in the developing countries, including Pakistan, had back back-fired. They changed the track and came up with poverty alleviation regime by the end of 1999, when Pakistan underwent the fourth military coup detat. The managers of national economy, picked up by the army from abroad, saw a lot of scope in the new regime, hyped by the Br!
etton Woods Institutions.
There were identical views held by them on three accounts. One, expansion of poverty during 90s was a direct consequence of poor economic and political governance. Poor economic governance included fiscal mismanagements, unmanageable public debt accumulation, loot of public money by the politicians and their cronies, including bureaucrats, and financial corruption in public commercial organisations and public organisations like WAPDA, KESC, Railways and CBR. Such views of the new ruling elite were to a large extent correct, and could not be contested. Two, it was possible to put the country's economy and financial institutions back on track by addressing causes of financial corruption. Their optimism was well founded, and that is why the revival of economy was on top of the agenda of the government. The government was emphatic about ending financial corruption in the banking sector, CBR, PSEs (Public Sector Enterprises) and making the latter financially self-reliant. Most of!
the analysts were hopeful about the government's ability of hitting the bull's eye, but there were a few sceptics also, about achieving all that the government was talking so loudly about. The reason for such scepticism was obvious; only visionary leaders and financial executives could achieve the targets with public support, which the new ruling elite had set for themselves.
Three, the post-coup managers of the national economy, alongwith the generals-in-command of the country, thought it prudent and compulsive to join the poverty alleviation programme of the IMF, WB and ADB. They were right, and the credit goes to them for being right. Had they tried to be indigenous to the core, sure enough, they, alongwith the economy, would have landed in greater trouble, which they could ill afford. A current example is of Argentina. It resisted the IMF/WB, and has pursued home-grown solutions during the past nine months or so, to contain economic melt down. The strategy has hardly paid. The situation has only aggravated further. Ultimately, the Argentine government had to negotiate with the IMF, and most likely some sort of solution of getting a bailout package is in sight. The government was conscious of not taking any risk of implementing home-grown solutions, because that would have further increased the distance between her and the IMF/WB that already !
existed soon after the coup, and the socio-economic and political cost would have been heavy. She preferred to accept IMF's conditionalities and executed them gradually, under SBA and PRGF package. By the end of 34 months, IFIs have given the verdict that measures adopted by the government were in the right direction, and that the ongoing reforms must continue even after the installation of political government after the October elections. The government has given all assurances of continuing the reforms, and is bending all laws and institution to ensure her commitment. The execution of the IMF conditionalities, which she claims to have see in the right direction for economic revival, and have helped to achieve macro-economic stability, must be viewed from one subtle angle of alleviating poverty. The Finance minister, in a recent interview, said that the economic benefits would trickle down to the people within next 2-3 years. But, prior to that, the pain of economic restruc!
turing will have to be borne by them.
The government in its wisdom, might be doing a good job, because this has been the requirement of the IMF over the years. But, the consequences of executing the IMF conditionalities has scuttled economic growth, increased unemployment and reduced income, with the result that poverty during past 34 months has increased.
the ADB's Country Director, in a public briefing last week, was emphatic about the increase in the poverty level during the 90s. The Country Director stated that bad governance during 1993-99, pushed 12 million below poverty line; that raised the poverty level from 26.6 per cent to 32.2 per cent.
ADB's strategy and devolution:
ADB has endorsed the IPRSP (Interim Poverty Reduction Strategy Paper) and wants to adopt a selective operational strategy that would address critical bottlenecks,
promote growth in various sectors of economy that would have maximum poverty reduction impact. It wants to promote pro-poor growth, through infrastructural development in rural areas; such as roads, health care centres, schools, self-employment opportunities etc., where around 75 per cent population lives. It wants to alleviate poverty in urban areas through operationalising SMEs. Such a strategy would generate employment in rural and urban areas. Micro-financing, which is already in action, but has not so far made any dent in poverty alleviation, is part of ADB's strategy. It also wants to give boost to 50 per cent women population by making it pro-active in national economy. The emphasis will be on primary education for girls, and improving social sector, health, water and sanitation.
In the same context, the ADB is pinning a lot of hope on devolution of power at the grassroot level, a radical programme of empowering people at the district level launched by the government on 14 August, 2001. According to ADB's Country Director, If the devolution process initiated by the present government is successful, it will bring a substantial and fundamental change in the economy and government.
One must concede that devolution of power was the need of time and the government, by taking the initiative, has taken a bold step. On the paper it sounds good. But, the crucial point is about its execution in letter and spirit at all tiers of exercising state power. During the past one year, things have not taken off as they should have started. Given the intriguing nature of our the political culture and micro-level corruption prevailing in the country, it remains doubtful if ADB's strategy and devolution of power can make a happy combination to address the issue of poverty alleviation in the next three years, any better than what it has done during the past three years. It is not being sceptical about the outcome.
The dilemma
The government's dilemma persists because of her inability to address the poverty issue, being over emphatic about macro-economic stability, reducing inflation and fattening forex reserves, primarily because of dollar purchase ($7.7 billion) during the past three years. She must accept that the root to alleviate poverty is through achieving higher economic growth rate by attracting investment, public support and human resource development, enhancing exports by reducing cost of production and producing quality products, reducing fiscal deficit by decreasing radically public expenditure, subsidies to inefficient PSEs, increasing employment opportunities and executing socio-economic policies that ought to be poor friendly.
Conclusion
Unless there is democracy, vision in economic management, with a spirit of self-sacrifice among the rich and ruling elite and socio-economic and political dispensation cares for the poor, poverty alleviation will keep alluding all and sundry.
Views presented
here are of those of the writer and Pakissan.com is not liable
them.
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