The gap between the rich and poor has widened in recent years, with some gaining financial comfort while others are finding it impossible to permanently escape from destitution.

During the 1990s, economic growth in Pakistan ranged from low to moderate, but was relatively steady.  However poverty rates stagnated. Indications are that economic growth was not strong enough, and its benefits distributed too narrowly to broadly reduce poverty.

Poor people in Pakistan also typically fail to receive the kind of essential services they need to get ahead-credit so they can build a home or start a small business; clean water and sanitation to keep families healthy; decent schooling for their children; and electricity so they can do their homework at night.

The current government of Pakistan has made concerted efforts to determine the cause of and solution to pervasive poverty.  It has improved survey methods and is working to increase the availability of services which are essential to helping people escape poverty. It has also put in place measures to strengthen economic growth and help spread its benefits to those who need them most.

The Challenge 

Compared to other low-income countries, Pakistan has seen relatively high economic growth over the last decade, and its educated, urban elite enjoy a standard of living similar to their counterparts elsewhere.

Other groups however, have remained trapped at or near the poverty line, with severely limited access to steady income, credit and public services.  Poverty levels are consistently higher in rural areas than in the cities.

The incidence of rural poverty is highest among those who own no land-more than one half of the rural population.  Inequity in land ownership in Pakistan is responsible for agricultural yields which are below those of other countries at similar income levels.

Female-headed households, tribal groups and those living at or below the subsistence level are particularly vulnerable. Poverty rates also vary significantly among provinces, from a low of 16 percent in the northeastern areas to 44 percent in the Northwest Frontier Province.

Extensive development research has shown a correlation between educational attainment and economic growth in developing countries.  Pakistan has increased school enrollment levels, however this progress stagnated in the mid 1990s.  The country still has a relatively low level of education, which has appeared to play a role in dampening economic growth.

Girls in Pakistan complete an average of  only two and a half years of education while boys complete five.  Only 44 percent of the population is literate, compared to 64 percent in countries with similar per capita incomes.  A  30 percent gap between female and male literacy has not decreased since 1970.

Economic status is a strong determinant of school enrollment.  Among the richest households in Pakistan, as measured by consumption, the gross primary school enrollment rate is 90 percent, whereas among the poorest households, it is 50 percent.

Lack of access to basic services impedes upward mobility.  Compared to countries with similar income levels,  23 percent fewer Pakistanis have access to sanitation.  Knowledge and ability to properly feed children is also insufficient in many poor households. 

Child malnutrition in rural areas has not changed in severity in 15 years, and impedes the economic prospects of affected adults in their later lives. Furthermore, only around 52 percent of poor households are connected to electricity, compared to 76 percent of non-poor households.

Insufficient coverage of public services are due in large part to a "squeeze" on social spending in Pakistan.  For the past two decades, the increasing burden of paying the country's growing debt, combined with continued substantial defense expenditure and stagnant revenues have reduced the resources committed to providing basic social services. 

Until recently, for example, Pakistan had been allocating  42 percent less in health spending per capita than was allocated by other countries at its income level.  Much of the government's debt is comprised of loans which were taken to finance short-term and unsustainable spurts in growth in the 1980s.

Making Progress 

The new millennium has seen Pakistan shift emphasis to more sustainable economic growth and poverty reduction.  The current government has demonstrated  a clear sense of direction, which is outlined in its Poverty Reduction Strategy-a plan devised after broad national consultations.

The strategy emphasizes tax reform to increase the government's revenues and help it pay off its debt.  It focuses on improving the business climate to encourage investment and sets out plans for reforming institutions to cut waste and corruption and improve public service delivery.  Federal budget allocations for education and health programs have been nearly doubled.

The government has nearly completed the process of privatizing state-owned banks and is following suit with other state-owned enterprises.

Since Pakistan is still predominantly a rural country, agricultural growth is fundamental to economic growth and poverty reduction.  The government has liberalized agricultural trade and pricing regimes, removing distortions, and increasing incentives for farmers.

The government has also implemented a far-reaching devolution program which led to locally elected officials with the legitimacy and mandate to improve public service delivery.

The budget deficit has fallen and inflation has remained below 5 percent.  Exports have begun to grow after years of stagnation.  Public expenditure on development has begun to rise as a percentage of GDP, while spending on interest and defense has fallen.

The World Bank is the largest provider of development finance to Pakistan.  The Bank's Country Assistance Strategy, which outline's support for Pakistan through mid 2005, is designed to directly support the government's poverty reduction strategy.  It focuses primarily on strengthening the basis for macroeconomic stability and government effectiveness; strengthening the investment climate; creating the conditions for accelerated, sustainable rural growth; and supporting policies which empower poor people and women.

Looking Ahead 

Pakistan still faces many challenges and risks as it works to eradicate poverty and enjoy the kind of prosperity seen in so many other countries.

It is the private sector which will drive growth, and yet Pakistan is still an expensive country in which to do business both in terms of time and money.  Inefficient public providers mean the cost of services such as railroad transfers and electricity, are higher than necessary.  In addition, mock enforcement of un-needed rules and regulations plague small businesses in particular.

Public expenditure reforms are required.  Although the public debt has been reduced, it is still at unsustainable levels, yet will be challenging for Pakistan to increase revenues by broadening its tax base.  Meanwhile, spending on social services, while having increased, is still relatively low.

Pakistan has developed education and health reform strategies, however these need to be developed into action plans and implemented.  To succeed, these will require substantial improvements in governance and public administration, and will also need incremental funding increases in the future.

Social protection for those living near the poverty line is essential to help protect them from economic downturns and other shocks. These can take the form of social assistance, jobs on public works, and direct cash transfers.  Increasing access to credit will also help.  Since most of the country's poor people live in rural areas, these measures would need to be part of  a well-coordinated rural strategy.

Finally, there are always vested interests who are opposed to reforms and modernization for fear of losing political influence or financial benefits. Demand for change by civil society and reform-minded leaders will be essential to completing reforms and  significantly improving the lives of the Pakistani people who have been left behind.