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Facing the Poverty Crisis
Dr.Akmal Hussain
Newspaper: The Nation
Dated: May 07, 2008
 

THE POVERTY CRISIS

Pakistan today faces the gravest poverty crisis in its history. My latest research on the impact of food inflation on poverty shows that the total number of persons below the poverty line in Pakistan has increased from 45.5 million people in the year 2004-05 to 56.6 million in 2007-08. This means that food inflation has pushed an additional 10 million people into the ranks of the poor during the last three years. During the Musharraf regime as a whole the percentage of the population below the poverty line has increased from 30 percent in 1999 to 33.8 percent in 2008. During this period in terms of absolute numbers the total number of poor has increased from 40.4 million in 1999 to 56.6 million in 2008. That is, an additional 16.2 million people have entered the ranks of the poor during the Musharraf regime (1999 to 2008).

My estimates for future poverty levels in Pakistan show that if remedial policy action is not undertaken then over the next four years by 2011-12 as much as 43 percent of the population will be living below the poverty line. With the total number of poor increasing from 56.6 million today to 79 million by the year 2011-12.

The new democratic government faces a dual challenge: On the one hand the huge fiscal deficit (almost 9 percent of GDP) inherited from the previous government requires restriction of public expenditure. On the other hand the severe poverty crisis requires an urgent relief package involving additional public expenditure targeted to the poor. Facing this challenge requires the following policy measures:

I.          FOOD SECURITY FOR THE POOR

  1. An immediate relief package for the poor that provides a targeted food subsidy of Rs.1000/- per household per month to the poorest three million households of Pakistan who are currently borrowing money for food consumption. This subsidy can be given in the form of food stamps to a carefully selected list of the poorest households.
  2. Organizing lunggars (free cooked food consisting of roti and daal chana) in the poor localities of the major urban centers of Pakistan. In the pursuit of this objective, city based Chambers of Commerce and various associations of traders could be encouraged to establish lunggars in each locality, and also at the sites of sufi saints. A network of lunggars named after national martyrs of democracy such as Mr. Zulfiqar Ali Bhutto and Mohtrama Benazir Bhutto could also be established through foundations named after them. Lunggar networks could also be established in the name of national heroes. These lunggars could be financed through donations from members of the Chambers of Commerce, traders’ associations, philanthropic organizations and individual citizens.  They could be administered by city based coalitions of Chambers of Commerce, NGOs, councilors of local government and philanthropic organizations such as the Edhi Foundation. 

II.         FOOD FOR WORK PROGRAMME: EMPLOYMENT THROUGH IMPROVED IRRIGATION

Pakistan’s farmers are facing an acute shortage of irrigation water. This is due to the failure to build adequate storage capacity on the one hand and deteriorating irrigation efficiencies on the other. The reduced water availability is occurring at a time when deterioration of the top soil has increased the requirement of water per acre. To overcome this water deficit it is proposed that a national campaign be launched for building dams, desilting and lining of canals wherever possible and building pucca khalas. (This proposal in outline has already been announced by the Prime Minister in his speech before the National Assembly on 29th March 2008). This construction activity would not only bring more water to the farm gate but would also be a major mechanism for generating employment and sustainable incomes for the poorest sections of rural society.

III.       ASSET BUILDING AND INCOME STREAMS FOR THE POOR

To enable the rural poor to quickly build an asset base and generate increased incomes for themselves a national credit programme for the rural poor is proposed whereby poor tenant farmers and agricultural worker households could be provided with loans for one additional milch animal per household. This programme of asset building for the rural poor would combine loans with establishing a marketing infrastructure for milk collection and cash payment at the door step. This would give an almost immediate asset and associated steady income stream to the poor peasants.

Those who get employment in the irrigation infrastructure programme or successfully use their loans for milch animals would become eligible for an additional loan equal to their annual income from employment or milk sales. This additional loan would range from Rs.40,000 to Rs.70,000 per household. The loan recipient would be provided with training and support for identifying micro enterprise projects which she/he could undertake at the household level to enhance and diversify their income base. The training and support for micro enterprise development could be provided by development NGOs such as the Pakistan Poverty Alleviation Fund (PPAF).

IV.       MAINSTREAMING THE POOR THROUGH EQUITY STAKES

An institutional change that could bring the poor into the mainstream of the market economy could be to establish professionally managed public limited companies in which the poor have a substantial equity stake. This concept was first propounded by Professor Rehman Sobhan and successfully tried out in the diversification process of the Grameen Bank in Bangladesh. It was also tried out in India by Dr. Kurien who set up the Amul (originally a cooperative) which is entirely owned by the poor and is now one of the largest manufacturers of milk products in the corporate sector in South Asia.
In the Pakistan case there may be considerable potential for developing livestock and milk production by the rural poor and providing these products to large private sector corporations for the manufacture and export of milk and meat products. These private sector corporations which would be buying their inputs from the poor could also be owned substantially by the poor. The equity stake to the poor could be initially achieved through the provision of loans which could be paid back from the dividends of the corporations. Similar public limited companies owned by the poor and run by high quality professionals could also be established in key main stream sectors of the economy such as energy, telecommunications and electronics. 

CONCLUSION
The programme for addressing the poverty crisis that I have proposed is designed to provide immediate economic relief to the poor while at the same time enabling them to build their assets, increase their incomes and participate in the mainstream national economy. In this way we can lay the foundations of economic democracy.

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