Macro Economics

POVERTY IN PAKISTAN

Submitted To :
Prof. M. Azmat

Submitted By :
Bilawal Shabbir (1210)
Waqas Sattar (1205)
Ch. Awais Zahid (1211)
Arham Javed (1215)
Macro Economics
 Macro Economics

PROJECT REPORT
POVERTY

Poverty is the lack of basic human needs, such as clean water, nutrition, health care, education, clothing
and shelter, because of the inability to afford them

Definition:

There are many definitions of poverty depending on the contest of the situation and the views of the
person defining it. These are some from various sources including a well known development scholar.
Poverty is also often divided into relative poverty and absolute poverty. World Bank: Poverty is
pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the
inability to acquire the basic goods and services necessary for survival with dignity. Poverty also
encompasses low levels of health and education, poor access to clean water and sanitation, inadequate
physical security, lack of voice, and insufficient capacity and opportunity to better one’s
life. UN: “Fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. It
means lack of basic capacity to participate effectively in society. It means not having enough to feed and
clothe a family, not having a school or clinic to go to; not having the land on which to grow one’s food or a
job to earn one’s living, not having access to credit. It means insecurity, powerlessness and exclusion of
individuals, households and communities. It means susceptibility to violence, and it often implies living on
marginal or fragile environments, without access to clean water or sanitation” World Summit on Social
Development in Copenhagen in 1995: Poverty is a condition characterized by severe deprivation of
basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and
information. It depends not only on income but also on access to services. It includes a lack of income
and productive resources to ensure sustainable livelihoods; hunger and malnutrition; ill health; limited or
lack of access to education and other basic services; increased morbidity and mortality from illness;
homelessness and inadequate housing; unsafe environments and social discrimination and exclusion. It
is also characterized by lack of participation in decision making and in civil, social and cultural life. It
occurs in all countries: as mass poverty in many developing countries, pockets of poverty amid wealth in
developed countries, loss of livelihoods as a result of economic recession, sudden poverty as a result of
disaster or conflict, the poverty of low-wage workers, and the utter destitution of people who fall outside
family support systems, social institutions and safety nets. Amartya Sen: To meet nutritional
requirements, to escape avoidable disease, to be sheltered, to be clothed, to be able to travel, and to be
educated. Irish government: People are living in poverty if their income and resources (material, cultural
and social) are so inadequate as to preclude them from having a standard of living which is regarded as
acceptable by Irish society generally. As a result of inadequate income and resources people may be
excluded and marginalized from participating in activities which are considered the norm for other people
in society.
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POVERTY IN PAKISTAN

Poverty is the lack of basic human needs, such as clean water, nutrition, health care, education, clothing
and shelter, because of the inability to afford them. This is also referred to as absolute
poverty or destitution. Relative poverty is the condition of having fewer resources or less income than
others within a society or country, or compared to worldwide averages. About 1.7 billion people live in
absolute poverty; before the industrial revolution, poverty had mostly been the norm.

The claim that industrial activity reduces poverty is disputable. Poverty could be defined in terms of quality
of life. A child needs no capital if everything they need is in their environment, and the environment is not
contaminated. Likewise, if people have a quality of life, a safe, uncontaminated environment, and freedom
from being harmed and used by others; then the need for capital is superfluous. Such people need not be
considered to be in poverty. Industrial systems can produce a surplus, when the costs of environmental
damages are externalized (paid by others). But this surplus is distributed disproportionately, by design.
The poverty of today is directly attributable to such activity. When prosperity is defined as prosperity for a
small percentage of human beings, and that prosperity is based on exploitation of natural resources and
other people; we have a mechanism that creates poverty; especially as resources are exhausted by
consumption and the people being used -- lose their land, their assets, and their livelihoods ... and are
considered homeless, worthless, and shiftless. Statistical analysis that uses the mean (average) instead
of the mode (the value that occurs most frequently in a given set of data), is not helpful with respect to
understanding what is actually going on.

Poverty reduction has historically been a result of economic growth as increased levels of production,
such as modern industrial technology, made more wealth available for those who were otherwise too poor
to afford them. Also, investments in modernizing agriculture and increasing yields is considered the core
of the antipoverty effort, given three-quarters of the world's poor are rural farmers.

Today, economic liberalization includes extending property rights, especially to land, to the poor, and
making financial services, notably savings, accessible. Inefficient institutions, corruption and political
instability can also discourage investment. Aid and government support
in health, education and infrastructure helps growth by increasing human and physical capital.

SPATIAL DISTRIBUTION OF POVERTY

At the time of partition and independence in 1947, Pakistan inherited the most backward parts of South
Asia with only one university, one Textile Mill and one Jute Factory. The country has made tremendous
progress and its per Capita GNP remains the highest in South Asia. During the last decade poverty
elimination programs helped many of the poor to participate and rise up. However the Global financial
crisis and other factors like the occupation of Afghanistan have impacted Pakistani growth. Poverty in
 Macro Economics

Pakistan has historically been higher in rural areas and lower in the cities. Out of the total 40 million living
below the poverty line, 30 million live in rural areas. Poverty rose sharply in the rural areas in the
1990s and the gap in income between urban and rural areas of the country became more significant. This
trend has been attributed to a disproportionate impact of economic events in the rural and urban areas.

There are also significant in homogeneities in the different regions of Pakistan that contribute to the
country's rising poverty. In the 1999 Fiscal year, the urban regions of the Sindh province had the lowest
levels of poverty, and the rural areas of the North West Frontier Province had the highest. Punjab also
has significant gradients in poverty among the different regions of the province.

The North West Frontier Province of Pakistan was one of the most backward regions of the South Asian
Subcontinent. Despite this, tremendous progress has been made in many areas. The NWFP now boasts
several universities including the Ghulam Ishaq Khan University of Science and Technology. Peshawar a
sleep cantonment during British towns is a modern cosmopolitan city. Much more can be done to invest in
the social and economic structures. NWFP remains steeped in tribal culture, though the biggest Pathan
city is Karachi where the Pakhtuns are one of the richest classes of people. The Pakhtuns of the region
are heavily involved in the transportation, lumber, furniture and small arts and crafts business. Some deal
in cross border arms and drugs smuggling. This smuggling actively encouraged by the West and by
Pakistan during the Soviet invasion of neighboring Afghanistan is intact and according to Western reports
supported the Taliban regime. These and other activities have led to a breakdown of law and order in
many parts of the region.

POVERTY AND GENDER :

The gender discriminatory practices in Pakistani society also shape the distribution of poverty in the
country. Traditional gender roles in Pakistan define the woman's place as in the home and not in the
workplace, and define the man as the breadwinner. Consequently, the society invests far less in women
than men. Women in Pakistan suffer from poverty of opportunities throughout their lives. Female literacy
in Pakistan is 43.6% compared to Male literacy at 68.2%, as of 2008. In legislative bodies, women
constituted less than 3% of the legislature elected on general seats before 2002. The 1973 Constitution
allowed reserved seats for women in both houses of parliament for a period of 20 years, thus ensuring
that women would be represented in parliament regardless of whether or not they are elected on general
seats. This provision lapsed in 1993, so parliaments elected subsequently did not have reserved seats for
women. Reserved seats for women have been restored after the election of 2002. Female labour rates in
Pakistan are exceptionally low.

ECONOMIC AND SOCIAL VULNERABILITY :

"Vulnerability" in this case stands for the underlying susceptibility of economically deprived people to fall
into poverty as a result of exogenous random shocks. Vulnerable households are generally found to have
 Macro Economics

low expenditure levels. Households are considered vulnerable if they do not have the means to smooth
out their expenses in response to changes in income. In general, vulnerability is likely to be high in
households clustered around the poverty line. Since coping strategies for vulnerable households depend
primarily on their sources of income, exogenous shocks can increase reliance on non-agricultural wages.
Such diversification has not occurred in many parts of Pakistan, leading to an increased dependence on
credit.

While economic vulnerability is a key factor in the rise of poverty in Pakistan, vulnerability also arises from
social powerlessness, political disenfranchisement, and ill-functioning and distortionary institutions, and
these also are important causes of the persistence of vulnerability among the poor.

Other causes of vulnerability in Pakistan are the everyday harassment by corrupt government officials, as
well as their underperformance, exclusion and denial of basic rights to many in Pakistan. Also, lack of
adequate health care by the state lead the poor to seek private sources, which are expensive, but still
preferable to the possibility of medical malpractice and being given expired medicines in state run medical
facilities. Also, the failure by the state to provide adequate law and order in many parts of the country is a
factor in the rise of vulnerability of the poor.

Un-Employment Rates
Administrative Unit 1998 Census 1981 Census
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Both Sexes Male Female

Pakistan 19.68 20.19 5.05 3.1
Rural 19.98 20.40 5.50 2.3
Urban 19.13 19.77 4.49 5.2
Khyber Pakhtunkhwa 26.83 27.51 2.58 2.2
Rural 28.16 28.64 4.00 2.0
Urban 21.00 22.34 0.74 3.7
Punjab 19.10 19.60 5.50 3.2
Rural 18.60 19.00 6.00 2.5
Urban 20.10 20.7 4.70 5.0
Sindh 14.43 14.86 4.69 3.3
Rural 11.95 12.26 3.70 1.6
Urban 16.75 17.31 5.40 5.8
Baluchistan 33.48 34.14 8.67 3.1
Rural 35.26 35.92 9.81 3.0
Urban 27.67 28.33 5.35 4.0
Islamabad 15.70 16.80 1.70 10.7
Rural 28.70 29.40 8.20 13.5
Urban 10.10 11.00 0.80 9.0
Unemployment Rate: It is the percentage of persons unemployed (those looking for work and temporarily laid off)
to the total economically active population (10 years and above).

ENVIRONMENTAL ISSUES :

Environmental problems in Pakistan, such as erosion, use of agro-chemicals, deforestation etc.

contributes to rising poverty in Pakistan. Increasing pollution contributes to increasing risk of toxicity, and
poor industrial standards in the country contribute to rising pollution.

LACK OF ADEQUATE GOVERNANCE :

By the end of the 1990s, the manner in which power is exercised in the management of a country's social
and economic resources for development emerged as Pakistan's foremost developmental problem.
Corruption and political instabilities such as various separatist movements
in Baluchistan and Waziristan resulted in reduction of business confidence, deterioration of economic
growth, reduced public expenditure, poor delivery of public services, and undermining of the rule of law.
The perceived security threat on the border with India has dominated Pakistan's culture and has led to the
domination of military in politics, excessive spending on defense at the expense of social sectors, and the
erosion of law and order.
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Pakistan has been run by military dictatorships for large periods of time, alternating with limited
democracy. These rapid changes in governments led to rapid policy changes and reversals and the
reduction of transparency and accountability in government. The onset of military regimes has contributed
to non-transparency in resource allocation. In particular, the neglect by the Pakistani state of
the Balochistan and Khyber has rendered the region poverty-stricken. Those who do not constitute the
political elite are unable to make political leaders and the Government responsive to their needs or
accountable to promises. Development priorities are determined not by potential beneficiaries but by the
bureaucracy and a political elite which may or may not be in touch with the needs of the citizens. Political
instability and macroeconomic imbalances have been reflected in poor creditworthiness ratings, even
compared to other countries of similar income levels, with resulting capital flight and lower foreign direct
investment inflows. The current government of Pakistan has professed commitments to reforms in this
area.

In addition, Pakistan's major cities and urban centers are home to an estimated 1.2 million street children.
This includes beggars and scavengers who are often very young. The law and order problem worsens
their condition as boys and girls are fair game to others who would force them into stealing, scavenging
and smuggling to survive. A large proportion consumes readily available solvents to starve off hunger,
loneliness and fear. Children are vulnerable to contracting STDs such as HIV/AIDS, as well as other
diseases.

FEDUALISM :

Pakistan is home to a large feudal landholding system where landholding families hold thousands of

acres and does little work on the agriculture them. They enlist the services of their serfs to perform the
labor of the land. 51% of poor tenants owe money to the landlords. The landlords' position of power
allows them to exploit the only resource the poor can possibly provide: their own labor.

POVERTY AND SUPPORT FOR ISLAMIC MILITANCY :

Poverty and the lack of a modern curriculum have proved destabilizing factors for Pakistani society that
have been exploited by militant organizations banned by the government to run schools and produce
militant literature. Though many madrassas are benign, there are those that subscribe to the radicalism
branches of Sunni Islam.

As a result, militant Islamic political parties have become more powerful in Pakistan and have
considerable sympathy among the poor. This phenomenon is more pronounced in the North Western
Frontier Province.

INEQUALITY AND NATURAL DISASTERS:

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The recent 2010 Pakistan floods have accentuated differences between the wealthy and poor in
Pakistan. Abdullah Hussain Haroon, Pakistan's diplomat to the United Nations, has alleged that
wealthy feudal warlords and landowners in Pakistan have been diverting funds and resources away from
the poor and into their own private relief efforts. Haroon also alluded to was evidence that landowners had
allowed embankments to burst, leading to water flowing away from their land. There are also allegations
that local authorities colluded with the warlords to divert funds. The floods have accentuated the sharp
divisions in Pakistan between the wealthy and the poor. The wealthy, with better access to transportation
and other facilities, have suffered far less than the poor of Pakistan.

CAUSES OF POVERTY :
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Pakistan is a poor country. Its economy is facing fluctuations now a day. At the time of independence
Pakistan has very low resources and capital, so the processes of progress were very slow. Unfortunately
the politicians of Pakistan were all not well aware of modern global system and the progress processes
and the needs of country. Due to bad policies today Pakistan is facing a lot of problems. The continuous
failure of policies leads the people of country to miserable conditions. The major problem in the country is
poverty which is becoming the cause of crime and social disorder.

It is difficult to point out all causes of poverty in Pakistan but the major causes of are given below:

GOVERNMENT POLICIES:

Government is not well aware of present conditions of country. The policies of government are base on
the suggestions of officials which do not have awareness about the problems of a common man. After
implementation the policies do not get effective result. After the failure of one policy, government does not
consider its failure and announces another policy without studying the aftermaths of last one. Heavy taxes
and unemployment crushes the people and they are forced to live below poverty line. The suitable
medical facilities are not provided to people and they are forced to get treatment for private clinics which
are too costly.

CORRUPTION:

Another cause of poverty is corruption. There are two types of corruption. There is not morality and
everyone is trying to earn more and more by using fair and unfair means. Officials waste their time has
low efficiency. Only one relationship that is exists in society is money. One has to pay a heavy cost to get
his right. Law and order conditions are out of control and institutions are failed to provide justice to a
common man. Justice can be bought by money only. But government is unable to control such type of
things. In this whole scenario some corrupt people has been occupying the resources and common man
is living in miserable conditions.

DIVISION OF AGRICULTURAL LAND:

Pakistan is an agricultural country. Most of people are farmers by profession. One has land which is
fulfilling the needs of his family but he has to divide the land into his children when they got young. After
division the land is not sufficient to support a family. Now the families of his children are suffering and
spending their lives below poverty line.

MATERIALISM :

In our society social bonding are gradually becomes thinner and thinner. A race of material object has
been started even no one tried to understand the problems of others. Everyone is gradually changing
from human to a bio man who only knows about his needs and have no concept about the limitations of
others. People are not ready to help each other. At last everyone has lost his trust on others which affect
our social and economic system and it is another cause of poverty.

LACK OF EDUCATION:

The literacy rate of Pakistan is very low. Most of people do not have any concept about the modern
earning sources. Most people are unable to adopt technology for their business needs, that’s why
business does not meet international standards and results as decrease in revenue which leads the
society to poor financial conditions.

LARGE SCALE IMPORT:

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The import of Pakistan is greater than export. Big revenue is consumed in importing good every year,
even raw material has to import for industry. If we decrease import and establish own supply chains from
our country natural resources the people will have better opportunities to earn.

LAW AND ORDER :

There are lot of problems regarding law and order. Terrorist attacks create uncertainty in stock markets
and people earning from stock are getting loss due to which the whole country faces uncertain increase in
commodity prices.

FLUCTUATED FOREIGN INVESTMENT :

Foreign investor comes to local markets. They invest millions of dollars in stock markets and stock market
gets rise in index. Then the investor withdraws his money with profit and market suddenly collapses. The
after math always is faced by poor people.

PRIVATIZATION :

Government is unable to manage the departments and country has low reserve assets. So the meet the
requirements some companies run by government are sold to foreign investors. The commodities or
services provided by the companies are becoming costly. For example if government sold a gas plant
then prices for gas in country rises.

MORAL CULTURE :

The main reason for poverty is the social dishonesty and irresponsible behavior of people. Everyone is
trying to get rich by using unfair means. A shop keeper is ready to get whole money from the pocket of
customer. People doing jobs are not performing their duties well. In society the man considered brave or
respectful who do not pay taxes or continuously violate the laws. This irresponsible behavior continuously
increases and produces loss for county.

EFFECTS:

The effects of poverty may also be causes, as listed above, thus creating a "poverty cycle" operating
across multiple levels, individual, local, national and global.

HEALT

Hunger, disease, and less education describe a person in poverty. One third of deaths - some 18 million
people a year or 50,000 per day - are due to poverty-related causes: in total 270 million people, most of
them women and children, have died as a result of poverty since 1990. Those living in poverty suffer
disproportionately from hunger or even starvation and disease. Those living in poverty suffer lower life
expectancy. According to the World Health Organization, hunger and malnutrition are the single gravest
threats to the world's public health and malnutrition is by far the biggest contributor to child mortality,
present in half of all cases.
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Every year nearly 11 million children living in poverty die before their fifth birthday. 1.02 billion People go
to bed hungry every night. Poverty increases the risk of homelessness. There are over 100 million street
children worldwide. Increased risk of drug abuse may also be associated with poverty.

According to the Global Hunger Index, South Asia has the highest child malnutrition rate of the world's
regions. Nearly half of all Indian children are undernourished, one of the highest rates in the world and
nearly double the rate of Sub-Saharan Africa. Every year, more than half a million women die in
pregnancy or childbirth. Almost 90% of maternal deaths occur in Asia and sub-Saharan Africa, compared
to less than 1% in the developed world.

Women who have children born in poverty cannot nourish the children efficiently with the right prenatal
care. They may also suffer from disease that may be passed down to the child through birth. Asthma is
common problem children acquire when born into poverty.

EDUCATION

Research has found that there is a high risk of educational underachievement for children who are from
low-income housing circumstances. This often is a process that begins in primary school for some less
fortunate children. In the US educational system, these children are at a higher risk than other children for
retention in their grade, special placements during the school's hours and even not completing their high
school education. There are indeed many explanations for why students tend to drop out of school. For
children with low resources, the risk factors are similar to excuses such as juvenile delinquency rates,
higher levels of teenage pregnancy, and the economic dependency upon their low income parent or
parents.

Families and society who submit low levels of investment in the education and development of less
fortunate children end up with less favorable results for the children who see a life of parental employment
reduction and low wages. Higher rates of early childbearing with all the connected risks to family, health
and well-being are majorly important issues to address since education from preschool to high school are
both identifiably meaningful in a life.

Poverty often drastically affects children's success in school. A child's "home activities, preferences,
mannerisms" must align with the world and in the cases that they do not these students are at a
disadvantage in the school and most importantly the classroom. Therefore, it is safe to state that children
who live at or below the poverty level will have far less success educationally than children who live
above the poverty line. Poor children have a great deal less healthcare and this ultimately results in many
absences from the academic year. Additionally, poor children are much more likely to suffer from hunger,
fatigue, irritability, headaches, ear infections, flu, and colds. These illnesses could potentially restrict a
child or student's focus and concentration.
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HOUSING

Slum-dwellers, who make up a third of the world's urban population, live in poverty no better, if not worse,
than rural people, who are the traditional focus of the poverty in the developing world, according to a
report by the United Nations.

Most of the children living in institutions around the world have a surviving parent or close relative, and

they most commonly entered orphanages because of poverty. Experts and child advocates maintain that
orphanages are expensive and often harm children's development by separating them from their families.
It is speculated that, flush with money, orphanages are increasing and push for children to join even
though demographic data show that even the poorest extended families usually take
in children whose parents have died.

VIOLENCE

According to a UN report on modern slavery, the most common form of human trafficking is for
prostitution, which is largely fueled by poverty. In Zimbabwe, a number of girls are turning to prostitution
for food to survive because of the increasing poverty. In one survey, 67% of children from
disadvantaged inner cities said they had witnessed a serious assault, and 33% reported witnessing a
homicide. 51% of fifth graders from New Orleans (median income for a household: $27,133) have been
found to be victims of violence, compared to 32% in Washington, DC (mean income for a household:
$40,127).

DRUG ABUSE

Unemployment and distance from rural areas are where most drug abuse occurs. Drug abuse can result
in a community shouldering the impact of many nefarious acts such as stealing, killing, theft, sexual
assault, and prostitution. Drug abuse is synonymous with poor performance in school & work, and a
general malaise of intra-personal intelligence. People who have abused drugs and have spent all of their
money buying substances—i.e. heroin, alcohol, methamphetamines etc.—become addicts. This induces
a downward spiral in the functionality of most addicts, as the drugs and poverty can be cyclical. When an
addict has no other way to support their addiction they resort to illegal measures to obtain income. This is
where a community becomes affected by drug abuse. The urge—or "Jonesin"—for many different
substances begins to take over an addict's life.

OTHER ASPECTS

Economic aspects of poverty focus on material needs, typically including the necessities of daily living,
such as food, clothing, shelter, or safe drinking water. Poverty in this sense may be understood as a
condition in which a person or community is lacking in the basic needs for a minimum standard of well-
being and life, particularly as a result of a persistent lack of income.
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Analysis of social aspects of poverty links conditions of scarcity to aspects of the distribution of resources
and power in a society and recognizes that poverty may be a function of the diminished "capability" of
people to live the kinds of lives they value. The social aspects of poverty may include lack of access to
information, education, health care, or political power.

Poverty may also be understood as an aspect of unequal social status and inequitable social

relationships, experienced as social exclusion, dependency, and diminished capacity to participate, or to
develop meaningful connections with other people in society. Such social exclusion can be minimized
through strengthened connectiOns with the mainstream, such as through the provision of relational
care to those who are experiencing poverty. Harlem, New York, USA. In 2006 the poverty rate for minors in the
United States was the highest in the industrialized world, with 21.9% of all minors and 30% of African American minors living

below the poverty threshold.

The World Bank's "Voices of the Poor," based on research with over 20,000 poor people in 23 countries,
identifies a range of factors which poor people identify as part of poverty. These include:

 Precarious livelihoods
 Excluded locations
 Physical limitations
 Gender relationships
 Problems in social relationships
 Lack of security
 Abuse by those in power
 Dis-empowering institutions
 Limited capabilities
 Weak community organizations

David Moore, in his book The World Bank, argues that some analysis of poverty reflect pejorative,
sometimes racial, stereotypes of impoverished people as powerless victims and passive recipients of aid
programs.

Ultra-poverty, a term apparently coined by Michael Lipton, connotes being amongst poorest of the poor in
low-income countries. Lipton defined ultra-poverty as receiving less than 80 percent of minimum caloric
intake whilst spending more than 80% of income on food. Alternatively a 2007 report issued by
International Food Policy Research Institute defined ultra-poverty as living on less than 54 cents per
day. BRAC (NGO) has pioneered a program called Targeting the Ultra-Poor to redress ultra-poverty by
working with individual ultra-poor women.
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SOLUTION

Poverty will never end unless there are real solutions to end it; solutions based on economic
justice and political changes.

1. The full equality between men and women in public as well as private areas of life, a
worldwide minimum wage of $20 per day and the end of child labor under the age of 16 with the
creation of a subsidy for scholarship.

2. The guarantee of shelter, healthcare, education, food and drinking water as basic human
rights that must be provided free to all.

3. a total redistribution of idle lands to landless farmers and the imposition of a 50% cap on arable
land devoted to products for export per country, with the creation of a worldwide subsidy for
organic agriculture.

4. an end to private monopoly ownership over natural resources, with a minimum of 51% local
communal ownership in corporations, which control such resources as well as the termination of
intellectual property rights on pharmaceutical drugs.

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