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PAKISTAN
Poverty Report

PAKISTAN
PHOTO: ICIMOD
150
Executive Summary
The Pakistan Poverty Report shows that Pakistan’s poverty records
are poor even compared to other developing countries in South Asia.
‘Softer’ indicators, such as those related to justice, law and order,
basic human rights, especially for women and religious minorities, all
show high levels of exclusion, particularly for the poor, but also for
materially more prosperous groups. Pakistan’s economy remains in a
state of crisis.
Pakistan has been ruled by military rulers for almost half of its
independent history of more than 50 years. Military rulers have been
the key players in the country’s body polity. Pakistan’s defence
expenditure as part of its GNP is the highest in South Asia; twice as
much is spent on defence as is on health and education combined.
Income distribution is highly skewed with the top 20 percent getting
50 percent of the income, while the bottom 20 percent get only six
percent. Income poverty is one of the main causes of growing poverty
in the country, reflecting inequality in human, physical and social
capital; an unequal distribution of assets, particularly land in the rural
areas, accentuates and perpetuates poverty further.
Successive years of fiscal and external deficits have resulted in the
accumulation of large domestic and external debts. Much of the annual
repayments has been based on increased borrowing, suggesting that
a substantial proportion of new loans enacted each year do not come
into the country and are used simply to pay-off old debts. Just as
generations of peasants have been enslaved by their debts, so has
Pakistan. With international debt accumulated to around US$35
billion, and with the IMF and World Bank watching and ordering
Pakistan’s each and every economic and political move, the term
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‘independence’ seems to have lost much significance in modern
Pakistan. The country’s policies are decided upon by advisors and
international bureaucrats who refuse to acknowledge the impact of
these deleterious policies. Since Pakistan’s exposure to global
organisations has grown since 1988, the economy has taken a nose-
dive. Moreover, the provision of large amounts of loans has doubled
the debt burden in a decade. While Pakistan’s managers are certainly
responsible for a great deal of the misdoing regarding the economy,
they must share this responsibility with a critical component and
instrument of globalisation, the International Financial Institutions.
There is compelling evidence which suggests that poverty in Pakistan
has increased markedly over the 1990s. Just as the declining trends
in poverty at the end of the 1980s coincided with the end of the Five
Point Programme (which featured a spendthrift government
undertaking smaller scale development projects), they also, equally
coincidentally, began a slowing down or reversal, soon after the start
of a comprehensive IMF funded structural adjustment programme.
With the State facing numerous fiscal and other crises and having to
withdraw from the arena of development over the last few years, the
void has been addressed (though certainly not filled) by non-
governmental organisations (NGOs).
The gains from peace and from trade between Pakistan and other
countries in SAARC, particularly India, ought to be high on the agenda
of all countries if they have any serious desire to alleviate poverty and
to evolve into mature societies, economies and nations.
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Introduction
If macro-economic policy is one of the main causes not just for continuing poverty,
but for creating it as we argue, any government serious about alleviating poverty will need to follow
economic policies very different from those that have become standard in Pakistan.

By all accounts, Pakistan ranks high on most deprivation indices. The
new rise in poverty levels over the past decade and a half is no
coincidence and comes as a direct result of the global economic
blueprint adopted by some governments and forced on others in the
form of structural adjustment programmes by international donors
such as the International Monetary Fund (IMF) and World Bank.
Pakistan belongs to the latter category. This model of privatisation
and deregulation claimed that the benefits of economic growth would
of their own accord trickle down to the rest of society. Yet the policies
of liberalisation themselves ensured that this could not happen, leading
to the massive gaps in income between rich and poor experienced
across the world today. It has become part of conventional wisdom of
development policy that reasonable progress in reducing poverty
requires a political leadership committed to this as a goal. There is
no substitute for a genuine commitment on the part of the decision-
makers to use the resources efficiently and effectively for poverty
reduction ends.
The main themes which suggest why poverty continues to exist in
Pakistan at the scale that it does, relate to the adherence to IMF and
World Bank structural adjustment programmes which end up causing
poverty as well as other themes including the militarisation of the
economy and of society; the position of women in society and in the
legal system; the denial of access to assets, particularly land; the
deprivation of health and education opportunities particularly as cuts
in development expenditure continue; and the lack of democracy and
of an environment which allows public participation.
If macro-economic policy is one of the main causes not just for continuing
poverty, but for creating it as we argue, any government serious about
alleviating poverty will need to follow economic policies very different
from those that have become standard in Pakistan. Policies which distance
themselves from structural adjustment and require increased and effective
development expenditure, for example, will have to be adopted. Advocacy
NGOs and activists will need to continue their pressure on government,
highlighting anomalies which accrue from its action.

PAKISTAN
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Country Background
Pakistan’s poverty records are poor even compared to other developing countries
in South Asia. In addition, ‘softer’ indicators, such as those related to justice,
law and order, basic human rights, all show high levels of exclusion.

Pakistan ranks as one of the least developed countries in the world
using standard GDP per capita statistics, a situation which becomes
even more obvious when we compare Pakistan with other countries
using the Human Development Index, which highlights social and
human indicators. Poverty continues to be one of Pakistan’s most
pressing and chronic problems.
Pakistan’s poverty records are poor even compared to other developing
countries in South Asia. In addition, ‘softer’ indicators, such as those
related to justice, law and order, basic human rights, especially for
women and religious minorities, all show high levels of exclusion,
particularly for the poor, but also for materially more prosperous
groups. Democratic rights such as the right to elect one’s own
representatives and to participate in the formulation of public policy
have been systematically denied to citizens of Pakistan. In contrast to
two other South Asian countries, India and Sri Lanka, that have had
democratic governments for a number of decades, Pakistan has its
own kind of governance, trying to accommodate both democracy
and military rule.
PAKISTAN
The Government of the Islamic Republic of Pakistan is a de facto
military dictatorship disguised as a democratically elected body.
Pakistan is a federal republic officially governed by a Constitution, bi-
cameral Parliament and National Assembly. However, after the 1999
military coup, General Pervez Musharraf suspended both the
Constitution and Parliament, appointed himself as Chief Executive
and established the National Security Council, Pakistan’s supreme
governing body. In July 2001 Musharraf declared himself the President
of Pakistan.
With 144.6 million people, Pakistan is the world’s sixth largest country
(2001). With a weak economy, population growth rate of 2.1 percent,
and 40 percent of the population under 15, feeding, employing, and
educating its citizens has become the government’s most serious
domestic challenge. Ninety-seven percent of Pakistanis are Muslims
(Sunni 77 percent, Shi’a 20 percent), and although Urdu is the official
language, only eight percent speak it. Punjabis are the largest ethnic
group (48 percent); Pashto (13 percent), Sindhi (12 percent), and
Urdu (7.5 percent) constitute the majority of the remaining population.

PHOTO: STEPHEN SHARPLES


Trends in Economic Performance
Pakistan’s economy remains in a state of crisis.
Successive years of fiscal and external deficits have resulted in the accumulation
of large domestic and external debts.
3.1 OVERALL GROWTH
Pakistan is poor and heavily populated, a situation that is made worse
by domestic political turmoil, lack of foreign investment, and the
ongoing, costly military confrontation with neighbouring India. Foreign
loans and grants (US$2 billion in FY99/00) provide approximately 25
percent of government revenue, but debt service obligations total
nearly 50 percent of government expenditures. With 40 percent of
the population below the poverty line, Pakistan continues to spend
US$2.5 billion on its military - over 20 percent of total government
expenditures and four percent of GDP (FY99/00).
When the British ended colonial rule in South Asia in 1947, both Pakistan
and India declared independence. A conflict arose between the nations,
which has lasted more than half a century already. Following nuclear
testing in May 1998, Pakistan, refusing to sign the Comprehensive Test
Ban Treaty, was sanctioned by G7 in the same year.
Pakistan’s economy remains in a state of crisis. Successive years of
fiscal and external deficits have resulted in the accumulation of large
domestic and external debts. Public debt (both domestic and external)
is estimated at 92 percent of the Gross Domestic Product (GDP) and
about 610 percent of fiscal revenue in the year 2000. The FY2001
interest payments on public debt are forecast at 40 percent of total
current expenditures in FY2001. As of 31 October 2000, Pakistan’s
total outstanding external debt was estimated at US$32 billion, and
the ratio of external debt and foreign exchange obligations to foreign
exchange earnings stood at over 300 percent. Even after debt
rescheduling, the external debt service ratio was almost 30 percent in
FY2000. The tight fiscal and monetary stance will mean slow initial
growth. The lack of fiscal space will constrain public investment, while
weak investor confidence will constrain private investment.
Furthermore, severe drought, high oil prices, and deterioration in the
terms of trade had a strong negative impact on economic growth in
FY2001. The path to economic recovery will be a slow and difficult
one. If Pakistan is to successfully reduce the fiscal deficit, meet the
demands of debt servicing, and revive economic growth, it will need
to generate additional resources.
Pakistan’s economic situation is expected to remain weak over the
period 2002-2004. During the coming years, the key challenges facing
the Government include restoring economic growth (constrained
further by a drought-affected agriculture sector, managing the large
debt burden), promoting domestic and foreign investors’ confidence,
increasing exports to generate foreign exchange, and maintaining a
level of social development improving social indicators.
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3.2 MACRO-ECONOMIC POLICIES, PERFORMANCES AND
SUSTAINABILITY ISSUES
Recent economic developments in Pakistan have been dominated by
the military campaign in neighbouring Afghanistan in 2001. The United
States permanently lifted sanctions against both India and Pakistan in
September 2001: sanctions were imposed in 1998 in the wake of the
nuclear tests, but a substantial aid programme has now resumed.
International donor organisations such as IMF and the World Bank
are concerned that Pakistan’s reforms are losing momentum due to
the difficulty in building a consensus in Pakistan’s Parliament. While
some reforms have already been carried out, it was noted that difficult
reforms, such as raising natural gas prices, have been put on hold.
The two institutions previously agreed to provide substantial amounts
of additional credit, totalling nearly US$10 billion over the next three
years.
Pakistan’s textile industry has been adversely affected since September
2001, and agricultural production was already suffering from a severe
drought in 2001.
Pakistan’s real gross domestic product (GDP) growth rate was 3.6
percent in 2002, falling well short of earlier forecasts. Real GDP
growth for 2003 is expected to reach 4.1 percent. Pakistan’s external
debt is equal to around 60 percent of its annual GDP, and its debt
payments due each year exceed its receipts from exports.
While formal legal protections for foreign investment in Pakistan are
generally good, inadequate infrastructure, a poorly educated
workforce, sectarian and ethnic violence, and a slow moving judicial
system have proven to be obstacles to attracting foreign investment.
3.3 ANALYSIS OF NATIONAL DEVELOPMENTS PLANS
The overall growth rate of GDP has fallen well below trend levels, and
appreciably below the average of the 1980s. During the fourteen years
since the implementation of the Five Point Programme (which featured a
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spendthrift government undertaking smaller scale development projects),
only in one of those years GDP increased more than the average six
percent observed since 1977; in two of those nine years, in 1992-93
and in 1996-97, the growth in GDP was 2.27 percent and 1.3 percent,
respectively, the lowest in more than three decades. In the years since
1988, inflation was in double digits in seven of those 14 years, while in
the previous 40 years, inflation was in double digits on only seven
occasions. Since the growth rate of real per capita income in the period
1991-98 had been about 1.3 percent, it was much too low to make any
significant dent in poverty.
154
At one stage manufacturing had been the leading sector in the
economy, with growth rates averaging 9.1 percent between 1980-
88; this rate fell to an average of 4.9 percent for the period 1988-
97, falling to a mere 1.19 percent in 1996-97, the lowest in the last
30 years, and again, to 1.5 percent in 1999-2000. In an attempt to
cut the fiscal deficit, public expenditure has been cut, and development
expenditure in particular, has borne the brunt of this. From a high of
9.3 percent of GDP in 1980-81, development expenditure has been
falling since, and since 1997-98, only a little over three percent of
GDP had been allocated to development. Additionally, remittances,
which had played such an important role in the 1970s and 1980s in
alleviating poverty, declined by about 41.8 percent (in constant prices)
between 1982-83 and 1995-96, and in 1998-99, were the lowest
since 1978-79. However, in the period 2000-02 remittances have
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shown a dramatic increase and, if the trend continues, may have some
impact on poverty alleviation.
Since the late 1980s, every single indicator that has some poverty reducing
impact (such as economic growth, manufacturing sector growth,
employment, public expenditure, development expenditure, remittances,
and subsidies) has worsened. Additionally, factors that contributed to
growth in the 1980s (increased capital flows, increased black market
activity, increased internal and external borrowing) all came to roost in
the 1990s and contributed to the general slowdown.
It comes as no surprise that poverty in Pakistan has increased over
the last one and a half decades. Given current macro-economic
trends, poverty is likely to persist and possibly increase over the next few years.
 155

Agriculture
Pakistan is an agricultural country, and more than 50 percent of its population
is employed in the agricultural sector. Less than 20 percent of Pakistan’s land
can be intensively farmed, nearly all of which is cultivated

4.1 OVERVIEW
Pakistan is an agricultural country, and more than 50 percent of its
population is employed in the agricultural sector. Less than 20 percent
of Pakistan’s land can be intensively farmed, nearly all of which is
cultivated. In 1990, 209,400 sq. km were in use as farmland.

The agriculture sector has fairly large potential for growth. The yield
gap, between potential yield and the national average, is quite wide.
Production has traditionally been constrained by problems of a
technical, institutional and policy nature. Technical constraints are
poor agronomic and harvest management practices, and the non-
availability or inappropriate use of physical inputs. Institutional
constraints include capital availability for small farmers, inadequate
research and extension, inefficient agricultural education and training,
lack of statistics and information systems, complex agriculture credit
institutions and policy problems relating to input and output price
distortions. The imperative need, therefore, is to address these issues
more forcefully in order to tap the considerable productivity potential
of the agriculture sector:

Non-efficient irrigation system

The fluctuations in production and low level of productivity would
indicate that irrigation systems (82 percent of the agriculture land)
are not working efficiently and effectively. Water supply uncertainties
translate into a high degree of variability in the crop production. Less
than half of the potential benefits from irrigation development are
being realised.

Salinity & water logging

The continuous percolation of canal irrigation water into the aquifers
leads to rising water tables and salinity problems in certain areas.
About 30 percent (4.7 million ha) of the gross command area is
water logged and about 13 percent is considered highly waterlogged.

Policies and role of the government

PAKISTAN

Pakistan has implemented a complex set of pricing, subsidy and tax

polices which have altered over time the nature of incentives targeting
the agricultural sector. These policies are often determined
independently with inadvertent effects on agriculture. Yet, looked at
in retrospect, the net effect of these policies on agriculture reflects a
clear pattern of bias against agriculture.

Land reform and security of land tenure

Land distribution in Pakistan is very skewed. Farms less than five
hectares in size account for about 81 percent of farms, but cover
only 38.7 percent of the total farm area. On the other hand, large
farms of more than 10 hectares comprised only 6.8 percent of all
farms but account for 39.8 percent of the total farm area.
156
Availability of credit
Small farmers do not have access to the financial resources needed
for production. The provision of adequate credit can be an important
instrument for improving production and income levels of small
farmers, the landless and rural women in poverty. Most small farmers
are unable to use the facility of cost free loans because of the
cumbersome procedures for transacting a bank loan even if it is
interest-free. The co-operative banking system is still very weak in
terms of its ability to extend loans to farmers, to recover these loans
and manage its affairs efficiently. Consequently, the influential farmers
tend to dominate the co-operative organisations at the apex level.
Other issues that need to be addressed are:
Ÿ Soil erosion and degradation;
Ÿ Inappropriate fertiliser and pesticide use;
Ÿ Inadequate availability of quality seed;
Ÿ Inadequate market infrastructure;
Ÿ Non availability of adequate farm power;
Ÿ Weakness of agricultural research and extension services.
4.2 PERFORMANCE IN AGRICULTURE
Pakistan’s agriculture has made a long and difficult journey. Its
performance is marked by a mixed trend as there have been some
years of slow growth and some years of moderate growth. Since 1980,
agricultural GDP at constant factor cost has more than doubled,
increasing from Rs. 76 billion in 1980/81 to Rs. 168 billion in 1999/
2000, with an average growth rate of 4.23 percent annually.
Agriculture’s share of total GDP, however, declined from 31 percent
to 26 percent over the same period. Crop production contributed
the largest share of agricultural GDP. During the past 50 years, a
significant increase in production of the major crops has been achieved.
Wheat production rose from 3.3 million tonnes in 1950/51 to about
21 million tonnes in 1999/2000. Similarly, during this period rice
production rose from 0.86 million tonnes to 5.2 million tonnes. The
production of cotton reached 9.2 million bales during 1997/98
however during 1998/99 its production decreased to 8.8 million
bales against the target of 10.5 million bales. Agriculture grew by
more than four percent per annum in the 1960s, fell to 2.6 percent
in the 1970s and again picked up in the 1980s. The growth
performance by different sub-sectors has also shown large fluctuations
over time.
Pakistan is faced with some common problems in both irrigated and
rain-fed areas used for agriculture. These problems can be summarised
as erosion of soil, under-use of organic fertilisers and over-use of
synthetic chemicals. In rain-fed areas, over extensive cultivation is
common. In Pakistan increasing productivity means changing major
agricultural systems, policies, and institutions, including:
Ÿ Poor incentive policies; these have led to inappropriate use of
land and hence to problems of soil erosion and land degradation.
Ÿ Poor distribution of land resources and inadequate systems of
land tenure; at one extreme one finds very large estates of absentee
landlords, and at the other very small, ill-equipped peasant farms.
Insecurity of tenure creates disincentives for investing in land.
Ÿ Lack of irrigation; irrigation is essential on more than three-quarters
of agricultural land in Pakistan.
Ÿ Weak human resources and infrastructure;
Ÿ Direct government intervention in agricultural markets; government
intervention, although recently diminished, still distorts markets.
Subsidised imports of wheat and price controls on cotton exports
reflect a persisting bias against cotton and wheat, while sugarcane is
heavily protected. The protection of domestic industry distorts sectoral
prices. Government policy also distorts the market for such vital inputs
as seeds and fertiliser. Serious problems in the credit market exacerbate
other problems arising from policy distortions.
The need for intensification of farm lands in Pakistan stems from a
demographic reality. In rough terms, one hectare of cultivated land
supported an average five people in 1993; by the year 2010, it is
estimated that the same land must support nearly ten. Pakistan has
developed strategies to ensure food security by 1998, which also
includes the agricultural sector.

BOX 4.2 (A) MATCHING GRANTS PROGRAMME: NOTEWORTHY RESULTS

In 1981-82, a programme called “Matching Grants Programme” (MGP) was initiated. The MGP focuses on the development of
infrastructure in rural areas, and is based on community participation. To date, about 22,000 schemes have been implemented in
26,500 villages. An evaluation of the MGP showed that the programme has had a noteworthy effect on the communities in terms of
raising both socio-economic standards, and mass-awareness of hygiene and environmental conditions. Numerous meetings and working
groups have been initiated to strengthen knowledge and capacity within the food production sector, improve access to agricultural
markets, and manage land and fertilizer use. A National Rural Support Programme was established to promote education and health,
based on community participation. In 1993, this programme was supported by the Government with Rs.1,000,000.
PAKISTAN

Trade
In the last two years exports went up by $1.4 billion,
from $7.7 billion to $9.14 billion. For the first time in history
Pakistan crossed the $9 billion export mark
5.1 EXPORTS IN 2001-2002
Pakistan defined its export goals for 2000 as follows:
Ÿ Export target of US$10 billion
Ÿ Sustainable and consistent growth in export earnings
Ÿ Diversification of export base and greater value addition
In the last two years exports went up by US$1.4 billion, from US$7.7
billion to US$9.14 billion. For the first time in history Pakistan crossed
the US$9 billion export mark. There has been a remarkable growth in
quantitative terms. For instance, during 2000/01 the volume of rice
exports went up by 28 percent to reach record levels, raw cotton
went up by 90 percent, leather by 35 percent, towels by 32 percent,
readymade garments by 17 percent, synthetic textiles by 35 percent,
petroleum products by 87 percent, and cutlery by 22 percent.
Although in dollar terms exports this year grew by only 6.7 percent,
in rupee terms the gain was an impressive 21 percent. There was
significant growth, in dollar terms, in such non-traditional products
as chemicals & pharmaceuticals (59 percent), oil seeds, nuts and
kernels (136 percent), and gems, jewellery and fans (more than100
percent each). The ‘miscellaneous’ group’s exports went up from
US$550 million last year to US$676 million this year.
Exports went up by 75 percent to China, to UAE and Saudi Arabia by
25 percent each, to Bangladesh by 20 percent, to Indonesia by 161
percent and to Korea and Australia by nine percent each. Other than
UAE and Saudi Arabia, these are all what we refer to as ‘non-
traditional’ markets. Impressive gains - in percentage terms though
not in overall value terms - have also been made in Kenya, Nigeria,
Iraq and Syria.
Export performance during the year however also needs to be viewed
in the context of the following developments:
§ Refunding delay. The exporters faced a serious liquidity crunch,
almost throughout the year, due to delayed and held back refunds
of Sales Tax and Duty Drawbacks. The Real Effective Exchange
Rate was not as favourable as it looks. While the rupee depreciated
by about 22 percent vis-à-vis the dollar, the gain in respect of the
euro was only nine percent. It needs to be borne in mind that
about 30 percent of Pakistan’s exports go to Europe.
§ Drought. Drought conditions caused a setback to livestock, which
affected exports of leather. Drought also affected horticultural
exports. Similarly, a lower catch of fish affected the export of
seafood.
§ Lack of export culture. Pakistan seems unable to create an
appropriate ‘export culture’. A major manifestation of this was
the stir caused by the infamous SRO 417 and the stuck-up refunds.
Generally speaking, the overall environment is not as exporter
friendly as desired.
157
§ Lack of diversification. Product and market diversification is lacking,
with exports concentrated in ver y few products and
markets.
§ Terms of trade. Per unit prices of most of the exports - especially
in the textile sector - have been falling. While this downward trend
is a worldwide phenomenon it is more pronounced in the case of
Pakistan, which faces a situation of a ‘buyers market’ in respect to
most of its exportable goods. Unless Pakistan can check the decline
in unit prices, it will be difficult to register significant growth without
making costly additions to the production capacities in most sectors
of export interest.
5.2 TRADE POLICY
Traditionally, Trade Policy has almost always been perceived as an
occasion for the Commerce Minister to arrive with a bag full of gifts.
Pakistan is departing from this tradition for two good reasons.
First, it was realised that Trade Policy should confine itself to strategic
objectives. It should seek to give a clear signal to producers and
exporters of the policy direction of the Government. It should signify
durability, consistency and predictability; and this is now being done,
building on past work and keeping the strategic direction the same;
only changing tactics and area of emphasis.
Second, specific issues and remedial measures pertaining to exports
cannot afford to wait for the next year’s Trade Policy. Clearly, if these
are important enough they ought to be resolved promptly.
5.3 EXPORT FINANCE
In the area of enhanced export competitiveness export finance occupies
a central position.
While the ‘subsidy’ on export finance has been withdrawn as part of
the commitment with the IMF, henceforth interest rates will be linked
to Market-based Treasury Bills (MTB). The State Bank is putting
together new instruments that will facilitate easier and greater access
to export finance.
PAKISTAN
One important sector that Pakistan has not so far capitalised upon is
the export of services. The General Agreement on Trade in Services
recognises 161 services that are globally traded. Except for some
attention to IT Services the sector has been largely neglected. Pakistan
is looking upon a one billion dollar accretion to export in this sector
that can be achieved over the short term.
Therefore, the focus of this year’s policy is on correcting the
fundamentals. Yes, it is short on incentives and rewards, but having
carefully studied the last five or so ‘incentive-studded’ Trade Policies,
the way forward is in visiting and resolving the key constraints to a
sustainable export growth. The basic export strategy has been
developed together with the stakeholders and this is being maintained
and long-term thinking is setting in.
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Official Development Assistance
and Debt Those institutions and countries, which have lent us money
over the last few decades, have reaped great rewards from their investments.
They are like the money lender or landlord, and Pakistan the indebted peasant.
6.1 OFFICIAL DEVELOPMENT ASSISTANCE
In January 2001, Pakistan visited the Paris Club, and was offered an
insignificant re-scheduling of her arrears and of ODA credits. The
repayment period on ODA debt was lengthened beyond 15 years, to
20 years; US$1.8 billion of the total bilateral debt of US$12.2 bil-
lion was re-scheduled. Pakistan is now seeking a further Paris Club
deal, which would closely mimic ‘Naples Terms.’ This would involve
cancellation of between 50 percent and 67 percent of non-ODA debt,
and a rescheduling of ODA debt with a concessional interest rate at
least as favourable as the rate under which the loan was originally
contracted.
6.2 DEBT
The IMF and the World Bank are influencing government economic
policy and it must be emphasised that both these organisations, and
many others besides, make loans to the Government of Pakistan (rather
than provide grants or ‘aid’), which must be paid back. Much has
been written about Pakistan’s external debt, and the fact that Pakistan’s
external debt is almost fifty percent of the GDP is indeed worrying.
Add to this the fact that the country’s domestic debt is only slightly
lower, and we have a major crisis on our hands. In this section, we
look at a critical dimension that relates to Pakistan’s external debt
and its repayment.
The realities of Pakistan’s external debts are highlighted with the help
of Table 6.2(A). The table reveals five extraordinary facts:
1. Interest payments are higher than outstanding debts. Total Debt
Outstanding in the period 1990-2000 was US$ 15.451 billion
while in the same period the total amount repaid as Interest and
Principal was US$36.611 billion. Pakistan has been making
average repayments to its loans enacted over many decades of
PAKISTAN
the order of US$ 3.66 billion annually over the last decade alone,
and yet has seen its external liabilities almost double. Much of
these repayments have been based upon increased borrowing,
suggesting that a substantial proportion of new loans enacted
each year do not come into the country and are used simply to
pay off old debt. This is an important point to consider as this
TABLE 6.1 (A) INTERNATIONAL FINANCIAL FLOWS
- Average Annual Receipts of Official Development Assistance (ODA) and Official Aid (OA) {b}, 1995-97 (million US$)
- ODA and OA as a Percentage of GDP (PPP) {b}, 1995-97
- ODA and OA per Capita, 1995-97 {b} (US$)
- Direct Foreign Investment, 1995-97 (million US$)
point is usually overlooked whenever a new loan is granted to
Pakistan. The euphoria that follows such agreements ignores the
reality that only a small amount of the new loan is actually available
to be made use of in the country. Once consultants, contractors,
suppliers and paybacks are taken into account, there is a pittance
for actual development.
2. Increase in the proportion of short and medium term debt. In
1990-91, short and medium term loans were a mere ten percent
of outstanding external debt to official creditors; this amount more
than doubled in 1998-99 when it was 22.2 percent, and since
1995-96 has been almost a fifth of the total debt. In contrast,
long-term debt has increased by only 5.7 percent since 1994-
95, while short and medium term debt has increased by 28 percent
over the same period.
3. Total debt servicing has fallen substantially. This has happened
only because of the rescheduling that took place recently. The
importance of this rescheduling can be gauged from the fact that
in the financial year 1999-2000, the total debt to be repaid had
there been no such arrangement, was of the order of US$ 7.827
billion, the highest ever. However, US$ 4.084 billion was
rescheduled and Pakistan had to repay only (sic) US$ 3.743 billion.
It is difficult to imagine from where Pakistan would have come up
with the additional money had the rescheduling not taken place.
The fact that the economy saw some signs of improvement and
‘stability’ reflected in a small improvement in the growth rate,
were critically dependent on this rescheduling.
4. Pakistan is caught in a fatal debt trap. Those institutions and
countries, which have lent us money over the last few decades,
have reaped great rewards from their investments. They are like
the money lender or landlord, and Pakistan the indebted peasant,
where just to survive and pay off some of the earlier debt, we are
having to borrow, increasing further our debt liabilities in the
process. Just as generations of peasants have been enslaved by
their debts, so has Pakistan.
765
0.4%
5
783

Debt creates increased poverty. What the table above suggests is
that, despite huge amounts of loans made to Pakistan, poverty has
actually grown; this suggests further that much of the money that was
lent to Pakistan was not used properly (in fact, as we argue, new loans
were acquired mainly to pay back old ones). Secondly, this huge and
growing debt liability reduces the fiscal space a government has if it
wanted to spend more on development to address issues of poverty.
159
Both ways, the huge accumulated debt has probably had a significant
impact on the persistence of poverty. It must be added that some
debt rescheduling which took place as a concession for Pakistan’s
role in the War Against Terror in 2002, will have a beneficial impact
on debt liabilities and will create some fiscal space, which will ease
the burden of debt. How this opportunity and space is utilised, will
need to be monitored over the next few years.

TABLE 6.2 (A) EXTERNAL DEBT (in US $ billion)

Year Total Debt Outstanding Annual Debt Servicing
II III IV V VI
I
Long Term Short/Med Total Principal Interest Total
Term
1990-91 15.471 1.824 17.295 1.669 0.711 2.381
1991-92 17.361 2.268 19.629 2.086 0.767 2.853
1992-93 19.044 3.002 22.046 2.130 0.814 2.944
1993-94 20.322 4.160 24.483 2.722 0.890 3.612
1994-95 22.117 4.409 26.526 3.304 1.020 4.324
1995-96 22.275 5.460 27.735 3.262 1.085 4.347
1996-97 23.145 5.140 28.285 4.038 1.042 5.080
1997-98 23.042 5.940 28.982 3.575 1.095 4.670
1998-99 23.101 6.572 29.673 1.905 0.752 2.657
1999-2000 23.834 5.622 32.746* 2.366 1.377 3.743
* Includes the ‘New Category’ of debt worth US$ 3.29 billion, introduced by the State Bank of Pakistan this year, which has not been
included in previous formats.

Source: State Bank of Pakistan, Annual Report, Various Years, Karachi.

PAKISTAN

PHOTO: STEPHEN SHARPLES

160
Privatisation and Globalisation
With international debt accumulated to around $35 billion,
and with the IMF and World Bank watching and ordering
Pakistan’s each and every economic and political move,
the term ‘independence’ seems to have lost much significance.
One of the criticisms that has been directed against the IMF and the
World Bank sponsored structural adjustment programmes, is that these
programmes are usually too uniform in nature and are implemented
universally and globally, across countries. Because they do not take
due cognisance of particular histories, institutions, or structures, these
programmes lack any semblance of contextuality. A very general
economic restructuring programme designed for any or all countries
in need of restructuring has, at best, a few minor specificities that are
spelt out in the details of the programme for each country. Usually, a
few specific targets or a set of numbers to be achieved at the end of
the programme period differentiate one country’s programme from
that of another.
Hence, there are two aspects of globalisation with respect to the
International Financial Institutions. First, is the question of supreme
power, which these two organisations, along with the World Trade
Organisation (WTO) and other less prominent entities use, to manage
and even run, numerous economies and governments worldwide,
primarily in underdeveloped countries. Secondly, all economies are
treated alike, which is the concept of universality: what is good for
Brazil is equally good for Bangladesh. Economic globalisation with
regard to IFIs is unequal in terms of power, and uniform in terms of
its policies, advice and programmes.
The trade aspect of globalisation is seen as an opportunity for
many countries to benefit from the opening up of new markets in
countries that were earlier closed or restricted. After the signing of
the World Trade Organisation (WTO) agreement, a new world order
for trade has emerged, where amongst a host of other effects,
countries will no longer be able to have restrictive trade practices
with other members of the WTO. Each is to be treated equally,
suggesting that a level playing field is to exist for all members.
Many countries that already have the technology, sophistication
and commodities which other countries need, are likely to be the
real beneficiaries of the opening up of trade as a consequence of
PAKISTAN
globalisation. Countries which export, say computer software or
information technology related products and services, as many do in
East Asia, can benefit as their products will be easily available without
duties in developed countries. Likewise, developed countries will also
have ready and easy access to markets in underdeveloped countries
as well. While this allows countries to benefit from goods and services
produced in developed countries, there are also apprehensions, if
not major fears, that this will affect domestic production in countries
that cannot compete.
Just as much as trade globalisation has advantages, it has a large
number of disadvantages too which are going to be felt differentially
by countries. Those countries which are not prepared and do not
have the skills and technology or commodities to export to others,
such as Pakistan, may become mere recipients of products from the
rest of the world unable to provide much in exchange, as is increasingly
visible. The consequences on these economies are likely to be
deleterious, just as they are for those countries that cannot compete
effectively, and are forced to de-industrialise in the face of strong
competition in the form of cheap imports. Moreover, many smaller
developing countries fear that they will become dumping grounds for
cheap imports wiping out domestic industry; again, growing evidence
from Pakistan seems to suggest that this process is underway. Similarly,
there are numerous concerns about the environment, and the impact
these policies will have on local and indigenous cultures. Genetically
modified foods and multinational firms and brands may wipe out eco-
systems, local practices and cultures. Moreover, lowering trade barriers
in order to get prices right may have benefited the few who still have
some purchasing power left in their pockets, but it has hurt local
industry, which is no longer able to compete against cheap and
sophisticated imports. In countries such as Pakistan, the double-edged
sword of globalisation seems to be working only in one direction.
7.1 GLOBALISATION, TRADE AND POVERTY
Unlike many countries, particularly those of East Asia, which are some
of the largest beneficiaries of economic globalisation (and also, perhaps
at times, some of its biggest victims) Pakistan’s exposure to the global
economy has been largely with respect to the International Financial
Institutions (IFIs).
While many countries have staked their claim to be part of an emerging
economic sector or area of the dominating global economy, Pakistan
must rank amongst those countries that are subservient to it. With
international debt accumulated to around US$35 billion, and with
the IMF and World Bank watching and ordering Pakistan’s each and
every economic and political move, the term ‘independence’ seems
to have lost much significance in modern Pakistan. Adherence to
structural adjustment packages simply to keep the economy afloat
has meant that economic policy is made by outsiders rather than by
the country’s Government. Whether it is privatisation, the exchange
rate of the rupee, power and utility tariffs, or the subsidy on wheat,
everything is decided by advisors and international bureaucrats who
refuse to acknowledge the impact of these deleterious policies. The
consequences and impact of following such policies on poverty are
addressed in sections below.
Since Pakistan’s exposure to global organisations has grown since
1988, the economy has taken a nose-dive. Not only have standard
and conventional indicators worsened, but there has been substantial

worsening of the level and extent of poverty in Pakistan, which has
more than doubled in only a decade. Moreover, the provision of large
amounts of loans to the country has not resulted in an improvement
in the economy, but has also doubled the debt burden in a decade.
While Pakistan’s managers are certainly responsible for a great deal
of the misdoing regarding the economy, they must share this
responsibility with a critical component and instrument of globalisation,
the IFIs.
A government that has been subservient and completely dependent
on global capital and the IFIs is in no position to have a political,
cultural or economic position in conflict or contradiction to whatever
global ideology happens to dictate. It is unlikely for such governments,
as Pakistan’s, to have an indigenous or nationalist stance against
globalisation, in any of its guises. Capitulation and the ability to accede
to any demands even if they go against the greater national interest,
is not an uncommon practice given the political economy of Pakistan.
The War Against Terror and the ‘coalition’ formed to fight terror, in
which Pakistan has become the frontline state, at a rather trivial price,
only reinforces the view that the government (past and present) in
Pakistan, capitulates to, rather than resists, global capital, global
politics, global culture and global might.
7.2 POVERTY, MACRO-ECONOMICS AND ADJUSTMENT,
1999-2002
As we show below, poverty remains a serious problem, one that has
increased over the last ten years. Since 1988, many governments
have voiced their concern over poverty and took different measures
to address this issue. One of the most vocal governments in recent
years to put poverty alleviation at the top of its agenda was General
Musharraf’s first government (October 1999 to November 2002).
161
There are several issues of importance in this case study. First, it is
unfortunate that the government is accountable to the IMF and not
to its own citizens. Second, while fiscal discipline is important, flexibility
is essential during an economic slowdown. Thus, this kind of blind
fiscal discipline can be anti-growth depending on the timing, and is
likely to enhance and not reduce poverty. Poverty reduction requires
serious structural reforms such as land reform and not what is normally
referred to as ‘structural’ reform. However, Pakistani governments
prefer the politically easier alternatives of poverty insensitivity and
inconsistency when framing mainstream economic policies.
The emphasis on macroeconomic stability has been stretched to the
most ridiculous extent. As a result the Public Sector Development
Programme expenditure, which was 7.6 per cent of the GDP as recently
as in 1991-92, has been brought down to 3.6 per cent in 2002,
poverty related subsidies have gone down from Rs 5.2 billion to a
paltry Rs 284 million, the tax burden has increased by four percent
for the lowest income group while it decreased by 21 percent for the
highest income group, and finally by messing up with the judiciary
and violating all norms of rule of law in order to perpetuate the
military’s pre-eminence in governance, ‘the government in the last
three years has only aided and abetted in the crime of expanding the
sea of poverty in this country’.
7.3 THE CREATION OF POVERTY: STRUCTURAL ADJUSTMENT
AND GOVERNMENT POLICY
Pakistan’s Interim-Poverty Reduction Strategy Paper (I-PRSP)
emphasises the twin objectives of rapid economic growth and poverty
reduction. Good governance is projected not only as an important
goal but also a fundamental pre-requisite for the achievement of
economic growth and poverty reduction objectives. The economic

BOX 7.0 (A) STRUCTURAL ADJUSTMENT: HAWKERS AND VENDORS IN DISTRESS

There is an obvious link between structural adjustment and rising poverty: structural adjustment policies including the implementation of
indirect taxes resulted in price rises for staple food items and energy products such as fuel oil, gas and electricity. Increases in the prices
of other utilities followed, which broke the back of the man on the street. Sales tax has an automatic inflationary impact and almost all the
measures adopted by the governments over a decade have been inflationary in nature, leaving the poorest of all to bear most of the
burden. The pressure to stay alive in most situations is so severe that people either take low paid jobs with little or no social security or
choose to work independently, as vendors and hawkers, despite the absence of any social safety nets.
These are the people who earlier had secure jobs but have been retrenched in the name of rightsizing or because the industries where they
worked closed down due to depression. Some of them used to get a good 5,000 to 6,000 rupees a month. Most people interviewed now
work long hours for as little as 75 – 100 rupees a day.
In order to survive, most families cut down on major expenses, while some have taken their children out of school and expect them to
contribute to the family income. Most live in small houses or share houses with members of extended families to cut down on utility
expenses. Most never take days off except for religious holidays like Eid or Muharram.
The findings are based on a survey of fifty women working either as domestic servants and on home based/piece work, and fifty men
PAKISTAN

working as hawkers and vendors. Most of the people interviewed have access to electricity and natural gas but the usage is limited. They
use gas for cooking food alone – for approximately 1 – 1 ½ half hours – and the whole family sleeps in a single room to limit their
electricity bill even if they live in a house that has more than one room. Most of the interviewees do not have access to fresh water and
have to buy it themselves which is a major drain on their meagre resources.
Some of them save money by foregoing important food components. For instance, most cannot afford to eat meat regularly, but eat beef,
which is relatively less expensive, once or twice a month. Most cannot afford to provide milk for young children and children start eating
regular meals when they are as young as 18 months old. Some of them even cut down on tea. Some save money by eating only one meal
a day.
Fighting poverty and inflation is a cumbersome task, but more so for the people who have no access to decent work and social safety nets.
They are managing because more people are now part of the active work force and they have strong family safety nets. For how long will
they be able to survive, only time will tell.
162
BOX 7.2 (A) IMF IN PAKISTAN: NO SPACE FOR MANOEUVRING
In November 2000, The Government of Pakistan sent a letter for a standby agreement addressed to the Managing Director of the IMF
signed by Pakistan’s Minister of Finance and the Governor of the State Bank. A Memorandum of Economic and Financial Policies 2000/
01 was enclosed and the Government agreed to many pre-conditions before signing the agreement. These prior actions included the usual
prescriptions: a devaluation of the rupee by 12 percent, an increase in the interest rate of three percent and trade liberalisation requiring
a reduction of the maximum tariff from 35 to 30 percent by July 1, 2001 (ahead of the WTO schedule). The plethora of performance
criteria (18), indicative targets (3) and benchmarks (10), and the stringent reporting requirements based on these, left no space for
manoeuvre.
Many of the IMF prescriptions were self-contradictory and ensured failure of the programme. For example, Pakistan continued to face an
economic slowdown (a recession occurs when GDP growth actually turns negative and that did not happen) at the turn of the new century.
In the face of such a slowdown, the country was expected to cut its already trimmed down development expenditure. If, partly as a result,
the slowdown continues, revenue targets and growth targets would be difficult to meet.
Pakistan faced a massive problem of de-industrialisation with a high number of sick units (reported as anywhere from 3,400 to 4,000
units). Despite this de-industrialisation, it cut down tariffs as agreed to in the structural adjustment programme, providing a risk of further
de-industrialisation. The tariff cuts also meant a loss in revenue, making the budget deficit target hard to meet. Also, if the tariff cuts raise
imports, it would make it more difficult to meet the balance of trade deficit target. Another conditionality is raising gas and power rates.
Utility subsidies in Pakistan cannot be deemed to exist by comparing rates in Pakistan to rates that exist in countries with much higher
labour and other costs. Higher utility rates represent another blow for local industrialists.
In view of these programme inconsistencies, failing to meet targets seems almost inevitable and, had politics dictated, the IMF could quite
easily have found grounds to conclude its structural adjustment association with Pakistan. However, Pakistan was suddenly transformed
almost overnight from a virtual pariah, which had turned its back on democracy, toyed with militants and exploded a nuclear device despite
warnings, to a frontline ally in the coalition against terror post September 11. As such, it immediately became a donor darling and a
suitable candidate for the IMF’s newly devised Poverty Reduction and Growth Facility (PRGF).
In March 2002, another letter of intent was sent by the Government of Pakistan to the Managing Director of the IMF. Once again, the
letter indicated the readiness of the government ‘to take any additional measures appropriate’ for achieving reform objectives. The reform
programme identified is not unusual and once again, includes in it many sensible features such as those requiring better accounting and
reporting. However, since poverty reduction is expected to now be the central aspect of the reform, as per the reorientation of the IMF let
us examine this aspect.
The Letter of Intent notes that the Government of Pakistan ‘will approve elimination of the GST (general sales tax) exemptions on
pharmaceuticals, effective from April 1, 2002, which will generate an estimated revenue gain of Rs 6 billion (on an annual basis)’. This
policy is a good illustration that governments in Pakistan are either ignorant of what causes poverty or callously indifferent. Poverty is
caused in no small measure by poverty insensitive economic policies such as fiscal policy, monetary policy and pricing policies. Thus, a
poverty reduction strategy should include an account of how mainstream economic policies will be made poverty sensitive. However,
evidence suggests that it is often the structural adjustment type PRGF conditionality agreed to by the government that generates the
poverty.

growth strategy outlined in the I-PRSP is based on stabilisation
measures and structural adjustment reforms including a debt
management strategy, privatisation of public enterprises, withdrawal
of price supports and subsidies, construction of mega development
projects especially new water storage projects, reforms in the banking
sector, comprehensive liberalisation of the economy to attract foreign
investment, tax reforms, corporatisation of agriculture and other similar
measures. The fundamental premise is that rapid economic growth
will help by itself in reducing poverty; an assumption that we show is
not supported by facts and past evidence. There is little coverage in
PAKISTAN
consequence of) the different governments’ adherence to macro-
economic policies based on the IMF and World Bank’s structural
adjustment programmes. These macroeconomic interventions usually
devalue local currency, cut the budget deficit – almost always by
cutting development spending and/or by raising indirect taxes – and
raise utility prices in order to rationalise the pricing structure. The
consequences of these measures almost always seem to fall,
disproportionately, on the poor, and are most likely to be a reason
why the proportion of the poor increases – due to cuts in government
employment or the closure of industrial units and a recession which

the I-PRSP of issues such as environmental degradation, access and
control of marginalised groups over livelihood resources and reforms
in social safeguard policies. It appears that the I-PRSP for Pakistan
was written in a way to ensure quick endorsement by the IFIs.
What the above discussion suggests is that in the case of Pakistan,
the return of poverty has been alongside (and probably, as a
ensues on account of cuts in the economy. Moreover, the quality of
the life of the poor – through cuts in public sector expenditure affecting
the delivery of government services, especially subsidies, and health
and education provision – worsens markedly. Government action, in
order to get further loans from the international financial institutions
by appeasing them, causes poverty.
 163
BOX 7.3 (A) GLOBALISING FISHERIES: A CATCH-22 SITUATION
In order to increase exports, the Government of Pakistan has been steadily expanding access of multinational trawlers to marine fisheries.
Announced and implemented by the Musharraf regime, the new Deep-Sea Fishing Policy further reduces the reserved zone for local
artisanal fishing, and increases the number of licenses for foreign trawlers. In this ill-considered policy, the Government is supported by IFIs,
specially the Asian Development Bank. Voices of the fisherfolk community express strong opposition to the deep sea trawlers:
“Foreign trawlers pollute the sea. From their catch they select big fish and throw away dead, smaller fish.”
“Their nets pull in all sizes of fish, catching small varieties like Mangar and Dothar. This hurts fish breeding. In a fortnight, one ship
catches thousands of tons of fish. They keep only the selected fish, and throw the rest back. Since it is already dead, this wastage wrecks the
sea.”
“Even though the government has set limits, these trawlers fish wherever they like. Instead of staying beyond 35 miles, the trawlers fish
as close as 10 miles. Sometimes they are hardly a mile away.”
“We are stopped from fishing during June and July. But deep sea trawlers fish all year round, violating their limits and damaging our
boats and nets. Their licenses should be cancelled and deep sea trawling banned completely. “

Protests continue to be organised by the Pakistan Fisherfolk Forum — a coalition of community activists - and NGOs such as Shirkat Gah
and PILER. These organisations demand a complete ban on foreign trawlers in the Exclusive Fishery Zone of Pakistan (200 miles off the
coast).

PAKISTAN

PHOTO: STEPHEN SHARPLES

164
Poverty
In Pakistan, income distribution is highly skewed with
the top 20 percent getting 50 percent of the income,
while the bottom 20 percent get only six per cent.
The Pakistan Human Condition Report prepared by the Centre
for Research on Poverty Reduction and Income Distribution (CRPRID),
a Planning Commission unit, paints a highly depressing picture of
the nature of poverty in the country, focusing on the condition
of education, health and institutions. It shows that at least six
million children between the ages of five to nine years are out of
school; of the remaining 14 million children, quality education is
available to only a small minority; about 55 percent of the
population aged 10 years and above is illiterate under a criterion
of literacy which is not even basic under the UNESCO definition.
Even using this sub-basic level of literacy, 80 million citizens are
illiterate. If functional literacy were the criterion, then the illiterate
population would be over 100 million in a country with a population
of 140 million. There is also a gender gap in this sub-basic literacy
along with a rural-urban gap.
In Balochistan the female literacy rate is nine percent, while in Punjab/
Sindh/North Western Frontier Province (WFP) the male literacy rate
is around 72 percent. The mortality rates for infants, children and
mothers, are high by regional and world standards. Due to the very
high maternal mortality rate of 340 per 100,000 live births, the sex
ratio in Pakistan is 108 males to 100 females. For Balochistan, this
ratio is 115 males to 100 females. Looking at some key deprivation
statistics can further delineate the meaning of poverty. For example,
45 percent of Pakistan’s population remains without access to adequate
health care, while 40 percent do not have adequate drinking water
and 55 percent are denied sanitation facilities. Seventy-five percent
of the female adult population is illiterate, and the under-five mortality
rate (a statistic which reveals a great deal about the quality of life) in
Pakistan is the highest in South Asia, higher even than Bangladesh
and Nepal. One should also add that while the human and social
condition of poverty in Pakistan is such as it is, military spending in
the country seems out of tune with the level of development (or the
lack of it), as it exists in the country. Pakistan’s defence expenditure
as part of its GNP is the highest in South Asia, its defence expenditure
PAKISTAN
as part of central government expenditure is also the highest in the
region, and twice as much is spent on defence as is on health and
education combined.
In Pakistan, income distribution is highly skewed with the top 20
percent getting 50 percent of the income, while the bottom 20 percent
get only six per cent. Income poverty is one of the main causes of
growing poverty in the country, reflecting inequality in human, physical
and social capital; an unequal distribution of assets, particularly land
in the rural areas, accentuates and perpetuates poverty further.
8.1 POVERTY AND BONDED LABOUR
‘Bonded labour’ has been around in Pakistan for centuries, and is
embedded and sanctified by traditional and cultural, social and
economic practices. In terms of severity and scale, it seems that
landless sharecroppers, particularly in southern Sindh and somewhat
in southern Punjab, are the largest category and suffer the most,
followed by agricultural wage workers in these two regions, followed
by brick kiln workers primarily in the Punjab and in NWFP. These two
categories probably make up the major proportion of bonded labourers.
Carpet weaving and fisheries are the other industries where bonded
labour is said to exist, although according to Anti-Slavery International,
‘there are many other sectors of employment in which bonded labour
has been the norm rather than the exception’.
‘Bonded’ labour can be of at least two kinds: workers who are ‘bonded’
and have debt obligations to their employer where indebtedness
actually defines the nature of their being bonded; and under more
so-called traditional or tribal settings where the nature of being bonded
to the sardar or tribal leader does not necessarily incur debt, but may
derive out of other forms of dependence and bondage, such as loyalty,
protection or other cultural and social forms of allegiance. Our interest
in this section is primarily with the former kind, i.e. debt bondage.
The main feature of the bonded labour system is that a debt is owed,
which gives rise to an exploitative and ‘bonded’ nature of relationship
between the creditor (in this case, presumably the employer rather
than a third party), where the employer can restrict the movement of
the debtor, restrict his right to work elsewhere, expropriate the
employee’s output which the employer can sell in the open market,
and can get forced labour out of him until such time as the debt is
repaid. The fact that the debt is seldom repaid and is passed on from
one generation to the next is an equally important aspect of this
relationship.
A PILER study on bonded labour which defines bondage simply as
‘the imposition of unpaid or nominally paid compulsory labour for
the landlord on his own farm or house (begar) regardless of the size
of the debt’ using upper and lower bounds, estimates 1.8 - 6.8 million
persons in bonded sharecropping families across Pakistan. Given the
lack of statistics and adequate data, either about overall debt or its
bonded nature, and large differences in definition, such huge
discrepancies between different estimates are likely to arise.
Nevertheless, if one were to consider even the lower end of the PILER
estimate, regardless of severity of bondage, we would account for
five percent of the current 40 million below the poverty line in Pakistan.
 165
The PILER study argues that ‘conditions of bondage are both a result to be far higher than some of these countries that are facing short-
and a sustenance of unequal economic and political power’. As a term temporary expenses rather than clear historic trends. Besides,
result of this extra-economic coercion, which is often overlooked, if two on this list are oil-rich and can probably afford this extravagance;
not totally ignored, due to the attitude of the local level administration Israel is the US’s closest ally and receives large amounts of bilateral
– police, justice, officialdom – cases of the landlord or his employers and concessionary aid, as perhaps does Jordan. Pakistan, however,
resorting to violence and rape are not uncommon even when the has a problem here: it has debts outstanding equivalent to around 98
original relationship may have been mainly one of a debt owed. Beatings percent of GDP and has had a growth rate over the last decade
and sexual abuse of women are often heard of, and many such landlords averaging barely 4.5 percent, lower than the decade average for even
maintain private jails so that the indebted haris do not flee. Issues of Bangladesh. Undoubtedly, the state of progress of the economy is
poverty more generally need redressing, but equally importantly, do bound to have an impact on the military and its budget.
those of violence. One of the many reasons why the local district
administration turns a blind eye to the issue of violence of bonded The military as an institution, even when it is not overtly in power, is
haris, is that most such haris belong to religious and ethnic minorities, a major player in the economy through the long arms of its Foundations.
many are migrants, and are considered ‘marginal’ to the mainstream More recently, and most visible, is the presence of the three forces in
and have less access to justice than even Muslim haris and landless the urban housing sector. Large tracts of extremely profitable urban
sharecroppers. land are owned by the military services, and the transformation of
this land into housing schemes for their personnel, further highlights
8.2 DEFENCE SPENDING, DEVELOPMENT AND POVERTY the huge advantages and benefits the military has as an institution,
Whether the military in Pakistan governs directly, as it did until very and the role that it plays in the economy. In addition, scores of serving
recently under General Musharraf and has done for almost half of and retired generals and senior officers are all placed in lucrative
Pakistan’s 55 years, or merely rules, often behind the charade of (civilian) positions.
elected government, as it has continued to do intermittently since
1985, it has very strong and clear vested interests in how the economy Without doubt, the military has a high stake in how the economy
functions. These interests can best be analysed at three levels of runs, and theoretically can double its own budget whenever it wants.
disaggregation: But in practice because it cannot do this, it enlarges its ‘real’ budget
as opposed to an accounting one, by employing its own personnel
1. Individual or particularistic interest of military personnel. Private and by advancing its institutional business interests. It is in the military’s
gains or losses, which relate to army personnel as individuals interest, as an institution and for individual military personnel, to
belonging to a certain institution. continue to remain in power indefinitely. However, this is not in the
2. Collective interests. Benefits may be individual, or distributed country’s or the economy’s interest as this serves different purposes.
collectively (though not necessarily equally), through different layers
and segments of the hierarchy within the institution. 8.3 TRENDS IN POVERTY
3. Individual and institutional interests. Both have an interest in how Towards the middle and late 1980s, there was ample evidence, which
the macro economy overall functions, as this is likely to have an confirmed the perception that poverty had been falling in Pakistan
impact on both the institution and the individual in the military. continuously for almost two decades, often at times quite dramatically.
However, towards the very beginning of the 1990s, some concerns
Pakistan’s military budget is around six percent of GDP and military emerged that suggested that perhaps that decline had slowed down,
expenditure is the second largest component, after interest payments, or had even been reversed.
of the budget each year. This spending on the military is more than
twice the expenditure on health and education combined – see Figure The availability of data and interpretation and analysis of macro-
8.2 (a) below. Pakistan’s military budget in terms of share of GDP is economic trends substantiated those earlier claims and now there is
the eighth largest in the world, although this ranking does not reflect compelling evidence, which suggests that poverty has increased
the true picture. In descending order, Saudi Arabia and Kuwait are markedly over the 1990s.
the countries which spend the most, paying as a consequence of the
Gulf war; Croatia at war, and Russia for historic reasons come next, Most of the studies, which estimate trends in poverty levels and poverty
followed by Israel, Jordan and Syria. Clearly, Pakistan’s ranking ought incidence in Pakistan, use a headcount measure under an arbitrarily

FIGURE 8.2 (A) EXPENDITURE ON HEALTH, EDUCATION & FIGURE 8.3 (A) POVERTY IN PAKISTAN 1963-99
DEFENCE, AS PRESENT OF GDP
PAKISTAN

60
12
50
10
40
8
30
6

4 20

2 10

0 0
1963-64

1966-67

1969-70

1979

1984-85

1987-88

1990-91

1992-93

1996-97

1998-99
2

9
-8

-8

-8

-8

-8

-8

-8

-8

-9

-9

-9

-9

-9

-9

-9

-9

-9

-9
81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

Total Rural Urban

Health Education Defence
166
defined poverty line. The poverty line itself is usually based upon the
concept of consumption poverty, where a minimum daily recommended
calorie allowance determines the poverty line. While comparison
between different sets of figures derived by different scholars is quite
problematic, this has been the norm for most comparisons.
The percentages presented in figure 8.3(a), and the numbers that
they reveal, are in themselves critically important especially when the
Government of Pakistan does acknowledge the fact that currently,
there are at least 45 million people that fall below the poverty line.
Let us examine the trends in poverty incidence rather than the scale
and magnitude of the incidence of poverty in Pakistan. The figure
confirms the view that poverty first rose in the 1960s, after which it
saw a continuous decline until around 1987-88, after which, for the
most part, there has been another rise in the incidence of poverty in
the country. Problems of data and measurement notwithstanding,
almost all of the recent literature on poverty in Pakistan seems to
suggest that there is a growing ‘consensus’ that poverty has increased
since the early, and most certainly, since the late, 1990s. However,
one must add that data provided by the World Bank shows that poverty
declined rapidly (as growth accelerated) in the 1980s, the decline in
poverty continued though less rapidly in the late 1980s through to
the early 1990s, and poverty began to rise significantly from the mid-
1990s. Despite the growing awareness about the increase in poverty,
the government has failed to publicly disseminate the latest income
survey that shows this trend.
If we examine trends in income distribution, we observe that during
the 1960s when there was high growth and poverty increased, the
Gini Coefficient fell from 0.355 to 0.33 improving the distribution of
income for both urban and rural areas — see figure 8.3 (b). In the
1970s, there was again an inverse relationship between poverty and
income distribution, with the latter improving and the former
worsening. Both the 1980s and the 1990s saw poverty and income
distribution moving in the same direction, with poverty falling in the
1980s and income distribution improving; the decade of the 1990s
had the opposite trends. Currently, income distribution based on the
Gini Coefficient is worse than it was in the early 1960s.
Why Poverty? Evidence from the Past
In much of the literature that has examined poverty trends in Pakistan,
a key concern has been with the relationship between economic growth
and poverty. Although most authors have argued and cautioned that
there are no hard and fast rules that reveal an automatic, strong,
correlation, poverty is seen to be closely linked to, if not determined
by, economic growth. In fact, economic growth is considered to be
an essential prerequisite for poverty reduction. Almost every study
PAKISTAN
FIGURE 8.3 (B) SECULAR TREND OF GINI COEFFICIENT (INCOME INEQUALITY)
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
1963-64
1966-67
1968-69
1969-70
1970-71
1971-72
1979
1984-85
1985-86
examining the relationship between economic growth and poverty
alleviation has argued that ‘economic growth is the foundation on
which poverty reduction can be achieved’, and that ‘economic growth
plays a dominant role in poverty alleviation and without strong and
sustained economic growth poverty alleviation is not possible’.
Although urban poverty declined in the 1960s, it was a considerable
rise in rural poverty that resulted in an overall increase in poverty
during Pakistan’s Development Decade. The reason for high levels of
poverty in the 1960s well into the 1970s is to be found in the significant
changes in the agrarian structure, especially the size distribution of
holdings which were said to have had important repercussions for the
rural occupational distribution of households. New technology was a
key factor, which allowed large landowners to resume land previously
rented-out for self-cultivation. Tenant farmers were hence evicted,
and had to either operate smaller landholdings, or join the ranks of
the landless labourers. Although there was greater agricultural growth
on account of technological innovation, at the same time, the
conditions of those evicted probably deteriorated. Increased
mechanisation led to a decrease in demand for labour, which may
have been one of the key reasons for the increase in poverty despite
high growth in output.
Growth rates for GDP, agriculture, and manufacturing in the 1960s
were two or three times those of the 1950s, and substantial structural
changes were made in the economy in this decade. A GDP growth
rate of almost seven percent for a decade and nearly ten percent for
manufacturing [figure 8.3 (c)], were probably responsible for the fall
in urban poverty during the 1960s. The mode of production and
relations of production were dramatically transformed in this decade,
and although agricultural growth rose substantially, it was the
manufacturing sector that was responsible for the high growth rates
in the economy and for the lowering of urban poverty.
While growth, particularly in the manufacturing sector, may have been
the main cause for the reduction in poverty in urban areas in the
1960s, the reasons for the fall in poverty in the 1970s are less directly
related with growth, and hence are far more interesting and instructive,
particularly when we later consider the more recent trends in poverty
and their explanations. The 1970s, mainly due to political factors,
were the only years in the history of Pakistan, when the issues of
poverty and economic equality were prominent.
The much derided nationalisation programme of the PPP government
of 1972-77, may have been a key factor that provided and ensured
employment guarantees to a vocal, predominantly urban, population.
Public sector employment ‘soared’, and the share of the social sectors
1986-87
1987-88
1990-91
1992-93
1993-94
1996-97
1998-99

FIGURE 8.3 (C) GROWTH RATES, PERCENT
10
8
6
4
2
0
1950s 1960s 1970s
GDP Agriculture
in development plans increased substantially. In fact, when the PPP
government was removed in 1977, development expenditure in 1976-
77 was an extraordinary 11 percent of GDP, the highest ever in
Pakistan’s 55 year history. Because of its political orientation, a number
of important changes were enforced in the economic and social
structure in Pakistan during the 1972-77 period, many having a
positive impact on poverty reduction, but perhaps not an immediate
impact on economic growth.
While many of these programmes and initiatives may have had
employment enhancing and poverty reducing consequences, an
additional factor which was to change the face of Pakistan’s economic
and social structure, particularly in the 1980s, had its origins in the
mid-1970s, and was to have a significant impact on poverty reduction
from 1975 onwards up to the end of the 1980s. This was the process
of migration to the Middle East and the beginning of the remittance
economy. During the 1972-77 period alone, as many as 100,000
workers left Pakistan to work overseas, sending in US$ 1.4 billion in
this period, a sum greater than the oil import bill for the country
(even after the OPEC price rise) in the same period. In the period
1977-80, an additional US$4.2 billion was remitted to Pakistan from
the Middle East. This process, which began in the 1970s, was to
become the single biggest factor which resulted in the high growth
rates for the economy and, simultaneously, for poverty reduction, in
the decade of the 1980s.
The high growth rates of the 1960s were repeated in the 1980s, with
the manufacturing sector leading overall economic growth, just as it
167
1980s 1990s 1999-2002
Manufacturing
did in the 1960s. It was primarily these high growth rates in the
economy that were responsible for the fall in poverty for much of this
decade. Income per capita in the 1980s rose by 3.2 percent a year,
compared to the 3.9 percent rise recorded in the 1960s. Development
expenditure continued to be high for most of the 1980s, as did
spending on the social sectors, especially in the period 1984-85 to
1987-88, when poverty fell markedly [see figure 7.3 (a)]. The trend
of increasing public sector employment begun in the 1970s continued
well into the decade of the eighties; urban and rural wages also showed
signs of an increase in this period. Probably the most important
contributor to growth and to poverty reduction in this period was the
amount of money remitted from the Middle East. In the decade of the
1980s, as much as US$23.1 billion was remitted to Pakistan,
equivalent to almost 10 percent of GDP in 1982-83.
Why did poverty return to Pakistan and why does it still persist?
Perhaps the answer to this question lies in much of the argument
made in the previous section, especially regarding the fall in poverty
in the 1980s. The factors that led to poverty reduction in the eighties
were, primarily, high growth rates helped by very significant
remittances, and an active and spendthrift public sector. Just as the
declining trends in poverty at the end of the 1980s coincide with the
end of the Five Point Programme (which featured a spendthrift
government undertaking smaller scale development projects), they
also, equally coincidentally, begin a slowing down or reversal, soon
after the start of a comprehensive IMF funded structural adjustment
programme initiated at the end of the 1980s and beginning of the
1990s.
PAKISTAN
168
Gender
Women in Pakistan are faced with increasing inequalities
in a ‘society’ that tends to ignore or veil their existence.
Women are considered to be economically invisible.
Looking at gendered indicators of development, Pakistan’s record
stands out as amongst the worst in South Asia. In terms of the GDI
and GEM, Pakistan’s scores are well below both the South Asian and
developing country averages.
Women in Pakistan are faced with increasing inequalities in a ‘society’
that tends to ignore or veil their existence. Women are considered to
be economically invisible, because their labour in family care,
household maintenance, and the domestic and informal sector market
where many of them work, is excluded from national accounts, and
the work that they do is compensated inadequately. Despite this
economic invisibility, the (visible) female labour force as a percent of
total labour force in Pakistan is the lowest of all countries in the
region.
The share of earned income by women as a percentage of that of men
is the lowest in the region, and half of what it is in Sri Lanka and the
Maldives, revealing the very high degree of women’s financial
dependence on men in Pakistan. The real GDP per capita for females
in Pakistan is the lowest amongst all the seven countries, and is also
the lowest as a share of the real GDP of men. In addition, women’s
invisibility is emphasised since much legislation has codified male
privileges as a result of which women are unable to gain equal access
to inheritance or property. Murder in the name of ‘honour’ killings
and other forms of terror and violence are commonplace in the Islamic
Republic of Pakistan.
Women in South Asia do not enjoy complete equality with men, despite
constitutional guarantees to the contrary. They do not have equal
access to property, to protection from harm, to decision making powers
surrounding their family and personal life, and nor do they have equal
PAKISTAN
access to the justice system. While this degree of inequality differs
across South Asia, probably Pakistan fares far worse than India and
Sri Lanka, and perhaps even Bangladesh. The lack of general overall
democracy, lower female (as well as male) literacy rates, the lowest
female primary school enrolment in South Asia, and cultural and
traditional norms may all play a part in further worsening the status of
women in Pakistan.
The status of women in Pakistan is far worse than that of men,
regardless of occupation or social class. However, amongst the poorer
sections of society, gender discrimination is made worse by lower
literacy rates, higher mortality and morbidity trends, less access to
justice and lower awareness of human rights. While both poor men
and women suffer as a result of their poverty, there is also visible
inequality with women taking the brunt as a consequence of their
poverty. While women in Pakistan are discriminated against on account
of being women, poor women face particularly severe conditions,
with their gender exacerbating their poverty.
Although most of the statistics and the qualitative evidence over time
show that the position of women in society in Pakistan has not shown
much improvement, it needs to be stated that the military government
of General Pervez Musharraf has made attempts to increase the
participation by women in all tiers of the political and electoral process;
not only have the reserved seats for women in Parliament been
increased, but local government bodies are by legislation supposed
to have at least a third of their seats reserved for women. Despite
continuing traditional relationships of power between men and women,
this step must be welcomed as one (of the very few) which may not
just raise the participation of women in the political process, but may
also allow them a greater role in public policy and decision making.

10
Human Rights
Mainstream political parties continued to operate under tight constraints.
A ban on rallies remained in force, and the authorities detained
thousands of political party members and activists
to forestall planned demonstrations.
Pakistan has been ruled by military rulers for almost half of its
independent history of more than 50 years. Military rulers have been
the key players in the country’s body polity. After taking power from
elected Prime minister Nawaj Sarif, General Pervez Musharraf took
steps that consolidated the army’s authority and all but ensured that
any future government would operate under military tutelage. With
media attention focused on internal unrest following Pakistan’s break
with the Taliban and its public support for the United States-led
intervention there, Musharraf’s movement toward establishing a
controlled democracy faced little international opposition. Musharraf
arguably emerged from the political realignment that occurred following
the September 11 attacks on the U.S. in a stronger position. He
reshuffled the military core command so as to marginalise key Taliban
backers; arrested leaders of religious parties who challenged his
authority; and secured a critical rescheduling of Pakistan’s debt, donor
commitments of new loans, and the lifting of existing sanctions.
Nevertheless, the potential domestic fallout from a prolonged U.S.
presence in Afghanistan and the possibility of a Northern Alliance-
dominated government emerging in Afghanistan left Musharraf clearly
discomfited by November.
Mainstream political parties continued to operate under tight
constraints. A ban on rallies remained in force, and the authorities
detained thousands of political party members and activists to forestall
planned demonstrations against government policies and continued
military rule. The government used a draconian accountability law
that it introduced shortly after the October 1999 coup as leverage in
a largely unsuccessful attempt to fashion a pliant party leadership.
10.1 HUMAN RIGHTS DEVELOPMENT
The National Accountability Ordinance, enacted in November 1999,
ostensibly to facilitate the prosecution of officials and other leaders
for corruption and other illegal acts, combined unchecked powers of
arrest, investigation, and prosecution. The other major devices
employed by the government to limit opposition political activity were
the Maintenance of Public Order (MPO) ordinance, which broadly
prohibited any speech deemed “likely to cause fear or alarm to the
public” or “likely to further any activity prejudicial to public safety or
the maintenance of public order”; and a ban on “political meetings at
public places, strikes and processions” that was imposed in March
2000.
The authorities prevented mainstream political parties from holding
meetings, but allowed religious parties to hold regular meetings and
processions in most parts of the country. This changed after September
11, however, when Musharraf announced his administration’s support
for the U.S.-led anti-terrorism coalition. Religious parties that
169
continued to mobilise protesters in support of the Taliban, or who
explicitly challenged Musharraf’s authority, faced arrest. On October
9, three Afghan refugees were shot dead by police in Kuchlak, a small
town close to Quetta, with police reportedly failing to give warnings
or use teargas or other means to control the mob before opening fire.
The militarisation of civilian institutions, a trend already observable
during Nawaj Sarif’s second term in office, continued under Musharraf.
According to official records cited by the respected Lahore-based
weekly Friday Times, at the beginning of the year about 175 serving
and retired military officers held high-level civilian posts. In addition,
Musharraf has established a countrywide network of army monitoring
teams to supervise and assist in the functioning of the civilian
bureaucracy.
Candidates associated with the mainstream political parties took the
lion’s share of the seats in the non-party local government elections,
dealing a setback to government ambitions of establishing local bodies
that were not bound to provincial political interests and were directly
accountable to the federal government. While accepting the need for
accountable government at the local level, Pakistani human rights
activists faulted the design and implementation of the administration’s
plan.
In September 2000, the government established the Commission on
the Status of Women. Despite its directive to safeguard and promote
women’s rights, the commission had few powers to implement its
mandate and in 2001 made little progress in the way of setting forth
concrete recommendations. Human rights activists decried continued
impunity and lenient sentences for so-called honour crimes against
women, the practice of punishing women said to have brought
dishonour to their families.
In a welcomed move affecting labour rights, Pakistan, on August 15,
ratified International Labour Organization (ILO) Convention No. 182,
PAKISTAN
which calls for immediate and effective measures to secure the
prohibition of the worst forms of child labour, as well as ILO Convention
No. 100, concerning equal remuneration for men and women.
10.2 DEFENDING HUMAN RIGHTS
Pakistani human rights groups played a vital role in challenging the
government’s policies toward refugees and, especially in the case of
minority NGOs, its retention of the separate electorate.
The formation of the multiparty Alliance for the Restoration of
Democracy (ARD) on December 3, 2000 posed the first major
challenge to military rule and remained a principal target of the
Musharraf administration during the first months of the year.
170
BOX 10.1 (A) RELIGIOUS KILLINGS ON THE RISE
Recently the Christian congregation in the southern Punjab town of Bahawalpur was attacked. The government promptly condemned the
attack and ordered an investigation into the incident. Eighteen people were killed when masked gunmen entered St. Dominic’s Church,
locked the doors, and fired at the assembled worshippers. Although Bahawalpur has been scarred by sectarian violence between Sunni and
Shi’a Muslims in recent years, human rights investigators said it was the first attack directed at Christians in the area.

10.3 ROLE OF INTERNATIONAL COMMUNITY
The international community almost unanimously eased diplomatic
and economic sanctions when Pakistan backed the U.S. led anti-
terrorism coalition. Pressure for elections and a return to constitutional
rule in 2002 was eased, while key donors made commitments of
huge aid packages for Afghan refugee relief and basic economic
assistance. Some donors resumed arms sales.
operation Agreement with the European Community, replacing the
1986 agreement.
On October 26, Japan joined the E.U., the U.S. and Canada, and
lifted economic sanctions against Pakistan. Japan had frozen new grants
and loans, except for humanitarian aid, to Pakistan since the country
conducted nuclear tests in 1998.

On September 22, the Bush administration, with strong Congressional
backing, waived economic sanctions imposed on Pakistan after its
1998 nuclear tests, allowing the U.S. to approve loans at the
International Monetary Fund (IMF) and the World Bank.
On October 17, the U.K. announced a 15 million pound debt relief
package to help Pakistan cope with the Afghan refugee crisis and
internal reforms. On November 24, Pakistan signed a new Co-
PAKISTAN
In its concluding statement of March 20, 2001, the Commonwealth
Ministerial Action Group criticised the restrictions imposed by the
Musharraf administration on political parties, including their formal
exclusion from the local government elections, and pressed the regime
to shorten its electoral timetable and to restore full democratic rule.
The ministers agreed that Pakistan should remain suspended from
the councils of the Commonwealth pending the restoration of
democracy.

PHOTO: STEPHEN SHARPLES


11
Food Security
The most serious inequities at present exist in the rural areas
mainly because of the pattern of land ownership.
Despite three land reforms about 40 per cent of the total farm area
is operated by only seven percent of farmers
11.1 FOOD AVAILABILITY
Pakistan is not a food insecure country. It generally has the economic
ability to import the required food (food import costs less than 20
percent of exports). Average food consumption is 150 kg per person
per year of cereals and pulses in total with a minimum of about 130
kg in 1961 and a maximum of 162 kg in 1993. Per capita availability,
however, fell to 140 kg in 1995 and marginally went up to 145 kg in
1996. Equity is another major issue of concern related to food security.
In Pakistan inequity in land holdings and income is relatively high.
There is also a wide variation in income, human development as well
as overall development across regions and provinces. Ethnic divides
within some provinces make the intra-provincial inequities more
sensitive than they would have been in a homogenous set-up.
The most serious inequities at present exist in the rural areas mainly
because of the pattern of land ownership. Despite three land reforms
(in 1959, 1972 and 1977), about 40 per cent of the total farm area
is operated by only seven percent of farmers with average holdings of
10 hectares or more whereas 81 per cent of the farmers have average
holdings of five hectares or less.
11.2 INCIDENCE OF FOOD POVERTY (CALORIC BASED)
For four decades, Pakistan has been trying to reduce poverty. The
proportion of people below the poverty line fell from 52 percent in
1970/71 to 17 percent in 1987/88. However, since the early 1990’s
the proportion of poverty is on the rise. Recent estimates from 1999
showed that 32.6 percent of the population fell below the poverty
line. Average daily calorie intake per person for 1998/1999 presented
in Table 12, is close to the recommended level of calorie intake.
Urban and rural areas did not differ much in terms of calorie intake
per capita, the differences across the four provinces were also not
substantial. The problem lies in the non-equity of food distribution
within each of these categories and even within the members of the
household.
11.3 INCOME OPPORTUNITIES
In Pakistan income inequality is not only high but is also increasing.
Income inequality measured in terms of Household Gini-Coefficient
has increased to 0.4 in 1992-93 from 0.38 in 1963-64. During the
same period the ratio of income of the highest 20 percent to that of
lowest 20 percent has increased from 7.1 to 7.8. There is no significant
difference in the prevalence of chronic malnutrition in low and medium
171
socio-economic groups but it was significantly lower (26 percent less)
in the high socio-economic groups. This reveals that the low and
medium socio-economic groups lack purchasing power hindering their
food consumption levels while in the high socio-economic group the
lack of adequate nutrition education may be the main cause. The
nutrition survey highlights also the gender inequities in intra-household
nutrition intake.
11.4 EQUITY OF FOOD DISTRIBUTION
The survey shows that procurement of food items had some association
with both poverty and farm/non-farm status of households. Poor and/
or non-farm households generally buy food that is required for their
subsistence. In terms of food procurement, farm households appear
to be relatively better off because they produce a substantial proportion
of food that is required for basic subsistence.
11.5 ACCESS TO FOOD
Access to food refers to the ability of an individual to acquire sufficient
food, quantity and quality wise at all times. This dimension of food
security is mainly related to poverty levels and can be best handled
through the following means:
Identification and Targeting of Food Insecure People In the context of
access to food, it would be important to identify the food insecure
people, who are financially poor and unable to acquire sufficient food,
even if the overall supply of food in the country is sufficient. The Task
Force already established by the UN Rural Development and Food
Security thematic group co-ordinated by WFP is giving attention to
improving co-ordination, information and statistical data on food
insecure and vulnerable groups, led by the recommendation of the
CCA network on FIVIMS chaired by FAO.
Guaranteeing equity of food distribution. Equity is related to the
reliability of both supply and access to food. In Pakistan inequity in
landholdings and income is relatively high. Due to the significant
PAKISTAN
variation in income, human resource development, gender imbalances
and overall development across different regions of the country, equity
has emerged as a crucial issue in food security. The need to address
inequity is not only crucial for social justice, but subsequently for
food accessibility. All the UN and MF institutions as well as bilateral
donors are giving great consideration to this dimension of GOP
policies.
172
12
The Role of Civil Society
Without the active role of advocacy activists, scholars and some NGOs,
the overall debate over development and structural adjustment
would have been far more one-sided than it has been.
With the State facing numerous fiscal and other crises and having to
withdraw from the arena of development over the last few years, the
void has been addressed (though certainly not filled) by non-
governmental organisations (NGOs), one of the constituents of what
is being called civil society. There have been, broadly, two types of
NGOs:
Ÿ Development oriented NGOs. These NGOs aim at providing
development related services and interventions, like running or
building schools, providing contraceptives or micro-credit, or
helping people lay sewers and sanitation facilities.
Ÿ Advocacy oriented NGOs. These NGOs are involved in advocacy
issues, putting pressure on the government on issues related to
democracy, human rights, and rights for women.
Both types have had varying influences on both development and on
advocacy and on specific issues related to poverty.
Their influence can be observed in three main areas:
1. Presenting alternative views. Some NGOs along with activists have
played an important role in contesting claims made by government
regarding its political and economic achievements and successes in
recent years. Increasingly, with information more easily available and
also easier to disseminate, activists and advocacy NGOs have begun
to present alternative reasons for the growing poverty and economic
slowdown in Pakistan. The military government of General Musharraf
and his numerous aides have gone out of their way to deride the
democratic governments between 1988 and 1999 and blame them
for all the ills of Pakistan’s society and economy. For the military,
democracy in Pakistan has been an outright failure and because of
problems of ’governance’, the economy has slowed down and poverty
increased. Numerous civil society activists have produced counter
critiques about the role of the military and about the so-called failures
of democracy affecting the economy. These alternative assessments
PAKISTAN
have shown how democracy has not been permitted to work in Pakistan,
thanks mainly to an intrusive military, and how the military has worked
in close tandem with international financial institutions and has been
given preferential treatment by the IFIs compared to governments
which were answerable and responsive to the electorate.
The interventions by civil society critiquing the governments’
viewpoints and offering alternative interpretations, have most certainly
had an impact on government action itself. Without the active role of
advocacy activists, scholars and some NGOs, the overall debate over
development and structural adjustment would have been far more
one-sided than it has been. While there have been only a few concrete
‘victories’, the presence of some advocacy groups has been critical
to many development interventions.
2. Carrying out development. Many NGOs have appeared as
development practitioners, replacing the State where the State has
itself withdrawn. In urban sewerage and sanitation, rural development,
and micro credit, many NGOs have now acquired expertise and
respect, which has forced both government and donors to take notice.
Increasingly, given the success of many development NGOs, their
advice is being sought by donors and government, and at times they
are beginning to offer alternatives to ‘official’ policy, on the grounds
that these initiatives are more cost effective, practical and they work.
3. Improving women’s status. The role of civil society in increasing
women’s participation and awareness about public life must count as
one of the more important contributions of NGOs and women activists.
Civil society initiatives have helped to organise women and to create
awareness on a range of issues from health to education to basic
rights. A significant number of women work for civil society
organisations, either on a paid or voluntary basis. Women’s movements
have led the way in incorporating gender into development theory
and practice. Poverty alleviation has always been an issue of the
women’s movement and women’s groups in Pakistan have actively
campaigned for the repeal of laws that discriminate against women
and religious minorities.

13
Alternatives and Recommendations
The gains from peace and from trade between Pakistan and the other countries
in SAARC, particularly India, ought to be high on the agenda of all countries
if they have any serious desire to alleviate poverty.
The main themes, which suggest why poverty continues to exist in
Pakistan at the scale that it does, relate to the following:
Ÿ IMF and World Bank structural adjustment programmes which end
up causing poverty. If macroeconomic policy is one of the main causes
not just for continuing poverty, but also for creating it, as we argue,
any government serious about alleviating poverty will need to follow
economic policies very different from those that have become standard
in Pakistan. Policies that distance themselves from structural adjustment
and require increased and effective development expenditure, for
example, will have to be adopted. Advocacy NGOs and activists will
need to continue their pressure on government, highlighting anomalies
that accrue from its action.
Ÿ Militarisation of the economy and of society. Militarisation in
Pakistan has not allowed democracy to take root in the country
and has also made peace in the region hostage to military
adventurism. While political society has to play a more mature
role in the context of developments in Pakistan internally, along
with other components of civil society, an attempt has to be made
to have greater peace with India. While contentious political issues
need to be debated between Pakistan and India, both nuclear
powers, there is a need to open other avenues of communication,
like trade, cultural and sporting links, and an exchange between
people between the two countries. At a time when countries are
forming economic and political unions with their neighbours, South
Asia continues to be the only large regional entity that is nowhere
near becoming a regional trading bloc. The gains from peace and
from trade between Pakistan and the other countries in SAARC,
particularly India, ought to be high on the agenda of all countries
173
if they have any serious desire to alleviate poverty and to evolve
into mature societies, economies and nations.
Ÿ Position of women in society and in the legal system. In the context
of Pakistan, unless women are put first when it comes to education,
development, the legal system or in public participation, the
country is unlikely to develop in any significant manner. There is a
need for government to review its strong gender biases and for
men’s and women’s groups to put pressure on government to
make policies that show affirmative action towards women.
Ÿ Denial of access to assets particularly land. If some poverty is
created through the lack of access to assets and land, a programme
of land distribution needs to be initiated. The distribution of already
existing state land to landless farmers and sharecroppers is a zero-
cost strategy. Not only will it bear no expense, it will be a politically
popular move and will also, in all likelihood, ensure far greater
agricultural output once the landless become landowners, of even
4-8 acres. The sense of ownership and the freedom to make and
implement decisions ought to generate another Green Revolution
dramatically reducing rural poverty and bonded labour. Of course,
a land reform or land distribution programme needs to be
supplemented with the provision of credit from formal and non-
formal sources.
Ÿ Deprivation of health and education opportunities particularly as
cuts in development expenditure continue.
Ÿ Lack of democracy and of an environment which allows public
participation.
PAKISTAN
174

14

References

This Country Report draws heavily on numerous published and unpublished papers, books and reports, some of which are as follows:

ActionAid Pakistan (1999), Bonded Labour in Sindh, ActionAid, Islamabad

Amjad, R. and AR Kemal (1997), Macroeconomic Policies and their Impact on Poverty Alleviation in Pakistan, The Pakistan Development
Review, Vol. 36, No 1, Spring 1997, pp. 39-68, Pakistan Institute of Development Economics, Islamabad

Anti-Slavery International (1996), The Menace of Bonded Labour: Debt Bondage in Pakistan, Anti-Slavery International, London

Burki, SJ. (1995), Poverty Returns to Pakistan?, mimeo., Address at a Seminar held by the Pakistan Institute of Development Economics,
December 4, 1995, Islamabad

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