UNDP Reports Pakistan Poverty Declined to 17%, Under Musharraf

Pakistan Monday, September 7th, 2009 Pakistan News

http://www.daily.pk/?p=10324

Center for Poverty Reduction (CPRSPD), backed by the United Nations Development Program(UNDP), is reporting that Pakistans poverty at national level declined sharply from 22.3 percent in 2005-06 (versus Indias poverty rate of 42%) to 17.2 percent in 2007-08. This poverty estimate has been validated by the World Bank. It should not be a big surprise, given the close relationship between poverty reduction and robust economic growth that Pakistan saw from 2005-06 to 2007-08. The economic slowdown has only occurred in 2008-09, which appears to have resulted in some visible poverty increase on the ground since the middle of last year. However, there seems to be a deliberate effort being made by some politically motivated Pakistani economists and politicians to delay the release of CPDSPD data and deny what Dr. Ashfaq Khan of NUST calls the major economic and social achievements of the last one decade under President Musharraf. Heres an interesting OpEd published in the News by Dr Ashfaque H Khan on how poverty statistics in Pakistan are fair game for the various experts with an ax to grind: The present government is facing real embarrassment on poverty estimates for 2007-08. The Panel of Economists, formed by the government in April 2008 under the leadership of Dr Hafiz Pasha, found that 35-40 percent people of Pakistan were living below the poverty line in 2007-08 up from 22.3 percent in 2005-06. The political leadership, unaware of the technical details of the estimation techniques, took the estimates of the Panel seriously and everybody, including the ministers, the prime minister and the president started mentioning the numbers within and outside the country. The political leadership had no reason to distrust the professional skills of the Panel of Economists. Their only fault was that they could not realize that some members of the Panel of Economists were positioning themselves to get ministerial jobs and some retired experts were trying to secure their jobs in the government. These people could have moved their way to the present regime only if they would paint a bleak picture of the state of the economy, including the substantial rise in poverty. I am positive that this Panel of Economists has had no courage to write similar three paragraphs as documented in the Memorandum of Economic and Financial Policies attached with the Letter of Intent, signed by the Government of Pakistan on Nov 20, 2008 with the IMF. These three paragraphs, written by the present regime, very aptly summarize the major economic and social achievements of the last one decade, including the reduction in poverty and an improvement in many social indicators. It appears that the Panel of Economists was trying to become more Christian than the Pope and as such came up with poverty estimates based on flawed methodology. On the other hand, the Centre for Poverty Reduction and Social Policy Development (CPRSPD), using the(Pakistan Social and Living Standards Measurement (PSLM) Survey 2007-08, also estimated poverty for the year 2007-08. They found that poverty at national level declined sharply from 22.3 percent in 2005-06 to 17.2 percent in 2007-08. Poverty, both in rural and

urban areas also registered sharp declines. The estimates of the CPRSPD were also validated by the experts from the World Bank. The experts from the Planning Commission are of the view that a sharp decline in poverty in 2007-08 does not depict the ground reality. Why should it depict the ground reality? Firstly, the period it covers is from July 2007 to June 2008. Secondly, poverty estimates are not like the growth number, money supply or inflation which change yearly. Poverty number reflects the changes in the lives of the people which are affected by the policies pursued for a fairly long period of time. To be fair to the government, how can they say now that the poverty in Pakistan has declined substantially in 2007-08 as opposed to their earlier stance that it had increased to the range of 35-40 percent? In other words, how can they say that at the time of taking charge of the state of affairs only 17.2 percent people were living below the poverty line and that there are indications that poverty is on the rise once again in Pakistan. This is indeed the real embarrassment for the government caused by the Panel of Economists. Poverty estimates are highly sensitive to changes in different variables. For example, should we use calorie intake or basic need approach or should we use 2550, 2250 or 2350 calorie to draw the poverty line? Should we use CPI, SPI, WPI or prices derived from the Survey itself to adjust the poverty line or should we use consumption or income? The basket of commodities may differ across researchers and even the cleaning protocol of data may give different poverty estimates. Thus, at any given point in time there can be different poverty estimates with same or different data sets. What is required, therefore, is that we continue to use the same methodology irrespective of its strength and weaknesses, lest we should never be able to know as to what is happening on poverty front. There are views about the methodology used by the Panel of Economists. One, that in the absence of PSLM Survey data for 2007-08 the Panel simply adjusted the poverty line upward to the extent of cumulative inflation (20 percent) for the period 2006-07 and 2007-08. On the other hand, they used household consumption expenditure for the year 2005-06, which was not adjusted upward to match the poverty line. In other words, apple was compared with orange. Naturally, such a flawed methodology was bound to produce erroneous results. Second, that the Panel used an equation to forecast poverty. This equation has many exogenous variables, such as food inflation, remittances, openness of trade, development expenditure as percentage of GDP, etc. Giving the value of each variable for 2007-08 and using the estimated parameters it predicted poverty for 2007-08. Forecasting is a complex exercise and requires transparency in the use of data. The Panel did not release those numbers which went into the model. Thirdly, they used the preliminary version of the model whose parameters changed substantially in subsequent revisions. The Panel never bothered to contact the author of the model. Had they contacted him, he could have saved the Panel from such disgrace. At the end, let me once again appeal to the Planning Commission to release the poverty numbers for 2007-08. Not releasing the number is not a good idea. The number is already out. Dont embarrass the government any more. Forget the Panels report and trust your own young economists at the CPRSPD.