ISLAMABAD - Pakistan Institute of Development Economics (PIDE) in its latest viewpoint series titled, “Rural Poverty Dynamics in Pakistan” has noted that about half of the rural population in the country experienced poverty during the last decade.

PIDE launched this report on the occasion of signing ceremony of Memorandum of Understanding (MoU) between PIDE and Pakistan Poverty Alleviation Fund (PPAF) here on Wednesday. The MoU was aimed at institutional collaboration with PPAF regarding short-term internship opportunities for the students of PIDE, and would share research, trainings and knowledge through library exchanges and borrowings.

While speaking on the occasion, Dr Rashid Amjad, Vice Chancellor, PIDE, said that this report would help the policymakers to understand the dynamics of poverty in Pakistan.

He was of a belief that poverty alleviation strategies should focus on addressing problem of unemployment of working age population and minimising shocks like natural disasters, floods, weather and economic recession.

Chief Executive Officer, PPAF, Qazi Azmat Isa was of the opinion that this agreement would strengthen both institutions in analysing poverty and addressing it through concrete actions.

The PIDE said the poverty debate overlooks the dynamism of poverty in the country as it focuses only on its levels and trends. Based on the PIDE’s Pakistan Panel Household Survey (PPHS) that covered the same rural households in its three rounds conducted in 2001, 2004 and 2010 finds that poverty reduction has not been sustainable in Pakistan and more importantly shows wide fluctuations.

A large proportion of the population lives around the poverty line, and any micro and/or macro shock (positive or negative) has pushed it into poverty or pulled it out of it. This dynamism of poverty, however, has been overlooked in the cross-sectional datasets around which the poverty debate in the country mainly revolves. Cross-sectional datasets, like the HIES carried out by the Pakistan Bureau of Statistics, no doubt contribute towards monitoring the progress in poverty reduction overtime but such static measures of households’ standard of living do not necessarily provide a good insight to their likely stability overtime.

The PIDE Viewpoint suggests that the poverty reduction trends in the past show a high mobility of population into or out of poverty in rural Pakistan. This mobility leads to a higher proportion of population experiencing poverty overtime than what the cross-sectional data might suggest. However, it is not all gloom and doom as the analysis also shows that a much smaller proportion of the population, at under 5 per cent, experiences chronic poverty, that is remained poor for a long period of time. Thus, an analysis of the poverty dynamics is important to uncover the true nature of the wellbeing of population.

Interesting regional differences are shown by the PIDE Viewpoint for rural poverty dynamics in Pakistan. Poverty in rural Punjab and Sindh declined rather sharply from 29.5 per cent in 2001 to 21.8 per cent in 2004, jumping again to 28 per cent in 2010. By taking into account the data for all provinces, which is available for 2001 and 2010 rounds, rural poverty declined by 5 percentage points from 27.5 percent in 2001 to 22.4 percent in 2010. Chronic poverty was found to be almost non-existent in north/central Punjab at only one percent.

The movement into and out of poverty is also relatively small in this region as three-quarters of the population is found to be in the `never-poor’ category. Thus, in terms of poverty reduction the north/central Punjab region seems to be stable. However, the situation in southern Punjab and Sindh is quite different and alarming, especially in rural Sindh where about two-thirds of the households have been below the poverty line for one or more periods and only one-third are in the ‘never-poor’ category. Chronic poverty is found higher in southern Punjab than in Sindh or in north/central Punjab, particularly the latter.

Incidence of chronic poverty and a household’s vulnerability to move into poverty is higher among households headed by less educated persons, and having no ownership of land and livestock, suggesting the structural nature of rural poverty in Pakistan. Shocks such as inflation, flood, and drought have played a key role in the past in poverty movements. Large family size and high dependency ratios are associated positively with chronic poverty and negatively with the desired state of being ‘never-poor’ or at risk of becoming poor.

The PIDE Viewpoint recommends that for rural poverty reduction and its sustainability the strategy should be to create assets for the rural poor and improve their human capital as well as the employability of the working age population. There is also a need to minimise the risks associated with economic and natural shocks which very easily push a household below the poverty line. Developing rural infrastructure and rural-urban linkages through investment in farm as well as non-farm sectors would also be useful to alleviate the rural poor. Last but not the least, there is a need to lower the dependency ratio by reducing fertility to help reduce poverty and vulnerability.