Pakistan: Promoting Rural Growth and Poverty Reduction
(April 23, 2007) Agricultural growth is necessary but not sufficient to alleviate rural poverty in Pakistan, says new World Bank report. An effective poverty reduction strategy must address the rural non-farm economy and the needs of the rural non-farm poor.
Facts: - Around 35 million people in rural areas are poor, representing about 80% of Pakistan’s poor. - Agriculture accounts for about 40 percent of rural household incomes. - The majority of the rural poor in Pakistan are not farmers. - Access to credit and usable water is unbalanced. - 37% of rural households own land
Over the last century, Pakistan has harnessed the Indus River to develop an irrigated-agriculture sector that remains the backbone of its economy. However, the country is divided by income inequality and geographic disparities. These divisions are particularly evident in the agriculture sector, as most rural poor people lack access to land and irrigation water. Ensuring efficient use of water and building public-private partnerships can contribute to diversification and growth in the sector. For the rural non-farm poor, escaping poverty will require migration and a revitalization of the rural economy, which generates substantial rural employment.
This chapter begins with a detailed examination of recent trends in poverty and rural incomes, as well as an overview of changes to non-monetary measures of welfare. The focus of the report is to shed light on the determinants of poverty and rural incomes to better understand the effects of agricultural growth, growth in other sources of income, and public investments in the welfare of the poor.
Survey evidence points to an encouraging 5.1 percent decline in rural poverty between 2001-02 and 2004-05. However, longer-term trends show only very small changes in real per capita expenditures of the rural poor or in the level of rural poverty. There have been marked improvements in non-monetary welfare indicators, including child immunization, access to drinking water, and electrification of the home. Moreover, educational levels have also risen, suggesting improved prospects for future income growth.
Agricultural growth in Pakistan throughout most of the last three decades has depended to a large extent on the major crops such as wheat, rice, cotton, and sugarcane. Although there is still scope for production increases of these crops, future increases in agricultural productivity and rural incomes are likely to be driven by diversification into high-value crops and livestock.
Substantial agricultural growth alone is not enough to achieve rapid rural poverty reduction as agricultural earnings accrue mainly to those with access to land and water. Therefore, increasing rural non-farm incomes is critical for rapid rural poverty reduction. This chapter examines the structure of the rural non-farm economy and the constraints it faces.
Chapter 5: Public Expenditures and Rural Service Delivery
Low levels of public service related to health and education contribute to a disparity between Pakistan and other South Asian countries on many social welfare indicators. Improving rural service delivery is crucial both for economic growth and improved welfare for the poor. This chapter analyzes this issue by examining the changes in total fiscal resources available at lower levels of government over time; the composition of expenditures; and constraints to more efficient service delivery.
Chapter 6: Social Mobilization and Enhancing Livelihoods
Numerous government and non-government programs and approaches have been used to promote rural development and poverty alleviation. This chapter provides an overview of the major programs in Pakistan and underscores the importance of social mobilization in creating effective demand for public services at the local level. Other direct interventions aimed at improving welfare of the poor are also examined, including micro-credit programs, safety nets and programs targeted at disadvantaged groups, particularly heavily indebted laborers.
Rural growth is crucial to Pakistan’s future. Two-thirds of the country’s population and 80 percent of the poor live in rural areas. Unless there is sustained progress in these areas, rapid overall economic growth and poverty reduction are impossible. Stagnation of the rural economy could also threaten the social cohesion of the country, drive massive migration to urban areas, and result in massive urban unemployment. Achieving rapid rural growth and poverty reduction requires overcoming major constraints related to unequal distribution of land and access to water, low productivity of crop agriculture, inadequate infrastructure, ineffective public-service delivery, and insufficient participation by rural people in most public-sector development programs.