Pakistans I-PRSP in the Light of Evaluative Experience of the World Banks Poverty Reduction Strategy and the Global Experience with the PRSPs so far Sohail.

Pakistan’s I-PRSP in the Light of Evaluative Experience of the World Bank’s Poverty Reduction Strategy and the Global Experience with

the PRSPs so far

Sohail Jehangir MalikChairman

Innovative Development Strategies (Pvt.) Ltd

Global Poverty Reduction during the 1990s

The World Bank’s three pronged poverty reduction strategy of 1990

• Growth• social sector development• and safety netshad mixed resultsIn terms of the money-metric measure of

poverty

By the end of the 1990s Global poverty rates were down but progress was extremely uneven

Take away China and there was actually a worsening of poverty

headcount numbers over the 1990s!!!

Reduction in child malnutrition has been slow prospect of reaching the targets of Millennium Development Goal is in doubt

120 million primary-school-age children were not in school in 1999.53 % of them girls.74 % living in South Asia and Sub-Saharan Africa.

Ratio of girls to boys in primary and secondary school (%)

Infant mortality rates

Pakistan - by the end of the 1990s

Not only was the poverty situation alarming!but prospects for its reduction were also bleak

y = 38.68e-0.0316x

10

15

20

25

30

35

40

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Expon. (Actual)

Expon. (Required)

Headcount Of Poor - Pakistan

Pakistan: Prevalence of Child malnutrition (number of children under five)

38.240.2y = 40.612e-0.0102x

y = 43.145e-0.029x

0

20

40

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Expon. (Pas t Trend)

Expon. (Required Trend)

Pakistan: Ratio of Literate Females to Males (% age 15-24)

58.949

53.7 57.9y = 48.094e0.0185x

y = 44.956e0.0294x

40

55

70

85

100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Expon. (Pas t Trend)

Expon. (Required trend)

Pakistan: Under Five Mortality Rate

110.3

138118

112 y = 138.95e-0.022x

y = 160.27e-0.0451x

30

60

90

120

150

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Expon. (Pas t trend)

Expon. (Required trend)

Details of the Poverty Trends in PakistanProvince FY93 FY94 FY97 FY99

Urban Areas 20.7 16.3 16.1 22.4Punjab 22.0 18.1 16.9 25.5Sindh 17.3 11.8 12.0 16.1NWFP 25.3 26.9 27.2 29.2Balochistan 31.8 16.8 23.0 24.3

Rural Areas 28.9 34.7 30.7 36.3Punjab 26.5 33.9 28.3 36.0Sindh 29.5 31.8 19.6 34.7NWFP 37.0 40.0 43.4 44.9Balochistan 28.1 37.9 42.5 22.5

Overall 26.6 29.3 26.3 32.2Punjab 25.2 29.5 25.0 33.0Sindh 24.1 22.6 15.7 26.6NWFP 35.5 38.1 41.2 42.6Balochistan 28.6 35.5 38.4 22.8

Poverty Trends across Provinces

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

FY93 FY94 FY97 FY99

Pakistan Punjab Sindh NWFP Balochistan

Poverty Diagnostics

• Poverty is strongly related to lack of basic needs• Poor have low access to health related

infrastructure• Poor communities have lower access to health

facilities and immunization coverage• Poor have higher dependency ratios• More than 1/3rd of the poor households are headed

by aged persons

Poverty Diagnostics (contd.)

• 27% poor versus 52% non-poor households are headed by literate persons

• Poverty is higher when head of the household is unskilled agricultural worker

• Cultivable land owned by poor versus the non-poor is 0.27 and 0.84 acres per capita, respectively

Investment as % of GDP

Consolidated Public Expenditures(as % of GDP)

The Poverty Reduction Strategy Papers

Born in late 1999 out of the pressures from:• HIPC• The lessons from the experience with the

World Bank’s 1990 strategy of Poverty Reduction

• The Recommendations of the Meltzer Commission Report to the American Congress

The PRSPs are an essential requirement for debt relief under

the HIPC initiative and good business plan for concessional

assistance under IDA

The PRSP requires:• A long term domestically owned holistic Vision

with a strategic articulation of the perceptions of poverty and how to address these encapsulated in a three year plan

• Clear and Verifiable time-bound M& E Indicators• A participatory consultative process at the grass

roots level• Coordination and Efficiency through a Medium

Term Budgetary Framework• PRSPs ensure IFI partnership as well as means to

monitor domestic performance

Lessons from the WB Experience - Policies• A strategy that emphasizes the mutually

reinforcing benefits of growth and human resource development is relevant.

• Most recent empirical evidence however, points to the importance of contingent factors such as:– property rights,

– a capable bureaucracy and

– the distribution of assets in mediating the poverty reducing effects of growth, and to the negative effects of corruption on both inequality and poverty.

Lessons from the WB Experience -

Policies • Human development has proven to be vital for

long-term growth. However:– Need to improve the interaction between policies that

sustain long-term growth,– Need to improve the distribution as well as the stock of

human capital,– Need to curb corruption and enhance the social and

physical capital of the poor, that are likely to make the real difference.

• These are all elements making up the new Comprehensive Development Framework underpinning the PRSP process.

Lessons from Country Studies• Growth that is based on rural development has a notable

impact on overall levels of poverty.• Lack of social consensus and government commitment can

be a major obstacle to reform, while weak institutional capacity can hinder prospects for implementation of an effective country poverty strategy.

• Slow private sector development, weak governance and high aid-dependence slow down the prospects for growth and reduce the long-term sustainability of growth and improvements in the social sectors.

• There is a need to monitor not only the level, but also the depth and severity of poverty. Safety nets are a necessary condition for ensuring that the poor are protected. All three elements of the 1990 strategy are important for sustained poverty reduction.

Lessons from Project Experience• Reaching the poor and making tangible

differences to their well-being depends on– a good project design

– macro institutional environment

– specific local institutional capabilities

– cultural acceptability of different types of interventions.

• Tightly targeted projects with good communication, supervision and in-built flexibility can work, even in difficult institutional/policy environments.

Lessons from Project Experience (contd.)

• There is no reason to expect that the benefits from social funds and decentralization will always be pro-poor.

• There is a need to better understand the synergy between key areas of public and private actions to better address the priority needs of the chronically poor.

Core Principles of Pakistan’s I-PRSP

• Engendering growth

• Governance reforms

• Creating income generating opportunities

• Improving human development

• Reducing vulnerability to shocks

Economic Reforms

Physical Asseet Creation for

The Poor

Social Asset Creation for

The Poor

Social Safety Net

Governance

Private Development

Public Expenditure

Rationalization

Tax Reforms

Khushal Pakistan

Programme

State Land Allocation

Zakat & Ushr Rehabilitation

Grant

Micro Credit PPAF Khushali Bank

Poverty & Environment

Social sector Programme Education Health Population

Welfare Water Supply Nutrition

Gender Related Reforms

Poor Women & Children

Social Welfare Programme

Zakat, Ushr & Baitul Mal

Systems

Food Support Programme

The Social Protection System Pension Plan Social Security

System

Indigenous Philanthropy

Judiciary Reforms

Public Sector Efficiency

Corporate Governance

Rule of Law For Society

Rapid Economic Growth

Utilization of Assets

Labour Market Mobility

Extreme Poverty Elimination

Creation of Employment

Income of Poor

Poverty Reduction Strategy 2001 – 2004.

Revenue and Expenditures (1998-99 to 2000-01 actual)(2001-02 to 2003-04 IPRSP)

-10

-5

0

5

10

15

20

25

30

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Per

cen

t

Budget balance Total revenue Development expenditure Total expenditure IPRSP expenditures

Trends in Crucial Growth Rates(1998-99 to 2000-01 actual)(2001-02 to 2003-04 IPRSP)

4.23.9

2.7

3.7

5.05.2

5.7

3.6

4.4

5.0 5.0 5.0

2.69 2.69

2.2 2.11.9 1.8

0

1

2

3

4

5

6

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

perc

ent

Real GDP growth Inflation Population growth

Trends in Poverty(1992-93 to 1998-99 actual)(2000-01 to 2003-04 IPRSP)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

1992-93 1993-94 1996-97 1998-99 2000-01 2001-02 2002-03 2003-04

Per

cen

t

Overall Urban Areas Rural Areas

I-PRSP Challenges

– extracting Pakistan from a debt trap,– accelerating growth,– improving social indicators, and– restoring the credibility and integrity of public

institutions.

Major I-PRSP Challenge

• Macroeconomic stabilization: – Increasing tax revenue in order to provide more

fiscal space for poverty reduction initiatives– overcoming adverse debt dynamics.– Maintaining a prudent monetary policy in order

to keep inflation low – Increasing export growth to improve the

external debt situation.

Major I-PRSP Challenge• Growth promotion:

– Acceleration of reforms in the areas of:• Privatization• Irrigation and drainage • Energy tariff rationalization• Karachi electric Supply Company• Gas pricing• Civil service reforms• Tax administration• Agriculture support services

The Bigger Challenge!

Getting growth going and ensuring that the Growth is pro-poor – and translates into faster

poverty reduction

tackling the distribution issue

Success of the I-PRSP hinges on:• Governance reforms and devolution:

– Reducing incentives for corruption– Governance reform agenda that includes reforms of

fundamental institutions• Central bank• Tax authority• CBR• Police• Judicial system• Civil service• Auditor general and controller general of accounts

– Reforms in the public financial management systems and institutions

– Establishment of an effective anti-corruption agency.

And the crucial assumption for Poverty Reduction under the

I-PRSP

• The success of the devolution plan in improving access to education, health and other public services

Major Strength of the I-PRSP

• Confirms the government’s commitment to sustaining and expanding targeted interventions that focus on disadvantaged sections of society, especially in rural areas

• Highlights the key role of agricultural sector in poverty reduction

Weaknesses

• I-PRSP does not question whether current policies of poverty reduction are appropriate or adequate, especially in the rural strategy.

• It does not present an analysis of alternatives

Weaknesses

The I-PRSP does not:

• recognize the fact that greater tariff adjustments will be required in the energy sector in future and that tariff increases must be accompanied by improvements in operational performance.

• acknowledge that privatization will take time, and that in the interim pressing investments will be needed.

Weaknesses

• I-PRSP does not fully exploit the potential role of the private sector in bringing education to the underprivileged.

Challenges and Risks Outlined by the I-PRSP

• Challenges:– To raise financing, and

– To improve governance and institutional capacity

• Risks– Political opposition to reforms,

– Lack of continuity,

– Insufficient institutional capacity, and

– Exogenous shocks

Common weaknesses in all PRSPs

• Inadequate information on the determinants of pro-poor growth

• Inadequate linkages between economic growth, macroeconomic and structural policies and poverty reduction

• Inadequate linkages between public expenditures, poverty outcomes, and costing.

Comparison of I-PRSPs and PRSPs shows

significant differences between the full and interim PRSPs in terms of :

• data availability• quality of data analysis and policy

formulation• development of medium term budgeting

procedures• participatory processes

Pakistan has committed to developing a FULL PRSP by

March 2003

This requires:• A wide ranging consultative process to ensure that

there is consensus on the long-term vision, ownership and sustainability of the program

• The long term vision requires consensus on the perception of poverty and on the strategic prioritization of interventions at all levels

The full PRSP requires:

• Strategic coordination of resources - including aid - over the medium term

• Development of detailed Provincial and sub-provincial level PRSPs

The full PRSP requires:• Expenditure tracking

– To monitor spending in important sub-sectors and programs

– To track expenditure data by economic classification

• Monitoring of intermediate and outcome indicators

• Adequate implementation of monitoring system. And the building of technical capacity (at provincial and district level)

• Consensus on a nationally acceptable poverty line

The full PRSP requires:

– Systematic data collection and analyses of poverty dynamics and vulnerability that is domestically owned

– Analyses informing of possible adverse impacts of some key macro/structural policies on the poor and other socio-economic groups

– Assessment of key poverty programs like Khushal Pakistan and Katchi Abadi etc.

The time is extremely short – the challenges are enormous!