A Governance Perspective on Development Issues

Economic growth and poverty reduction are difficult to achieve in the best of times. With decaying institutions and poor governance, these goals become an impossible dream. That is why the theme of this year’s annual meeting is “Governance, Institutional Reform, and Economic Growth”. I hope that the papers being presented and the discussions on or around this theme during these four days will indicate the way forward from the current morass. I shall not bore you with the details of the economy’s deplorable condition—most of you are familiar with them. Its deterioration is best judged by the International Country Risk Guide (ICRG) ratings for Pakistan, which are computed by weighting three elements—corruption, rule of law, and bureaucratic quality. These ratings for Pakistan in 1998 are three times what they were in 1982. This means that on a relative scale, things in Pakistan are three times as bad in 1998 as the 1982 levels. Still, I must dwell on the essential elements of this year’s theme for a way forward. I strongly believe that our salvation now lies in good governance and appropriate institutional reform which is sustained over a suitably long period of time.

Impact of Changing Profile of Rural Land Market in Pakistan on Resource Allocation and Equity

Agricultural impact

Recent Evidence on Farm Size and Land Productivity: Implications for Public Policy

Agricultural productivity is low in most of the developing countries including Pakistan. Moreover, slow and meandering agricultural growth is unable to keep pace with the fast and persistently growing population pressure in these countries. That in turn, has, continued to result in malnutrition and recurrent famines [Cornia (1985)]. Worse than this are the results of an ILO (1977) study, which has shown that food consumption inequalities have actually increased overtime not only in the food deficit countries but also in countries experiencing rapid agricultural growth. This points to the ever-hanging shadows of food deficiency and resulting malnutrition over the countries characterised by slow or negative growth in per capita food production and perverted income distribution [Cornia (1985)]. The only choice with these countries is to enhance food production and provide better access to food consumption for the poor masses. In order to achieve this objective policy-makers consider various options including increased use of modern inputs—mechanical and biological technologies, and removal or reform of the prevalent socio-economic power structure in agriculture that is considered to be an impediment to growth. It may not be desirable to apply these options separately in order to achieve the objective of reducing rural poverty [Cornia (1985)]. Growth in agriculture—that is sustainable and appropriate, is possible when all factors of production are accessible to all strata of the farming community. This is particularly so in the case of access to land. In this regard, land redistribution accompanied by increased input supply is the preferred policy option.

Trends in Absolute Poverty in Pakistan: 1990-91 and 2001

Poverty, defined comprehensively as absence of options to shape one’s life according to one’s own preferences, comes closer to the concept of human development as presented in UNDP’s Human Development Reports. Absolute poverty, on the contrary, defines poverty in terms of satisfaction of minimum physical needs of food and non-food items to enable people at the lower end of income distribution to engage in economic activity. From the vantage point of the policy-maker concerned with alleviation of poverty, it is crucial to know the magnitude of the existing level of poverty and identify the policy determinants of poverty as well as constraints standing in the way of an effective attack on the worst forms of absolute poverty. In Pakistan, like many other developing countries, poverty has emerged as a core issue on the policy agenda. The traditional measures of poverty—headcount, severity and poverty gap indicate that the incidence of poverty during the previous decade have shown no sign of poverty abatement despite numerous policy and institutional initiatives undertaken by the government. The debate on trends in poverty during the 1990s—an era of stabilisation and structural adjustment has been wide-ranging in Pakistan. However, there is no consensus on the poverty outcomes from the policy and institutional reforms. Primarily due to non-availability of basic data, the last year for which poverty estimates are available is 1998-99. In view of the need to monitor poverty trends and continuously evaluate the efficacy of policies adopted by the government under the poverty reduction strategy, it is important to evolve a consensus on the use of a consistent poverty line, sources of data and data adjustments for measuring poverty. It is this policy context that has guided us to use a consistent definition of poverty line.

A Critical Evaluation of the Budgetary Process for Public Expenditure in Pakistan

Over the past decade budgetary policies have emphasised a firm restraint on the growth of total expenditure and a restructuring of the profile of both current and development expenditure to deal with a high fiscal deficit in Pakistan. Regarding current expenditure, there has been an increasing emphasis on meeting fully the recurrent cost requirements of completed public investments and on the minimisation of the costly subsidY programmes. Development expenditure has been increasingly directed towards the priority sectors pertaining to physical and social infrastructure and to early completion of the on-going development projects. Effective public expenditure management places heavy demands on existing government institutions and has a much wider scope than the formulation and implementation of conventional expenditure budgets. The formulation of an appropriate macroeconomic framework, selection of projects on a sound basis, prqper designing of public sector investment programmes and appropriate linkages between planning and budgetary processes is as, if not more, important than the narrow focus on expenditure budgeting [Hussain (1979»). Notwithstanding the importance of these broader aspects of budgetary issues, this paper does not deal with such public expenditure management issues. Instead it concentrates on a description and an analysis of the formulation process of government expenditure budgeting. The conventional practice in Pakistan in the formulation of expenditure budgets is based on the ''bottom-up" demands of various government agencies. Feats regarding the adverse consequences of deficit financing with respect to macro instability have persuaded the government to impose constraints on total expenditure. Donor agencies, especially the International Monetary Fund, have been instrumental in the imposition of 'top-down' constraints on the 'bottom-up' demands

Credit for Rural Poor in Pakistan

Farmers, large and small, and the non-farm population in rural areas all suffer from the liquidity constraint. Credit is needed to acquire command over the use of working capital, fixed capital, and consumption goods. The Green Revolution technologies have increased the credit requirement for modern inputs and farm investment. A new expanded role of rural credit institutions has emerged in the wake of the technology revol~tion in rural areas. Two distinct approaches have been used to provide the financial services to the rural poor. The most widely favoured approach in the past was the use of subsidised interest rates with a portion of credit reserved for the poor. The low interest policy was based on the premise that it would induce farmers, large and small, to use modern' inputs on a larger scale. One of the adverse side-effect of this policy was the introduction of an element of financial unsustainability in the loan portfolios of the credit institutions. The recent view about the delivery of rural credit consists of using market interest rates and using a mixture of 'bottom-up initiatives' at the local level, using non-government groups and 'top-down initiatives' by the formal credit institutions in terms of the simplification of the procedures and decentralisation of the credit operation for credit supply to the rural poor. In this paper, an attempt is made to evaluate the efficacy of these two approaches in the case of Pakistan for delivering credit to the rural poor

Domestic Terms of Trade and Public Policy for Agriculture in Pakistan

Despite the crucial importance of information on intersectoral terms of trade in the formulation of a host of public policies, the official statistical system in Pakistan is yet to generate a statistical series of the terms of trade for the .agricultural sector on a regular basis. A number of views expressed on Pakistan's agriculture appear to be based either on results of studies that are now outdated, or on a complete neglect of the existing data that could be processed to calculate the terms-of. trade indices. This paper attempts to provide information on the movement of terms of trade for the agricultural sector for the period from 1951-52 to 1983-84. The impact of changes in terms of trade on farm output, distribution of income and efficient use of resources is also traced

Landlessness and Rural Poverty in Pakistan

Although reducing rural poverty has been the key agenda of economic reforms in Pakistan, the rural poverty continued to rise during the 1990s. The causes of rural poverty are complex and multidimensional. The rural poor are quite diverse both in the problems they face, and the possible solutions to these problems are also different. The paper uses the most recent household data set available—PIHS 2001-02—to examine the causes of rural poverty, as to what accounts for its persistence and what policy measures should be taken to alleviate it. Poverty estimates using official poverty line suggest the high prevalence of rural poverty ranging from 39 percent to 48 percent in all provinces. Rural poverty is found to be strongly correlated with lack of asset in rural areas. The unequal land ownership in the country is found to be one of the major causes of rural poverty, as poverty level was the highest among the landless households followed by non-agriculture households. The incidence of landlessness is common in rural areas. About 67 percent households own no land in the country. Unusually, just 0.3 percent households own 55 and above acres of land across the country, suggesting a highly skewed landownership pattern. Gini Coefficient of landholding suggests that Punjab has the most unequal landownership pattern, followed by the NWFP, Sindh, and Balochistan. The highly unequal land distribution seems to have resulted in tenancy arrangements such as sharecropping, resulting in high prevalence of absolute poverty particularly in Sindh. A broad-based land reform programme, including land redistribution and fair and enforceable tenancy contracts together with rural public works programmes and access to credit, is critical to reducing rural poverty in Pakistan.Poverty, Pakistan

Trends in Absolute Poverty in Pakistan: 1990-91 and 2001

Poverty, defined comprehensively as absence of options to shape one’s life according to one’s own preferences, comes closer to the concept of human development as presented in UNDP’s Human Development Reports. Absolute poverty, on the contrary, defines poverty in terms of satisfaction of minimum physical needs of food and non-food items to enable people at the lower end of income distribution to engage in economic activity. From the vantage point of the policy-maker concerned with alleviation of poverty, it is crucial to know the magnitude of the existing level of poverty and identify the policy determinants of poverty as well as constraints standing in the way of an effective attack on the worst forms of absolute poverty. In Pakistan, like many other developing countries, poverty has emerged as a core issue on the policy agenda. The traditional measures of poverty—headcount, severity and poverty gap indicate that the incidence of poverty during the previous decade have shown no sign of poverty abatement despite numerous policy and institutional initiatives undertaken by the government. The debate on trends in poverty during the 1990s—an era of stabilisation and structural adjustment has been wide-ranging in Pakistan. However, there is no consensus on the poverty outcomes from the policy and institutional reforms. Primarily due to non-availability of basic data, the last year for which poverty estimates are available is 1998-99