Essay About Rapid Economic Growth And Macroeconomic Stability

Povert In Pakistan
Essay Preview: Povert In Pakistan
Report this essay
POVERTY AND INCOME
DISTRIBUTION
The fight against poverty represents the greatest challenge of our times. Considerable progress has nevertheless
been made in different parts of the world in reducing poverty. The proportion of people living in extreme poverty on
global level fell from 28 percent in 1990 to 21 percent in 2001 (on the basis of $1 a day). In absolute numbers the
reduction during the period was 130 million with most of it coming from China. In Sub-Saharan Africa, the absolute
number of poor actually increased by 100 million during the period. The Central and Eastern Europe and the CIS also
witnessed a dramatic increase in poverty. While incidence of poverty declined in South Asia, Latin America and the
Middle East witnessed no change.
The recent trends in global and regional poverty clearly suggest one thing and that is, that rapid economic growth
over a prolonged period is essential for poverty reduction. At the macro level, economic growth implies greater
availability of public resources to improve the quantity and quality of education, health and other services. At the
micro level, economic growth creates employment opportunities, increases the income of the people and therefore
reduces poverty. Many developing countries have succeeded in boosting growth for a short period. But only those
that have achieved higher economic growth over a long period have seen a lasting reduction in poverty – East Asia
and China are classic examples of lasting reduction in poverty. One thing is also clear from the evidence of East Asia
and China that growth does not come automatically. It requires policies that will promote growth. Macroeconomic
stability is therefore, key to a sustained high economic growth. Although extreme poverty on global level has
declined, the gap between the rich and poor countries is increasing, even when developing countries are growing at
a faster pace than developed ones – perhaps due to the large income gaps at the initial level. In a world of six billion
people, one billion have 80 percent of the income and five billion have less than 20 percent. In the next 25 years, two
billion more people will be added in the world we live. All but 50 million of them will be in the developing countries. In
the year 2025, seven out of the eight billion people will be living in developing countries. This issue of global
imbalance is at the core of the challenge to scale up poverty reduction.
In Pakistan, Poverty Reduction Strategy was launched by the government in 2001 in response to the rising trend in
poverty during 1990s. It consisted of the following five elements:- (a) accelerating economic growth and maintaining
macroeconomic stability, (b) investing in human capital, (c) augmenting targeted interventions; (d) expanding social
safety nets and (e) improving governance. The net outcome of interactions among these five elements would be the
expected reduction in transitory and chronic poverty on a sustained basis. The reduction in poverty and improvement
in social indicators and living conditions of the society are being monitored frequently through large- scale household
surveys in order to gauge their progress in meeting the targets set by Pakistan for achieving the seven UN
Millennium Development Goals by 2015. Among them the most important is halving the population living below the
poverty line from 26% in 1990 to 13% by 2015. The improvement in household social indicators and living conditions
at the national level during 2001-05, based on information from 76520 households is documented in last year
Economic Survey. Preliminary findings of Pakistan Social and Living Standards Measurement Survey (PSLM 2004-
05) on poverty status were released in end February this fiscal year.
Pakistans growth performance over the last four years is enviable in many respects. Sound macroeconomic policies
and implementation of structural reforms in almost all sectors of the economy have transformed Pakistan into a
stable and resurgent economy in recent years. The real GDP has grown at an average rate of over 7.5 percent per
annum during the last three years (2003/04 to 2005/06). With population growing at an average rate of 1.9 percent
Economic Survey 2005-06
per annum, the real per capita income has grown at an average rate of 5.6 percent per annum.
The strong economic growth is bound to create employment opportunities and therefore reduced unemployment. The
evidence provided by the Labour Force Survey 2005 (First two quarters) clearly supports the fact that economic
growth has created employment opportunities. Since 2003-04 and until the first half of 2005-06, 5.82 million new jobs
have been created as against an average job creation of 1.0 – 1.2 million per annum. Consequently, unemployment
rate which stood at 8.3 percent in 2001-02 declined to 7.7 percent in 2003-04 and stood at 6.5 percent during July –
December 2005. The rising pace of job creation is bound to increase the income levels of the people. Agriculture,
housing and construction, IT and Telecom sector, and SME are the sectors which have created relatively more jobs.