According to a World Bank report, 32.6 per cent Pakistanis are living below the poverty line. The government disputes this figure. It says poverty has declined in recent years as a result of the government’s economic policies and that only 24 per cent of Pakistanis are now living below the poverty line. Independent analysts argue that the government continues to put an overly optimistic spin on the poverty numbers and that the real level of poverty is closer to the World Bank’s figure.

Based on Pakistan’s current estimated population of 160 million, the World Bank figure of 32.6 per cent translates into about 50 million people living below the poverty line. That’s a huge number. If one uses the government figure of 24 per cent, the number of people living below the poverty line still translates into more than 38 million people. Even that is a huge number, and one that poses serious challenges for our policy makers.

The other thing about this debate on what constitutes the true level of poverty in the country is that the income yardstick of less than a dollar a day per person that is used to define the poverty line is much too low, given today’s cost of living and the inexorable rise in prices across the board and food prices in particular.

A more realistic yardstick of what constitutes the poverty line would be an income of less than two dollars a day per person. Using this yardstick, the number of Pakistanis living below the poverty line jumps up to over 70 per cent. That translates into a staggering 112 million people.

The World Bank’s "Pakistan Poverty Assessment" report says Pakistan’s fiscal policies "do not reflect the imperatives of improving social indicators."

Government officials, for their part, dispute some of the report’s conclusions, arguing that it was the wrong sequencing of the so-called financial sector reforms of 1987-88 that had trapped the economy in a vicious cycle of high-cost deficit financing, constrained fiscal balances, low GDP growth and high poverty. The government and the World Bank also disagree on how to assess poverty in a fault-free manner. According to government officials, the existing methodology is not fault-free.

The Pakistan Poverty Assessment report warned that Pakistan must close its social gap to alleviate poverty and achieve long-term economic stability.

The report said that poverty, defined on the basis of expenditures and health, education and public service needs, had declined from an overall 46 per cent in the 1980s to 32.6 per cent in the 1990s. "If the country does not close its social gap, its long-term ability to grow economically, alleviate poverty and sustain its debt will be fundamentally compromised," the report warned.

"Issues of governance are at the heart of many of the difficulties encountered in mitigating poverty and broadening access to social services in Pakistan," the report said. "Neither debt reforms nor the mere availability of donor funds is likely to dispel these problems."

The report said that while urban poverty had declined, rural poverty has not, widening the gap between city and country dwellers. It said that differences between urban and rural education and public health services must also be narrowed to achieve poverty reduction and macroeconomic growth.

The government, for its part, says it will spend over Rs300bn in fiscal 2007-08 to attack poverty.

That sounds like a lot of money. Based on a population of 160 million, however, this level of poverty-related spending translates into the equivalent of only Rs 1,875 per person during the current fiscal year. Not very much poverty reduction can be achieved by spending of that order.

Given the size of the country’s population and the two per cent a year rate at which it is growing, any serious effort aimed at reducing poverty has to be one on a much bigger scale than we have seen so far. Mega problems need mega solutions. Tokenism will not do.

Tokenism, in fact, has been the bane of the economic policies of successive governments for years. Among other things, this tokenism approach has resulted in a huge shortage of decent housing for the poor, a huge shortage of good schools for the poor, a huge shortage of good healthcare facilities for the poor, and a huge shortage of civic services for the poor.

These shortages are prevalent in urban and rural areas alike. But the problem is particularly acute in the rural areas, where the majority of the country’s population lives.

The problem is further compounded by the fact that there are huge disparities in the level of development in different parts of the country. Punjab is much more developed than Balochistan, the NWFP, the interior of Sindh and the Northern Areas.

There has been virtually no economic development in huge chunks of Balochistan. The same goes for NWFP’s Federally Administered Tribal Areas and much of Sindh.

Back in the 18th century, Thatta was Sindh’s richest city. It had a population of over 700,000 and was the centre of South Asia’s handloom textile industry. Today, Thatta is an impoversished community. Its infrastructure has been crumbling for years and there are very few employment opportunities for its inhabitants.

A similar story of neglect and lack of economic development can be told about many other towns across the country.

The government, for its part, says that, in addition to anti-poverty spending, a significant amount of public resources are aimed at providing social protection to the poorest of the poor segments of society.

The government says its macroeconomic policies for the last seven years have been geared towards poverty alleviation and improving the living conditions of the vulnerable segments of society.

But both the government and its development partners need credible statistics regarding poverty and social indicators to gauge the impact of the government’s efforts in reducing poverty and bridging the social gap. Unless we have credible and timely statistics, we will not know whether the government’s efforts are bearing any fruit or whether the money being spent on poverty-reduction schemes is being spent productively.

The government says the World Bank’s "Pakistan Poverty Assessment" report has created some concerns about certain aspects of data measurement and time frames.

According to the government’s "Pakistan Integrated Household Survey," the situation on the ground is somewhat different, and the percentage of the population living below the poverty line is much lower than reported in the World Bank report.

Arguments about the true level of poverty in the country aside, it is an undeniable fact that tens of millions in Pakistan still live on less than a dollar a day per person. Equally, however, it is also a fact that the economic consequences of the events of 9/11, which pushed many world economies into the dumps, appear to have marked a turning point for the better for the Pakistani economy.

GDP growth and company profits are up, budget deficits are down and banks are awash with liquidity. Foreign exchange reserves are at record levels and are likely to exceed $ 18 billion by June 30, 2008. Despite occasional dips, the Pakistani share market has continued on an upward path. On Thursday, last week, the benchmark KSE-100 index rose by another 137.88 points to 12,365.94 points. The rise was triggered partly by a revival of foreign buying in the shares of leading banks and partly by positive news on the political front.

"Pakistan has turned around a deteriorating macroeconomic situation of a few years ago to a rapidly improving one," said the World Bank report.

Remittances from Pakistanis living abroad are currently running at an annualised level of $6bn a year. Foreign direct investment in fiscal 2006-07 rose to more than $5bn – the highest figure ever. The bigger coffers have, in turn, eased budgetary pressures to a certain extent and have given the government more fiscal space to increase development spending.

In the end, however, the success of Pakistan’s efforts to combat poverty and build a more economically efficient and more egalitarian society, hinges on the extent to which it is able to achieve greater economic distributive justice for the poor, and the extent to which it is able to provide better access to health, education and other social services for all sections of the population.