COVID-19 impact on poverty incidence | By M Zahid Rifat 

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COVID-19 impact on poverty incidence


THERE is dire need to look into the drivers of poverty in the country. The existing literature documents several factors that adversely impact poverty situation such as natural disasters, health shocks, crop failures etc on one hand.

Factors on the other hand affecting poverty positively include cash transfers, better crop return owing to better pricing or volume, remittances back home from Overseas Pakistanis.

The poverty is estimated by using Household Integrated Economic Survey (HIES) data. National Accounts data also provides consumption trends of private households.

National accounts consumption is estimated using Gross Domestic Product (GDP) data and thus, is not comparable exactly with the consumption estimates based on household survey data.

However, according to the information available from official sources, for analyzing impact of pandemic of COVID-19 on poverty, it is assumed that contraction in private consumption is mirror image of fall in household consumption.

As per the National Accounts Committee (NAC) assessment, private consumption had contracted by 4.14 per cent in real terms in 2019-20.

Mapping the impact of this contraction on the resultant incidence of poverty, the headcount was estimated to have increased from actual 21.9 to 25.36 at national level.

Analysis of the data from 2004-05 to 2018-19 showed that growth in consumption expenditure estimated from Household Integrated Economic Survey (HIES) data and that estimated from National Accounts Committee (NAC) were quite significantly correlated.

Further, incorporating the possible impact of COVID-19 pandemic by subtracting Rs 750 from the consumption of Ist and 2nd deciles, the stimulated poverty headcount reached 25.36 per cent using HIES 2018-19 data.

This was due to a decline in consumption of households who were already below the poverty line of Rs 3757.85 per month would increase the poverty gap but had little impact on the incidence of poverty.

Now, to estimate the impact of the federal government response of cash transfers to keep consumption afloat for lowest deciles of the household, an amount of Rs 1000 per month was added to the consumption expenditure of each household in 3rd and 4th and again in the 5th docile.

The estimates thus showed that poverty headcount was reduced to 20 per cent as compared to the actual number 21.9 per cent.

The huge transfer of money to rural areas in the shape of higher prices of crop output was expected to make quite significant impact on poverty situation.

A similar episode of higher prices of wheat had happened in 2008-10 which brought unprecedented increase in consumption expenditure and reduction in poverty.

Federal Government’s response to the COVID-19 pandemic and Ehsaas-led initiatives have positively impacted the incidence of poverty and inequality and has such reversed the negative impact of COVID-19 in terms of decline in overall consumption.

In principle, the cash transfers under Ehsaas-led initiatives are effective in reducing poverty or inequality because around 3/4th of the population surrounded the poverty line (termed as transitory poor or transitory vulnerable).

Even a small cash injection can make a significant difference by reducing poverty or a shock like crop failure, which otherwise can lead to rise in poverty.

COVID-19 could have had a disastrous effect on poverty situation in the absence of rapid cash support provided and extended by the Federal Government through Ehsaas-led several initiatives both in the urban and rural areas of the country without any discrimination particularly targeting the poor segments of the society, daily wage earners and resource-less people.

It is worth mentioning here that Ehsaas was launched by Prime Minister Imran Khan on 27 March 2019 as Pakistan’s largest ever social protection and poverty eradication initiative.

Ehsaas aims at creation of a welfare state by countering elite capture and leveraging 21st century tools—such as using information and digital payment systems, to create a modern safety net programmes; promoting financial inclusion and access to digital services; supporting the economic empowerment of women; focusing on the central role of human capital formation for poverty eradication, economic growth and sustainable development and overcoming financial barriers to accessing health and post-secondary education.

This programme is quite unique because of its scale, multi-sectoral character, coverage, design process, management and governance, institutional arrangements and funding.

Ehsaas programme is especially designed for the ultra-poor, orphans, widows, the homeless, the disabled, those who are at the risk of health shocks, jobless, poor farmers, labourers, sick and undernourished, students from low-income backgrounds, poor women and elderly citizens. This programme is also supporting geographical areas where poverty is high.

—The writer is Lahore-based Freelance Journalist, Columnist and retired Deputy Controller (News), Radio Pakistan, Islamabad.

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