Country background

Pakistan has faced fiscal and monetary constraints since the 1980’s and embarked upon the economic reforms process through the Structural Adjustment Programme. One of the targets was to reduce the fiscal deficit to a sustainable level by increasing revenues and/or controlling expenditures. The Government was financing this deficit by borrowing at very high rates of interest which resulted in the rapid growth of public debt. The servicing of this debt was eating up the major chunk of resources, leaving a very little amount for protecting the economy to external and internal economic shocks. The target was set to reduce the fiscal deficit to 4% of GDP either by increasing the tax revenues, controlling the public sector expenditures or through both measures. The evidence shows that the Government successfully controlled its expenditures and the fiscal deficit declined to a manageable level since the year 2000.

Poverty and Inequality

Pakistan current rank on the HDI scale is 136 (TABLES A, B, C), which is very low in life expectancy, adult literacy and gross enrolment, almost bringing it close to Sub-Saharian Africa. But surprisingly, the growth rate of Pakistan amounted to 5.8% in 2008 and Pakistan was at a higher GDP per capita ($2600 USD in 2008, CIA World Factbook) as compared to low ranking in terms of HDI (TABLE D). Therefore, the issue is not the lack of capital, but equitable distribution and allocation of funds amongst the population, particularly among the vulnerable groups. Pakistan also suffers from a high inflation rate: in 2008 it rose to 20% (CIA World Factbook). Indeed, according to the State Bank of Pakistan figures, the food inflation in Pakistan reached 30% in 2008 (TABLE E) and food is the primary driver of inflation.

This situation is likely to hit the elderly and poor subgroups the hardest and demands the provision of social protection for these people and their families. Indeed, according to the Planning Commission of Pakistan, CPRID 2007, 32% of the population lives below the poverty line (TABLE F), indicating an overwhelming incidence of poverty in the rural areas, which is close to almost 40%. This is very high compared to the other regions of the world (TABLE G). Therefore, great efforts need to be invested to reduce poverty in rural areas. Islamabad steadily raised development spending in recent years, and poverty levels decreased by 10% since 2001. However, in the current context of global recession, these are trying times, particularly for those who are already economically disadvantaged.
 

According to the World Health Organisation (WHO), 90% of the Pakistanis population had sustainable access to improved water source in 2005 whereas only 54% had access to improved sanitation. 96% of the population had access to local health services in 2007, i.e. 100% of the urban population and 92% of the rural population.

According to the OCHA (United Nations Office for the Coordination of Humanitarian Affairs) and the Provincial Government, there was in 2008 more than 550,000 families registered as internally displaced persons (IDPs) in Pakistan. Moreover, according to the UNAIDS Indicators, the HIV/AIDS prevalence rate for adults aged 15 to 49 in Pakistan currently reach 0.1%.

Labour Market

The labour force participation rate in Pakistan is very low. On the basis of estimated current population, the labour force was estimated around 50 million with the labour force participation rate at 32.2% in 2005-2006. The 2005-2006 Labour Force Survey data further shows that most of these employed persons work in the informal sector constituting 73% of the economy. The under-utilisation of the labour force in Pakistan is about 13% if unemployment and under-employment rates are combined.

Social security schemes and programs by branch