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ISLAMABAD: Prime Minister Imran Khan has said his government will speak to the International Monetary Fund (IMF) because, according to him, there are “economic disruptions ahead” due to a “very scary” third wave of Covid-19. The prime minister said: “It is time for a new [IMF] package”. The prime minister said this while giving his remarks about the UNDP’s Pakistan National Human Development Report.

“We are going to speak to the IMF because there are disruptions ahead. We have to revive the Ehsaas programme, so that the people could be given more money.”

The PM said he will talk to the IMF as the country is experiencing a “very scary” third wave of Covid-19. Unfortunately, he said, the government has to review the whole situation and its new Ehsaas programme to give incentive packages to people in the third wave as the service sector — the tertiary sector of the economy — has been badly hit by the pandemic.

The PM said the head of the IMF has realised that it is a very unique situation. “This is not the situation where you can suppress demand and impose restrictions on people when the people are already suffering,” he added. According to him, “my government’s main concern is to lift the people out of poverty and the Human Development Report is a report that highlights inequalities and the people who have been left behind and the situation of minorities and transgender.” He said a civilised society is defined by the way it looks after its weakest sections of population and not by elites’ lifestyle.

He said Covid-19 had made the poor people poorer and more and more people have gone below the poverty line. “Some of the rich people, however, got richer during the Covid-19 situation,” he added.

He said the “elite capture” is specifically a problem of developing countries, including Pakistan, and a UN report points out that “every year, one trillion dollars leave developing countries into tax havens or into properties in richer countries and that seven trillion dollars of the poor countries’ money laundered out of those countries is parked in safe tax havens.”

He said: “this one fact is the reason behind this huge inequality and the cause of huge poverty. This is the one fact that is causing more debt, poverty, and misery.”

He added that the present government is the first one that has gone after the cartels and powerful sugar cartels that jack up prices, and the government also wants to strengthen the Competition Commission of Pakistan (CCP) to stop cartels from making “mega profits” at the expense of people.

The PM said it gives him immense pleasure that the report has highlighted KPK as a province that has reduced poverty and achieved greater human development.

The Pakistan NHDR 2020 is titled “The three Ps of inequality: Power, People, and Policy”.

These foundational concepts are strongly intertwined with the theme of inequality, and form the main thrust of the NHDR 2020. Power refers to privileged groups that make use of loopholes, networks, and policies for their benefit. People refer to the deeply embedded belief systems that encourage bias against social identities like race, gender, religion, or caste, among others.

The report focuses not only on inequality of income, but also on inequality of opportunity in terms of access to services, work with dignity, accessibility, and more.

The report shows that the richest one percent of Pakistanis have access to nine percent of the country’s income, and that this inequality goes far beyond income and wealth.

The poorest and richest Pakistanis effectively live in “completely different countries”, with literacy levels, health outcomes, and living standards that are poles apart.

The report noted that power, the first driver of inequality, relates to groups who take advantage of loopholes, networks, and policies. This highlights the need to recognize and account for privileges and redress the imbalances of power. People, the second driver of inequality, refer to the deeply embedded belief systems that encourage bias against marginalized groups. For the country to be more equal, a culture of empathy wherein people are not discriminated against just for being ‘different’ needs to be created. Policy, the third driver of inequality, speaks to the systems and strategies that are either ineffective, or at odds with the principles of social justice.

In addressing this, the report lays out a reform agenda to guide Pakistan’s laws and policies towards a more equitable path.

The overwhelming takeaway of this report is the need to advocate for Pakistan’s vulnerable communities, and to unravel the Gordian knot of ‘Power, People, and Policy’ to alleviate inequality in the country.

The complexity of this task demands a well-rounded, evidence-based, and contextual analysis of the problem of inequality. Therefore, the NHDR 2020 looks at this issue from a multidimensional perspective, examining aspects that run the gamut from wealth and income to education, health, and social mobility in the context of inequalities across Pakistan.

The NHDR 2020 adds to the conversation on inequality with several new measures and indices that are crucial to addressing inequality in Pakistan.

The NHDR 2020 uses several methods to measure inequality in the distribution of income, wealth, and public resources (education and health). One of the simplest, most revealing measures of income and wealth inequality is to calculate the share of national income, or wealth, held by the ‘top’ – that is, the richest – one percent of the population. The stark reality of inequality in Pakistan is revealed when the poorest one percent of the population, who hold only 0.15 percent of the national income, compared to the richest one percent, whose share of national income exceeded nine percent in 2018–2019. The original Palma ratio of 1.31 reveals that the income of the richest 10 percent of Pakistan’s population is over 30 percent more than that of the total income of the poorest 40 percent of the population. The 10/10 ratio of 9.42 shows comparatively higher levels of inequality at the extreme ends of this distribution. This indicates that the richest 10 percent have 9.42 times the income of the poorest 10 percent. The Robin Hood ratio reveals that Pakistan would need to transfer 23 percent of the income of the richest two quintiles to the poorer three quintiles to ensure the equal distribution of income across all quintiles. The modified Palma ratio (20/20) of 4.7 indicates that the richest 20 percent of Pakistanis have 4.7 times the income of the poorest 20 percent. Pakistan’s relatively low Gini coefficient – indicating low levels of inequality – contradicts the finding about the share of wealth of the richest one percent of the population. This is due to considerable underreporting of income by the richest households in Pakistan in the Household Integrated Economic Survey.

The report noted that fewer than half a million (about 0.460 million) of Pakistan’s richest households own almost 16 percent of the country’s residential property. The average value of property owned by each household is almost Rs25 million (about US$149,000). This is particularly alarming for a country with an average annual per capita income of US$1,355. Just one percent of Pakistan’s population owns over 20 percent of its farmland; each of these farmland owners owns more than 400 acres of agricultural land. This leads, first and foremost, to the accumulation of farmland in very few hands. Second, this unequal distribution of land ownership leads to an uneven distribution of agricultural income, which, in turn, adversely impacts inequality and poverty.

Just one percent of individual borrowers obtain almost 37.5 percent of the total credit, while one percent of those with bank accounts hold 26.4 percent of the total deposits. Income tax payments also imply high levels of wealth inequality, with one percent of the population possessing enough wealth and income to pay 29.8 percent of the total personal income tax collected in Pakistan.

Given the unequal distribution of wealth in Pakistan, any income generated through wealth can also affect income inequality. Among the sources of income in 2018– 2019, social protection contributed more to the national household income of the poorest income quintiles, while foreign remittances and income from property contributed most to the national household income of the richest quintile.

The Palma ratio is the highest, at almost 16, in the case of foreign remittances, followed by over 11 for property income. The ratio is lowest for social protection. It is also relatively low for crop production, livestock, and domestic remittances. The results reveal that the most skewed distribution is in foreign remittances, where the ratio approaches 15.6. This means that foreign remittances contribute 15.6 times more to the household income of the richest 20 percent of the population than to the income of the poorest 20 percent. As expected, the ratio is also high for income from property, which contributes 11.2 times more to the household income of the richest 20 percent compared to the poorest 20 percent. Inequality in social protection transfers, domestic remittances, and agricultural income are characterized by the lowest ratios and, therefore, the lowest levels of inequality.

Copyright Business Recorder, 2021


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