Floods could push nearly 9 million Pakistanis into poverty
Pakistan's 40% population already living in poverty while 20% living in extreme poverty
In its new
report titled Pakistan Development Update, the World Bank has estimated
that floods could push between 5.8 million to 9 million people into poverty.
The World Bank report warned that vulnerable people would take years to recover
from the impact of the devastating floods and high inflation. Despite a
reduction in the poverty estimate, still 40% of the population, or 89 million,
will be living in poor conditions.
The World Bank
report further says that “Preliminary estimates suggest that as a direct
consequence of the floods, the national poverty rate can increase further by
2.5 to 4 percentage points, pushing between 5.8 million and 9 million people
into poverty,”
Earlier, the
bank had told the government that the national poverty rate could further
increase in the range of 4.5% to 7%, which would envelop another 9.9 million
and 15.4 million people. The fresh number is lower by 4.1 million to 6.4
million.
It is a
quickly evolving situation and in light of the latest information, the World
Bank has revised downward the poverty estimate, said the bank’s economist
Moritz Meyer. Meyer said that the inflationary pressures were likely to
continue in the context of recent floods, which were expected to disrupt the
supply of critical household and agricultural goods, disproportionately
impacting the most vulnerable people.
Reversing
these negative socio-economic effects is likely to take considerable time and
some losses, such as human capital and land productivity. These can lead to a
more sustained decline in welfare and will warrant specific policy attention,
according to the report.
The World
Bank has also revised the international poverty line by adjusting the
purchasing power parity. The extreme poverty measure has been adjusted from
$1.9 to $2.15 per day.
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The World
Bank has described the recent floods as the “most severe since independence”,
saying that these have further exacerbated inflationary pressures.
Due to the
consequences of floods, agricultural output is expected to be negatively
impacted as rising inflation has reduced the real purchasing power of
households, with adverse welfare implications, especially for the poor and
vulnerable. Based on a phone survey, the World Bank observed that economic
hardship remained high in Pakistan, with over half of respondents having
concerns about running out of food in the next week, and 44% of households, who
are struggling to pay rent.
The survey
also showed a decrease in school enrolment rates, as parents could no longer
afford school fees. Meyer said that over the past year, inflation in Pakistan
rose rapidly, breaking from past trends as higher food and energy prices
underpinned the increase in inflation.
Quickly
rising prices and their high volatility impact firms and households. During
times of quickly rising food prices, the poorer households experienced higher
inflation rates, the report stated. Similarly, due to the differences in
consumption patterns, relatively poorer households have been more exposed to
food inflation, whereas better-off households have been more exposed to energy
inflation, according to the report.
The poorer
households tend to have fewer savings to mitigate the impact of rising prices,
which often forces them to cut back on the level of consumption or to
substitute for lower-quality products. Over the medium term, this may have a
detrimental impact on the human development outcomes.
“Pakistan should
undertake those sectoral policies that benefit poor, including trade policies
to reduce prices,” Meyer suggested.
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