Structural Adjustment and Poverty: The Case of Pakistan

Tilat Anwar

Abstract


Despite the external shocks in the 1980s, the economy
continued to grow at a respectable rate. However, increasing internal
and external imbalances caused an economic crisis in 1988 and lead to an
implementation of a medium term structural adjustment programme within
the framework of the IMF and the World Bank. Neither theory nor existing
evidence gives a conclusive verdict about the effects of adjustment
policies on poverty. Hence, the paper examines the actual changes in
absolute poverty during the period of adjustment. The actual changes in
the distribution have been examined from two comparable household income
and expenditure surveys (HIES) for 1987-88 and 1990-91, spanning the
period of adjustment. Evidence suggests that the stylised facts of
structural adjustment policies are consistent with actual changes in the
absolute poverty. The first order stochastic dominance test suggests
that not only the absolute poverty incidence but also the intensity and
severity of poverty increased significantly by all poverty lines and
poverty measures over the period of adjustment. Structural adjustment
created new poor in urban areas amongst the low income groups (mainly
Clerical and Sales workers) whose real wages were eroded over the
period. Poverty also increased unambiguously among self-employed
(smallholders in the informal sector) and unemployed who seems to have
been affected adversely by the overall economic contraction. Though, the
government has the priority to achieve the fiscal balance, it should
seek to ameliorate the most distressing cost arising in the short run.
Excessive reliance on demand management in scale or speed is
counter-productive for adjustment. Adjustment strategies need to account
for the trade-off between shortterm gains and long-term benefits
foregone.

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DOI: https://doi.org/10.30541/v35i4IIpp.911-926

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