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Poverty Incidence and the Roles of the WEF Nexus in its Reduction

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Poverty Incidence and the Roles of the WEF Nexus in its Reduction

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Steve Davies, Senior Research Fellow, IFPRI
Pakistan Water Week
October 25, 2022

Steve Davies, Senior Research Fellow, IFPRI
Pakistan Water Week
October 25, 2022

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Poverty Incidence and the Roles of the WEF Nexus in its Reduction

  1. 1. Poverty Incidence and the Roles of the WEF Nexus in its reduction A presentation for Pakistan Water Week, October 25, 2022 By Steve Davies, IFPRI Senior Research Fellow
  2. 2. www.cgiar.org Introduction As a lower middle-income country, Pakistan has made considerable strides in growth since partition in 1947, despite many wars, natural disasters and a complicated regional setting • Yet challenges remain: 20% of households are poor; literacy is about 60% and female literacy is less than 50%; child stunting is just under 40% and environmental and climate change issues are uncomfortably present This session focus on “Opportunities, Needs and Challenges for Achieving Sustainable Growth and Inclusive Development the WEF Nexus in the Indus Basin” • While the main discussion is a review of capacities and institutional change the water, energy, agriculture, and environment sectors, this presentation will analyze one of the main targets for successful WEF interventions, poverty reduction
  3. 3. Household Poverty with “Ballpark” Dimensions Poverty Line is defined as households with consumption expenditures less than PKR 45,312. Poverty Ballpark has been arbitrarily bounded between PKR 45,312 to 52,000 for distribution of PKR 144 billion of Ehsaas Emergency Program. 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 Non Poor Poor Poverty ballpark
  4. 4. 23% 13% 64% 0 5000 10000 15000 20000 25000 30000 Poor Pov. Ballpark NonPoor Thous of Households Poor and Non-Poor Households, Pakistan 2018/19
  5. 5. 9% 23% 11% 11% 43% 33% 24% 7% 48% 44% 65% 82% 0 2000 4000 6000 8000 10000 12000 14000 Farm Landless/Rural R Nonfarm Urban Thous of Households Incidence of Poverty by Household Type (No of Households) Poor Pov. Ballpark NonPoor
  6. 6. Basic Structure of SAM Expenditure columns Activities C1 Commod’s C2 Factors C3 Households C4 Government C5 Investment C6 Rest of world C7 Total Income rows Activities R1 Domestic supply Activity Income Commodities R2 Intermediate demand Consumption spending (C) Recurrent spending (G) Investment demand (I) Export earnings (E) Total demand Factors R3 Value-added Total factor income Households R4 Factor payments to households/ enterprises Social Transfers and interest on domestic debt Foreign remittances Total household income Government R5 Sales taxes and import tariffs Direct taxes Foreign grants and loans net of interest Government income Savings R6 Private savings Fiscal Surplus/ deficit Current account balance Total Savings Rest of world R7 Import payments (M) Foreign exchange outflow Total Gross output (factor costs) Total supply (mkt prices) Total factor spending Total household spending Government expenditure Total investment spending Foreign exchange inflow
  7. 7. www.cgiar.org Structural Path Analysis Methodology: SPA, an Illustration Interpretation: Origin pole is flour milling , Destination pole is unskilled labor or poor households 36%)
  8. 8. www.cgiar.org SPA Effects of PKR 1.0 Billion to Agriculture Farm Households (Q3, Q4) Total Impact PKR 150 Million Main Paths: Farm labor Livestock Land % of Total Amount (PKR Mill.) 56 55 3 95 Farm Households (Q1, Q2) Total Impact PKR 70 Million Main Paths: Farm labor Livestock Land % of Total Amount (PKR Mill.) 27 25 14 95 Non-Farm Households (Q1, Q2) Total Impact PKR 1.9 Million Main Paths: Services → Labor (Low Skill) Services → Labor (Low Skill) Capital % of Total Amount (PKR Mill.) 0.62 0.23 14 55
  9. 9. www.cgiar.org SPA Effects of PKR 1.0 Billion to Food Processing Farm Households (Q3, Q4) Total Impact PKR 44 Million Main Paths: Ag → Farm labor Ag → Livestock Ag → Land Food → Livestock % of Total Amount (PKR Mill.) 13 12 7 6 85 Farm Households (Q1, Q2) Total Impact PKR 21 Million Main Paths: Farm labor Livestock Land % of Total Amount (PKR Mill.) 27 25 14 95 Non-Farm Households (Q1, Q2) Total Impact PKR 4.0 Million Main Paths: Labor (Low Skill) Services → Labor (Low Skill) Capital % of Total Amount (PKR Mill.) 0.62 0.23 14 55
  10. 10. www.cgiar.org SPA Effects of PKR 1.0 Billion to Construction Rural Non-Farm Households (Q1, Q2) Total Impact PKR 12 Million Main Paths: Labor (Low Skill) Trade → Labor (Low Skill) Tran → Labor (Low Skill) Labor (High Skill) Amount (PKR Mill.) 8.5 0.5 0.5 0.4 Farm Households (Q1, Q2) Total Impact PKR 5 Million Main Paths: Labor (Low Skill) Ag → Farm labor Ag → Livestock % of Total Amount (PKR Mill.) 2.2 0.4 0.4 59 Urban Households (Q1, Q2) Total Impact PKR 2.8 Million Main Paths: Trade → Labor (Low Skill) Trans → Labor (Low Skill) Capital % of Total Amount (PKR Mill.) 2 0.1 0.1 77
  11. 11. www.cgiar.org Conclusions There is no one size fits all to poverty reduction in Pakistan, and the prevalence Well designed WEF interventions that create growth in various sectors, with these perspectives in mind, can provide good ways to encourage poverty reduction This will be even more important to reach female farmers and landless workers in low skilled occupations, and so even greater attention to different paths is required

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