This document discusses poverty incidence in Pakistan and the role of the water-energy-food nexus (WEF) in poverty reduction. It finds that 20% of Pakistani households are in poverty, with literacy and health indicators also challenging. The presentation analyzes how successful WEF interventions could help reduce poverty. Using social accounting matrix (SAM) modeling, it shows the economic impacts of investments in agriculture, food processing, and construction, finding they help households in rural and urban areas through various paths like increasing farm and non-farm labor opportunities. It concludes that no single approach can reduce poverty in Pakistan and well-designed WEF sector interventions are needed that consider different regional and demographic impacts.

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. 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. 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. 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. 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. 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

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Structural Path Analysis
Methodology: SPA,
an Illustration
Interpretation:
Origin pole is flour milling
,
Destination pole is
unskilled labor or poor
households
36%)

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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

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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

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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

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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