Diluting impacts of macroeconomic shifts on poverty graduation capacities of the poor

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Abstract/Description

We examine the impacts of macroeconomic shifts due to the COVID-19 pandemic, exacerbated by locust attacks and recent floods, on the microeconomy of poor and ultra-poor households in Pakistan. Using primary data of 423 poor and ultra-poor households in Pakistan, we find that the COVID-19 pandemic resulted in a 59% decline in monthly income, 64% – the sharpest – decline in income of daily wage workers (especially those with no savings or livestock). Further, we find a 10% decline in household expenses (sharpestin KPK), 62% of households reporting ‘huge shock’ to livelihood, 68% women (versus 61% men) reporting adverse impacts on income, 39% households reporting their overall wellbeing being negatively affected, 76% households buying less expensive food, 45% households shifting children to less expensive schools, and 70% households acquiring less expensive healthcare. We use a micro-macro econometric model to simulate the impacts of macroeconomic shifts on poverty, unemployment, and education at a national level. We consider three scenarios: i) no economic recovery; ii) partial economic recovery, and iii) full economic recovery. We find that overall poverty increased from 21.5% in FY19 to 26% in FY20, by 4.5% in urban, and by 4.6% in rural areas during the same period. The poverty rate in FY21 will range from 27.8% to 30.5%, and unemployment range from 8.5% to 9.1%, depending on three economic recovery scenarios. We record a 71% reduction in per capita education expenditures during COVID-19 and estimate that FY20 will have around 1.97 million additional school dropouts. We project that additional school dropouts in FY21 range from 1.65 million to 2.13 million in absolute terms. To dilute the impacts of these macroeconomic shocks on the microeconomy of Pakistan’s poor and ultra-poor households and sustain their poverty graduation capacities, we propose micro-level programmatic interventions and macro-level policy interventions.

Session Theme

Poverty, Nutrition andInequality - Session - IIIB

Session Type

Parallel Technical Session

Session Chair

Dr. Lubna Naz, Assistant Professor - University of Karachi

Session Discussant

Dr. Irum Saba, Assistant Professor - IBA Karachi

Start Date

3-4-2021 4:00 PM

End Date

3-4-2021 5:30 PM

Comments

  • Shaheera Jalil Albasit, Research Specialist, National Poverty Graduation Program at Pakistan Poverty Alleviation Fund
  • Dr. Nasir Iqbal, Dean, Faculty of Social Sciences, Pakistan Institute of Development Economics, Islamabad
  • Samia Liaqat Ali Khan, Program Director, National Poverty Graduation Program at Pakistan Poverty Alleviation Fund

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Apr 3rd, 4:00 PM Apr 3rd, 5:30 PM

Diluting impacts of macroeconomic shifts on poverty graduation capacities of the poor

We examine the impacts of macroeconomic shifts due to the COVID-19 pandemic, exacerbated by locust attacks and recent floods, on the microeconomy of poor and ultra-poor households in Pakistan. Using primary data of 423 poor and ultra-poor households in Pakistan, we find that the COVID-19 pandemic resulted in a 59% decline in monthly income, 64% – the sharpest – decline in income of daily wage workers (especially those with no savings or livestock). Further, we find a 10% decline in household expenses (sharpestin KPK), 62% of households reporting ‘huge shock’ to livelihood, 68% women (versus 61% men) reporting adverse impacts on income, 39% households reporting their overall wellbeing being negatively affected, 76% households buying less expensive food, 45% households shifting children to less expensive schools, and 70% households acquiring less expensive healthcare. We use a micro-macro econometric model to simulate the impacts of macroeconomic shifts on poverty, unemployment, and education at a national level. We consider three scenarios: i) no economic recovery; ii) partial economic recovery, and iii) full economic recovery. We find that overall poverty increased from 21.5% in FY19 to 26% in FY20, by 4.5% in urban, and by 4.6% in rural areas during the same period. The poverty rate in FY21 will range from 27.8% to 30.5%, and unemployment range from 8.5% to 9.1%, depending on three economic recovery scenarios. We record a 71% reduction in per capita education expenditures during COVID-19 and estimate that FY20 will have around 1.97 million additional school dropouts. We project that additional school dropouts in FY21 range from 1.65 million to 2.13 million in absolute terms. To dilute the impacts of these macroeconomic shocks on the microeconomy of Pakistan’s poor and ultra-poor households and sustain their poverty graduation capacities, we propose micro-level programmatic interventions and macro-level policy interventions.