A. Introduction

25. Available data indicate that after significant poverty reduction during the 1980s, poverty in Pakistan stagnated in the 1990s, and continued to be marked by sharp differences across the country’s provinces, and its rural and urban areas. In 1998–99, nearly 33 percent of the population could be classified as poor, indicating little progress since 1990–91, when the proportion was 34 percent.¹⁰

26. The slowdown in poverty reduction during the 1990s was related to a significant drop in Pakistan’s overall growth performance. The benefits of the growth that did occur were distributed unevenly: the rural-urban gap increased substantially between 1990–91 and 1998–99, due to rural poverty remaining stagnant while urban poverty declined. Inequality measures worsened for the country as a whole; and even in urban areas, where poverty declined on the whole, a sharp rise in inequality revealed an uneven pattern of growth and poverty reduction. This stagnating and uneven development is also mirrored by Pakistan’s education and health indicators, which lag most other developing countries with comparable incomes (Pakistan’s “social gap”).

27. In addition, there exist in many instances significant social gaps within Pakistan, evident from disparities between men and women, among provinces, rural and urban areas, and most significantly, between rich and poor. Lagging national social indicators are in a large part a direct result of very low health and educational outcomes among the poorer segments of its population in comparison to its richer ones, whose indicators are in fact almost on par with those of developed countries. As argued here, these outcomes are in large part a result of failure of public services, on which the poor rely disproportionately since they, unlike the rich, are largely unable to resort to private service alternatives. The reliance of the rich on private alternatives has reduced pressure from the most politically influential segments of society to improve public service delivery—either in terms of influencing spending, or its quality and effectiveness.

28. Underlying the failure of public services in Pakistan is, firstly, a notable bias against social spending. During the past two decades, high military expenditures and a rising debt servicing burden have squeezed social expenditures. Second, the failure of public services can also be traced to a record of poor implementation of public programs, which has eroded their quality and impact. These patterns of spending can be attributed in part to skewed incentives confronting political decision makers in Pakistan.

29. Among the consequences of this are lagging human development indicators among a majority of Pakistan’s population, which crucially undermines not only their well-being but also their productive capacity, with severe consequences for economic growth and poverty reduction. These findings highlight another important point: not only has economic growth failed to generate concomitant reductions in Pakistan’s social gap, but the persistence of this gap is one of the likely reasons for Pakistan’s low economic growth in the 1990s (see Chapter II). Part of a vicious circle of underdevelopment, Pakistan’s social gap is a critical long-term constraint on sustainable growth and poverty alleviation.

B. Pakistan’s Social Gap

30. Evidence indicates that while historically—particularly during the 1970s and the 1980s—Pakistan’s economic growth compared well with that of most developing countries, increasing incomes were not translated into commensurate progress in human development, with the result that Pakistan has poor health, education, and fertility indicators for its level of per capita income.¹¹ Table III-1 shows the lag in health and education indicators in Pakistan. For instance, compared with what is expected for countries at this income level, Pakistan has 27 excess infant deaths per thousand, 23 percentage points less share of population with access to sanitation, and 42 percent lower health spending per capita. Further, Pakistan has 20 percentage points fewer of its elementary school age children enrolled in primary school—a gap explained entirely by the 40 percentage points fewer of elementary school age girls who attend primary school. Similarly, the 14 percentage point shortfall in secondary enrollment is explained mainly by a 20 point shortfall for females. An additional 24 percent of Pakistan’s population is illiterate, above what is normal for a country of its income level. Public spending on education is 1.4 percentage points lower than the benchmark for income level.

Table III-1

Pakistan: Education, Health, and Demographic Indicators in Pakistan Relative to comparable Countries

(Regression coefficients, with t–statistics below each coefficient)

^1/The percentage is the coefficient on the Pakistan dummy variable in regressions of the dependent variable (health/education/demographic indicator) that also control for per capita incomes (ppp measure) over the relative time period. All coefficients, except those marked with*, are statistically significant at the 5 percent level.

Table III-1

Pakistan: Education, Health, and Demographic Indicators in Pakistan Relative to comparable Countries

(Regression coefficients, with t–statistics below each coefficient)

Dependent Variable in each Regression		Percentage Difference Between Actual Indicator and Indicator Predicted for Pakistan’s Income Per capita 1/
Births attended by trained personnel, 1998		−36.54
		−18.54
Percent low birthweight, 1990s		11.63
		17.62
Log (health spending per capital PPP$, 1990s)		−0.56
		−8.13
Public health spending as percent of GDP, 1996		−162.00
		−7.38
Infant mortality, 1998		27.43
		11.55
Under-five mortality, 1998		18.95
		3.91
Percentage of population with access to sanitation, 1990s		−23.73
		−10.43
	Rural population	−25.07
		−8.86
	Urban population	−17.23
		−7.33
Gross primary enrollment, 1990s		−20.84
		−7.87
	Female	−40.50
		−14.36
	Male	−2.19*
		−0.84
Gross secondary enrollment, 1990s		−13.60
		−9.72
	Female	−20.47
		−13.43
	Male	−9.03
		−6.20
Illiteracy rate, 1990s		24.42
		13.64
	Female	32.18
		15.73
	Male	16.29
		10.30
Public spending on education as percent of GDP, 1990s		−1.37
		−7.55
Population growth, 1997		0.14*
		0.81
Contraceptive prevalence		−21.02
		−12.87
Fertility, 1998		0.63
		6.83
Female proportion of population, 1999		−2.06
		−21.30

^1/The percentage is the coefficient on the Pakistan dummy variable in regressions of the dependent variable (health/education/demographic indicator) that also control for per capita incomes (ppp measure) over the relative time period. All coefficients, except those marked with*, are statistically significant at the 5 percent level.

View Table

Table III-1

Pakistan: Education, Health, and Demographic Indicators in Pakistan Relative to comparable Countries

(Regression coefficients, with t–statistics below each coefficient)

Dependent Variable in each Regression		Percentage Difference Between Actual Indicator and Indicator Predicted for Pakistan’s Income Per capita 1/
Births attended by trained personnel, 1998		−36.54
		−18.54
Percent low birthweight, 1990s		11.63
		17.62
Log (health spending per capital PPP$, 1990s)		−0.56
		−8.13
Public health spending as percent of GDP, 1996		−162.00
		−7.38
Infant mortality, 1998		27.43
		11.55
Under-five mortality, 1998		18.95
		3.91
Percentage of population with access to sanitation, 1990s		−23.73
		−10.43
	Rural population	−25.07
		−8.86
	Urban population	−17.23
		−7.33
Gross primary enrollment, 1990s		−20.84
		−7.87
	Female	−40.50
		−14.36
	Male	−2.19*
		−0.84
Gross secondary enrollment, 1990s		−13.60
		−9.72
	Female	−20.47
		−13.43
	Male	−9.03
		−6.20
Illiteracy rate, 1990s		24.42
		13.64
	Female	32.18
		15.73
	Male	16.29
		10.30
Public spending on education as percent of GDP, 1990s		−1.37
		−7.55
Population growth, 1997		0.14*
		0.81
Contraceptive prevalence		−21.02
		−12.87
Fertility, 1998		0.63
		6.83
Female proportion of population, 1999		−2.06
		−21.30

^1/The percentage is the coefficient on the Pakistan dummy variable in regressions of the dependent variable (health/education/demographic indicator) that also control for per capita incomes (ppp measure) over the relative time period. All coefficients, except those marked with*, are statistically significant at the 5 percent level.

31. In terms of demographic indicators, fertility in Pakistan is significantly higher than the average for comparator countries, and 21 percentage points fewer married women of childbearing age use contraceptives. Finally, there is the well-known phenomenon of “missing women.” Pakistan has a lower female proportion of population than normal even by South Asian standards—presumably reflecting the consequences of various forms of gender discrimination.¹² Girls between the ages of one and four had a 66 percent higher death rate than boys in Pakistan during the 1990s.¹³

32. The social gap for Pakistan has also persisted over time, even as economic growth occurred. Countries that grew at a rate comparable to Pakistan over the past two decades achieved greater improvements in social indicators.¹⁴ Infant mortality in the control group declined by 73 percent from 1960 to 1998. In Pakistan, the same amount of growth resulted in a 43 percent lower decline. Also the difference between female and male illiteracy in Pakistan actually increased since 1970 as income per capita increased, while it declined sharply in the group of other countries.

33. Moreover, as Table III-2 shows, Pakistan’s social development falls short not only of countries with similar incomes and growth patterns, but also of other countries in the region. School enrollment is less, adult illiteracy greater, and the infant and child mortality rates higher than in Bangladesh, India, and Sri Lanka.

Table III-2.

Pakistan: Regional Comparisons of Select Human Development Indicators, 1998/99–1999/2000

Note: All Pakistan figures are for 1998–99 (Pakistan Integrated Household Survey: PIHS).Sources for other countries: ^* Bangladesh: 1995–96 (HIES); India: 1995–96 NSO 52nd round; ^** World Development Indicators

Table III-2.

Pakistan: Regional Comparisons of Select Human Development Indicators, 1998/99–1999/2000

	Percentage of children (age 11–15) currently enrolled in school*		Adult illiteracy (age 15+) 1999/2000**		Mortality rate per 1000 1998/99**
	Male	Female	Male	Female	Infant	Under-five
Bangladesh	62	66	48	70	73	96
India	73	58	32	55	70	83
Pakistan	63	41	42	73	83	116
Sri Lanka	…	…	6	11	15	19

Note: All Pakistan figures are for 1998–99 (Pakistan Integrated Household Survey: PIHS).Sources for other countries: ^* Bangladesh: 1995–96 (HIES); India: 1995–96 NSO 52nd round; ^** World Development Indicators

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Table III-2.

Pakistan: Regional Comparisons of Select Human Development Indicators, 1998/99–1999/2000

	Percentage of children (age 11–15) currently enrolled in school*		Adult illiteracy (age 15+) 1999/2000**		Mortality rate per 1000 1998/99**
	Male	Female	Male	Female	Infant	Under-five
Bangladesh	62	66	48	70	73	96
India	73	58	32	55	70	83
Pakistan	63	41	42	73	83	116
Sri Lanka	…	…	6	11	15	19

Note: All Pakistan figures are for 1998–99 (Pakistan Integrated Household Survey: PIHS).Sources for other countries: ^* Bangladesh: 1995–96 (HIES); India: 1995–96 NSO 52nd round; ^** World Development Indicators

34. The above tables conceal significant disparities among regions and rural and urban areas in Pakistan, which are in many instances at least as stark as the differences in performance between Pakistan and other developing countries. For instance, in the province of Sindh, only 25 percent of girls of primary age living in rural areas are enrolled in school, compared with 62 percent in urban areas. Similarly, while female literacy stands at only at 55 percent in urban Sindh, it reaches the low of 11 percent in rural North West Frontier Province (NWFP) and 7 percent in Balochistan. The next section will focus on highlighting such disparities along various dimensions, including gender and economic status.

C. Exploring the Social Gap: the Human Development in Pakistan in the 1990s

Education

35. The PIHS data for education from the 1990s indicate that primary enrollment, as measured by the Gross Enrollment Rate (GER), showed some improvement for the country as a whole between 1991 and 1995–96, but none thereafter (Table III-3). The gains were essentially driven by higher enrollment rates of females, and in urban areas.¹⁵ School enrollments were relatively low among the poor, and the poor also had relatively higher dropout rates. Private schooling increased, though the exact ramifications for this remain unclear (see below).

Table III-3.

Pakistan: Primary Gross Enrollment Rates, 1991–99

(In percent)

Sources: PIHS for relevant years

Table III-3.

Pakistan: Primary Gross Enrollment Rates, 1991–99

(In percent)

	1991	1995-96	1996-97	1998-99
Punjab	…	73	73	76
Sindh	…	70	64	56
NWFP	…	66	68	67
Balochistan	…	63	58	58
Azad J & K	…	…	…	101
Northern Areas	…	…	…	75
Urban	81	88	87	91
Rural	59	64	63	61
Male	78	81	78	78
Female	53	60	61	60
Overall	65	71	70	69

Sources: PIHS for relevant years

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Table III-3.

Pakistan: Primary Gross Enrollment Rates, 1991–99

(In percent)

	1991	1995-96	1996-97	1998-99
Punjab	…	73	73	76
Sindh	…	70	64	56
NWFP	…	66	68	67
Balochistan	…	63	58	58
Azad J & K	…	…	…	101
Northern Areas	…	…	…	75
Urban	81	88	87	91
Rural	59	64	63	61
Male	78	81	78	78
Female	53	60	61	60
Overall	65	71	70	69

Sources: PIHS for relevant years

36. Gross educational enrollment figures are but one indicator of educational achievement, and a more detailed picture emerges from looking at indicators like dropout and completion rates. These rates reveal that a large number of Pakistani children appear to enter school later than they should, and that few of those enrolled in school attend a grade that is appropriate for their age. Nationwide, 38 percent of those between age 5 and 17 have never attended school, and only 18 percent attend grades appropriate for their age. 41 percent of those who enter school drop out by the time they reach the age of 13. Significant rural-urban gaps exist for these indicators also: as a proportion of those who have attended school, dropout rates are relatively higher in rural areas.

37. Both male and female literacy rates increased from 1991 to 1998–99, rising from 40 percent to 58 percent for males, and from 17 percent to 27 percent for females, with most provinces showing significant improvements. A comparison across provinces however reveals large differences, mirroring those observed for enrollment rates.

38. Educational attainment is closely related to poverty. As Figure III-1 shows, improvements in enrollment during the decade occurred primarily among those who were relatively well-off. Also, the proportion of children who have never attended school is much larger among the poor (52 percent) than among the nonpoor (31 percent). Poor children are also likely to fare poorly in school, with relatively higher dropout rates, and greater proportions attending grades lower than those appropriate for their age. The gap between the rich and the poor is reflected not only in the enrollment rates, but also in the pattern of spending on education. Households who are better off on average spend more on primary schooling per school-going child.

Pakistan: Widening Rich-Poor Gap in Primary Enrollment

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

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Pakistan: Widening Rich-Poor Gap in Primary Enrollment

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Pakistan: Widening Rich-Poor Gap in Primary Enrollment

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

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39. A multivariate regression analysis of the factors that affect school participation confirms that economic status, along with other factors like parents’ education and access to school facilities, are critical in determining whether a child attends school.¹⁶ For example, nationally, the probability of a child attending school is 10 percent, 16 percent, 21 percent, and 25 percent higher if his/her household belongs to the 2^nd, 3^rd, 4^th and 5^th expenditure 1 quintiles, respectively, rather than the 1st.

40. Historically, Pakistan has had some of the lowest female enrollment rates in the world. This is particularly troubling because numerous studies have documented the important role of female education, in the context of the variety of social and economic roles women typically play. While the gender gap in primary enrollment in Pakistan has been reduced to some extent over the last decade, significant gaps still remain, especially in rural areas (Table III-3). The same applies to literacy rates—female literacy rate is merely one-third of that among males in rural areas (Table III-4). School dropout rates are also higher for girls than for boys, with the gap being relatively large for rural areas. There is also a sizeable male-female gap in household spending per student that persists across nearly all expenditure groups—indicative of bias in household behavior that is likely to further reinforce gender gaps in educational attainment.

Table III-4.

Pakistan: Literacy Rates, 1998–99

(In percent)

Table III-4.

Pakistan: Literacy Rates, 1998–99

(In percent)

	Male	Female	overall
Urban	73.2	52.3	63.1
Rural	51.0	16.8	33.6
Overall	58.0	27.2	42.5

View Table

Table III-4.

Pakistan: Literacy Rates, 1998–99

(In percent)

	Male	Female	overall
Urban	73.2	52.3	63.1
Rural	51.0	16.8	33.6
Overall	58.0	27.2	42.5

41. Another important educational trend in Pakistan is an observed increase in the share of the private sector in schooling over the years, to the extent that it is clearly no longer an elite phenomenon. Private share in primary enrollment (excluding enrollment in religious schools or madrassas)¹⁷ increased across all deciles, from 14 percent to 23 percent between 1991 and 1998–99, and in secondary enrollment from 8 percent to 17 percent. The increases were distributed across the economic spectrum, though most pronounced in the higher expenditure groups. According to a recent Census of Private Schools (2000), Pakistan has as many as 40,000 private schools, the result of significant growth over the 1990s.

Health

42. While various health indicators in Pakistan have shown improvements since the beginning of the decade, most indicators still compare inadequately with countries with similar levels of income. Overall, health indicators for Pakistan tend to be much worse in rural areas than in urban areas, and for the poor relative to those better off; they also tend to improve with women’s education and where relevant, with access to safe water and sanitation.

43. On infant mortality, Pakistan’s rate of 83 per 1000 live births in 1998–99 compares favorably with 127 in 1991 (Table III-5.) However, infant mortality in Pakistan still compares poorly with comparable countries in the region—mortality rates are 70 for India and 61 in Bangladesh. While no significant gap in infant mortality exists between male and female children in Pakistan, there is a large rural-urban gap of 18 percentage points, and an even larger gap of 34 percentage points between infants born of women with some education, and those born of women with no education. Infant mortality rates are also significantly lower for households with access to facilities like piped drinking water, covered underground drainage systems, and toilets inside the residential building.

Table III-5.

Pakistan: Infant Mortality, 1991–99

(Per 1000 live births)

^1/Sources: World Bank (1995)

^2/Sources: PIHS (1998–99). Infant mortality rates were calculated as averages for children born in the period 1993–97, to ensure that only infants who would be of age 1 and above (if they were alive) are considered.

Table III-5.

Pakistan: Infant Mortality, 1991–99

(Per 1000 live births)

		1991 1/	1998–99 2/
All Pakistan		127	83
Urban		..	70
Rural		..	88
Male		..	85
Female		..	81
By Mother’s education:
	No education	134	90
	Some education	81	56
	Drinking water:
	Piped indoor	117	70
	Outside home (covered)	121	90
	Open source (river, pond)	156	83
Drains:
	Covered underground	94	54
	Uncovered open	120	86
	None	141	89
Toilet:
	Yes	105	73
	No	132	95

^1/Sources: World Bank (1995)

^2/Sources: PIHS (1998–99). Infant mortality rates were calculated as averages for children born in the period 1993–97, to ensure that only infants who would be of age 1 and above (if they were alive) are considered.

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Table III-5.

Pakistan: Infant Mortality, 1991–99

(Per 1000 live births)

		1991 1/	1998–99 2/
All Pakistan		127	83
Urban		..	70
Rural		..	88
Male		..	85
Female		..	81
By Mother’s education:
	No education	134	90
	Some education	81	56
	Drinking water:
	Piped indoor	117	70
	Outside home (covered)	121	90
	Open source (river, pond)	156	83
Drains:
	Covered underground	94	54
	Uncovered open	120	86
	None	141	89
Toilet:
	Yes	105	73
	No	132	95

^1/Sources: World Bank (1995)

^2/Sources: PIHS (1998–99). Infant mortality rates were calculated as averages for children born in the period 1993–97, to ensure that only infants who would be of age 1 and above (if they were alive) are considered.

44. Information on pre- and post-natal care, and statistics on the conditions surrounding childbirth are indicative of female health in Pakistan. From the PIHS data of 1998–99, incidence of pre-natal medical consultation among married women (of age 15—49) is found to be low in general (31 percent), with very large differences between rural and urban regions (22 percent and 60 percent, respectively), and within regions among various expenditure groups, as well as women of differing literacy levels. Similar patterns are observed in other related indicators. As far as the rate of contraceptive use—an important indicator for fertility—is concerned, the actual use of contraception from 1991 to 1998–99 (10 percent to 20 percent) has increased far less than knowledge of contraceptive methods (38 percent to 92 percent). As expected, there are wide differences in use of contraception, by rural and urban areas (14 percent and 34 percent respectively), economic status and the woman’s education.

45. A particularly important health issue in Pakistan is the persistence of chronic child malnutrition in rural areas. Preliminary survey findings from four rural districts present a stark picture of chronic malnutrition, which has shown virtually no improvement over the 15 years covered by the surveys.¹⁸ The most recent information from 2001 indicates that in these districts, by the time a child reaches age 5, he/she has a 62 percent probability of being stunted, 45 percent likelihood of being underweight, and 12 percent chance of being in a wasted condition (Figure III-2). There are also significant regional variations; and notably, both female and male children appear equally affected by this trend. The findings also show that chronic malnutrition tends to start early in childhood. These findings are particularly important in the light of research from other countries that show nutrition in early childhood to be critical for long-term human development, and the relative inefficacy of interventions beyond the second year of the child.

Pakistan: Proportion of Malnourished Children in Four Rural Districts

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

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Pakistan: Proportion of Malnourished Children in Four Rural Districts

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Pakistan: Proportion of Malnourished Children in Four Rural Districts

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

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46. There is also evidence that the rate of immunization, which represents a key indicator of preventive medical care with strong implications for infant mortality and health, is low in Pakistan, in spite of some improvements made over the decade. Data from PIHS reveal that only about half of the children in the country were immunized in 1996–97, implying that the national health system failed to reach over 9 million out of 19 million children of age five and under.

D. How Low Education and Health Affect Growth and Poverty

47. Human development, as measured by education and health indicators, has been found to be an important determinant of long-term growth.¹⁹ A cross-country growth regression prepared as background paper to the latest Pakistan poverty assessment²⁰ indicates that among the factors that impact long-term growth in per capita income, the education variable is among the most important, and remains stable across different specifications. A 10 percent increase in the initial secondary enrollment rate is found to result in a 0.5 percent increase in the subsequent decadal average per capita growth rate.

48. The impact of education on Pakistan’s growth can most easily be quantified through some simple counterfactual exercises that calculate growth trajectories for Pakistan, based on the coefficients from the regressions, under the hypothetical scenario of it having South Korea’s and Malaysia’s levels of human capital in 1990.²¹ In 1990, Pakistan’s secondary enrollment rate was 23 percent, compared with 56 percent for Malaysia, and 90 percent for South Korea The model predicts that with the Korea’s enrollment, Pakistan’s per capita GDP would have grown on average at almost 3 percent, as opposed to the actual 1 percent, and in 1999 would have been about 20 percent higher than actual.

49. Evidence from micro-data also underscores the important role played by education and health in raising incomes and reducing poverty. Findings from PIHS (1998-99) suggest that education has significant impact on earnings, particularly in the urban economy. Education is associated with lower incidence of poverty—42 percent of the population living in households with illiterate heads are found to be poor, compared with 21 percent of those in other households. Estimation exercises indicate that a worker’s own literacy and education have positive effects on individual earnings for all nonfarm workers. For instance among males, literate workers earn 42 percent and 9 percent more than nonliterate workers in the urban and rural nonfarm sectors, respectively. Literacy or education variables however have no significant effects on earnings in the rural agricultural sector. In rural areas, male and female workers who are educated and literate are far more likely to participate in the nonfarm sector.²²

50. Beyond individual benefits however, investments in education also yield large intra-household externalities.²³ These include positive externalities of education on earnings of household members, arising out of the fact that for a nonliterate worker, there may be benefits from having easy access to a literate household member. For instance, an illiterate urban worker who has to be aware of employment opportunities or requires information in order to bargain with employers, might benefit considerably from this. Estimations using PIHS data show that having a literate member in the family has positive and significant effects on earnings of nonliterate urban workers, and especially so for male workers. In comparison, externalities are generally weaker for female wage earners, and for the rural nonfarm sector compared with the urban sector; they are nonexistent for the rural farm sector.²⁴ The presence of these externalities carries a powerful policy implication—namely, the importance of the spread of literacy and education among the population.

51. The pattern of education being more important for wage earnings in the nonfarm sector is consistent with what one would reasonably expect, given that wage earners in the farm sector are likely to consist mostly of daily wage labor engaged in activities with low or nonexistent returns to education. The pattern of education having higher direct returns and externalities on earnings in the urban sector, compared with rural areas, is also consistent with expectations since urban areas are likely to offer greater range of opportunities to workers with more education or are better-informed about job opportunities (as a result of having educated members in the household).

52. Externalities of education also arise from parents’ education, and notably, mother’s literacy and education is associated with lower infant mortality rate, higher enrollment rates of children, and smaller gender differences in enrollment of children. As shown in Table III-5, mothers’ literacy is associated with lower infant mortality. Simple cross-tabulations also show that when mothers are literate, the school participation rate of children is higher, and the urban-rural differential—as well as gender differences—are significantly lower. The aforementioned multivariate regressions to explain school participation of children show that the marginal effects of whether the parent has ever attended school are high and significant for mother and father alike. Having a mother who has attended school makes it 23 percent more likely that a child will also do so; having a father who has attended school makes it 16 percent more likely that a child will do so.

53. The health status of the population also has important implications for future earning capacity of individuals, and therefore the likelihood of being poor. In the context of Pakistan, the poor status of maternal and child health likely perpetuate poverty in the long In the light of evidence showing widespread malnutrition among children at an early age in Pakistan, it is particularly important to note that poor nutrition in an individual’s early childhood has lasting repercussions for the productive work-life of the adult, and also that interventions to improve nutrition during the first two years of childhood are likely to have the most significant impact on future development.²⁵ Such findings underline the importance of policies that target nutritional programs during pregnancy and early childhood years, from the point of view of improving human capital and reducing poverty.

E. What Explains Education and Health Outcomes in Pakistan

54. Regression analyses based on household data provide the starting point for looking at the range of factors that explain the observed outcomes in education and health in Pakistan. The aforementioned multivariate regression to explain school participation of children of age 6–14 years indicates, for example, that both supply and demand factors play important roles. On the supply side, access to school facilities is found to be critical for girls’ schooling in particular; the probability of a girl attending school is increased by 15 percent by the presence of an appropriate primary school within one kilometer of the village. For a village with a primary school for girls within one kilometer, the net primary enrollment rate for girls is 43 percent, compared with 13 percent for the rest of the rural population.

55. In terms of access to schooling, the PIHS data reveal that about 79 percent of the rural population live in areas where there is at least one primary school for girls in or within one kilometer distance from the village. There are large regional variations—ranging from 100 percent in certain areas to 41 percent for Balochistan. Access to primary school for boys, on the other hand, seems to be uniformly high across the country; 95 percent of the rural population lives in areas where the nearest primary school for boys is within one kilometer of the village. Such differences in the availability of primary schools for girls and boys in rural Pakistan no doubt partly explain wide gender gaps in schooling outcomes. Related to this, a recent study of private schooling indicates that low female enrollments are closely linked to institutional defects in the public school system that limits access of girls to school facilities.²⁶ The experience of private schools points up ways to address these defects, in order to expand access to schooling for girls (see below).

56. Lack of availability of schooling facilities, however, provides only a partial picture of the factors constraining education in Pakistan. A better understanding of what limits school participation requires exploring factors—like caste or social hierarchies—that limit access to groups; examining the quality of available schooling; and examining demand side considerations, which are in turn likely influenced by issues of quality and access.

57. Firstly, the mere presence of a school may not necessarily make it equally accessible to all members of a local community; caste or social hierarchies may influence access. A recent study finds that interaction of caste relationships and public services can produce a range of outcomes, with very different policy implications.²⁷ While in some cases, properly functioning public facilities tend to eradicate caste-based differentials, in other areas there is evidence that existing social hierarchies compromise the very functioning of these public services. In these areas, true public access to these services is likely to become possible only through political empowerment of marginalized groups.

58. Secondly, the mere existence of a school does not imply that it offers quality education, or even that it meets the minimum standards of a functional school. Result from the PRHS facilities survey evidence widespread quality problems, ranging from teacher absenteeism to lack of amenities. Out of the 206 rural schools surveyed in a sample of around 130 rural communities, classes were not being held in 34 at the time of the visit.²⁸ In schools where classes were being conducted, the rate of teacher absenteeism was around 20 percent. Since the majority of rural schools are single or two-teacher establishments, these aggregate numbers in fact understate the disruption to education caused by teacher absenteeism at the individual school level. Lack of infrastructure and amenities was also widespread: only a third of the sample schools had an adequate building;²⁹ only about half the schools had access to drinking water and toilets; 23 percent had adequate supply of textbooks; and 16 percent of the coeducational schools had a separate toilet for girls.

59. Given these problems with facility quality, it is no surprise then that student attendance rates were rather low—approximately 64 percent of enrolled boys and 61 percent of enrolled girls were observed to be present at the time of the visits. The survey data revealed significantly lower student attendance rates in facilities lacking toilets, furniture, textbooks, drinking water, electricity, and an adequate building (Figure III-3). Also, linking household level information on enrollment with facility level information, one finds that higher enrollment rates are associated with better quality of amenities in schools. Among girls of primary school age in communities with schools with adequate amenities, the net enrollment rate is 42 percent, in comparison to 32 percent in communities where the local girl’s school lacks amenities, and 24 percent when there is no girls’ school in the community. These results indicate that quality and functionality of schools, over and above their mere presence, matter for school participation.

Pakistan: Student Attendance as a Function of School Quality

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

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Pakistan: Student Attendance as a Function of School Quality

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

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Pakistan: Student Attendance as a Function of School Quality

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

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60. Thirdly, multivariate analysis of school participation confirms the importance of demand-side factors in determining the school participation. As mentioned previously, the probability of participation increases significantly if the child belongs to a higher expenditure group or has educated parents. Household social attitudes also have a role in determining school attendance, particularly for girls. Subjective results from PIHS point up that for all of Pakistan, parental disapproval is more frequently cited as a reason for girls never attending or leaving school than it is for boys, by a margin of 39 percent and 18 percent versus 6 percent and 4 percent in rural and urban areas, respectively.

61. It is however important to note that demand side responses are influenced by supply factors: parents may well have little incentive to send their children to far away or nonfunctioning schools. Such interplay of both supply and demand side factors only emphasizes the importance of crafting comprehensive educational policies in Pakistan, focusing on institutional reforms to expand availability and improve quality of education facilities, as well as providing appropriate demand side incentives to households to send their children to school.

62. In determining health outcomes, along with various household characteristics like education, social attitudes, cultural mores, and access to information, availability and quality of facilities appear to play important roles. Access to health services is far from universal in rural areas—38 percent of the rural population in the PIHS sample live in villages with a government hospital, dispensary or clinic. Infant and child mortality rates, for males and females alike, are lower for villages with a hospital, dispensary, or clinic. Similarly, availability of health facilities in the community is also associated with higher indicators of maternal health care.

63. In addition, an important finding of regression analysis based on PRHS data,³⁰ is that the average economic status of the community is likely to be most important to a child’s health. Estimation results show that the relationship between expenditure and nutritional status is almost entirely driven by differences in the average per capita consumption across communities. Richer communities have taller and less underweight children, but once the average per capita income of the community is controlled for, there is little impact of household expenditure on anthropometric outcomes for children across different households in the community. This finding however begs the question of what specific characteristics such community level fixed effects represent. A reasonable hypothesis may be that wealthier communities command better facilities, likely because they are in a better position to influence the location of a health facility, as well as ensure more regular, high quality operation compared with a poor village.³¹

64. There is no direct evidence to support this hypothesis, partly because record-keeping at the facility level was of insufficient quality to provide important data on quality indicators. Further investigation is thus needed, using detailed facility level information linked with nutrition data. Preliminary and rough indicators of quality, such as patterns of outpatient visits and personnel records in the PRHS sample, do indicate that wide quality variations exist across health facilities. For instance, while the top three Basic Health Units (BHUs), ranked in terms of outpatient visits for a one-year period (separated by month), regularly show more than 1,500 visits per month, the bottom three consistently report no visits for each month during the year. Evidence from secondary sources also indicates a dearth of qualified doctors, and there are serious questions about public facilities where rampant absenteeism of medical personnel and severe shortages of equipments and medicines are reported.

65. Regardless of what specific factors explain intercommunity differences in anthropometric outcomes, the very impact of these differences suggest that health policies should target relevant health care interventions, including preventive care initiatives, to poorer communities. Moreover, in the light of available evidence on deficient and highly variable quality of services, expanding the availability of health facilities must be accompanied by measures to ensure the quality of service.

F. Explaining the Social Gap: the Bias Against Social Spending

66. The evidence so far provides a strong basis for concluding that the scarcity and poor quality of public services is a significant constraint to progress in health and education. This suggests that more investments in facilities, despite potential demand-side problems, should have a strong impact on health and education outcomes accompanied by steps to correct the institutional failures that have hampered access to quality services in the past.

67. In this regard, attention should first be drawn to the fact that social spending in Pakistan has historically been insufficient. This is partly due to the constraints imposed by the country’s heavy debt burden and high military expenditures. That said, social spending rather than other types of “discretionary” spending, such as public investment, seems to have borne the brunt of the adjustment to these other expenditures. As Figure III-4 shows, throughout the 1980s, social spending—comprising largely recurrent spending on items such as teacher salaries, textbooks, and medicines—hovered around 2.5 percent of GDP, while development spending—largely for public investment or infrastructure such as roads, irrigation, and building—comprised about 7 percent. This relationship was briefly reversed during 1992–98, when social spending rose to 4 percent of GDP, largely due to an infusion of US$2 billion in external assistance in support of the Social Action Program.

Social Service Expenditures in Pakistan

(Categories of spending as a fraction of GDP)

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

Source: Pakistan Economic Survey

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Social Service Expenditures in Pakistan

(Categories of spending as a fraction of GDP)

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

Source: Pakistan Economic Survey

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Social Service Expenditures in Pakistan

(Categories of spending as a fraction of GDP)

Citation: IMF Staff Country Reports 2002, 247; 10.5089/9781451830569.002.A003

Source: Pakistan Economic Survey

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68. Moreover, even after development expenditures had fallen substantially relative to social service expenditures in the 1990s, cross-country comparisons indicate that social spending still remained low relative to infrastructure spending. For example, education spending was 1.8 percent of GDP in Pakistan in 1998, compared with the 2.5 percent of GDP allocated to public investment. In Sri Lanka, on the other hand, education spending was 5.3 percent of GDP, compared with a similar rate of public investment of 2.6 percent of GDP.³²

69. The relative lack of attention to social spending in Pakistan has had particularly adverse consequences for the poor, since they tend to derive disproportionately high benefits from such services. For instance, in the case of Pakistan, a rough benefit-incidence analysis of public expenditure on education reveals that spending on primary education, in particular, is strongly pro-poor (Table III-6). This is however not the case for spending on secondary and tertiary education, primarily because of the low participation of the poor at such levels.³³

Table III-6.

Pakistan: Benefit and Distribution of Public Spending in Education, 1998–99

Source: PIHS (1998–99).

^1/Benefit of primary public education spending per capita for expenditure quintile k is calculated as (total public expenditure on primary schooling/total number of public primary school students in population) x (number of primary public school students in quintile k/total population in quintile k); similarly for secondary and tertiary spending.

Table III-6.

Pakistan: Benefit and Distribution of Public Spending in Education, 1998–99

Per capita consumption quintiles	Per capita benefit of public education spending (in Pakistan rupees) 1/			Distribution of public exp. on education (percentage share)
	Primary	Secondary	Tertiary	Primary	Secondary	Tertiary
1	185	55	10	20.9	11.4	3.1
2	219	85	27	24.7	17.6	8.1
3	194	101	39	21.9	20.7	11.8
4	180	124	65	20.3	25.5	19.9
5	110	122	187	12.3	24.9	57.0
Average	178	97	65

Source: PIHS (1998–99).

^1/Benefit of primary public education spending per capita for expenditure quintile k is calculated as (total public expenditure on primary schooling/total number of public primary school students in population) x (number of primary public school students in quintile k/total population in quintile k); similarly for secondary and tertiary spending.

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Table III-6.

Pakistan: Benefit and Distribution of Public Spending in Education, 1998–99

Per capita consumption quintiles	Per capita benefit of public education spending (in Pakistan rupees) 1/			Distribution of public exp. on education (percentage share)
	Primary	Secondary	Tertiary	Primary	Secondary	Tertiary
1	185	55	10	20.9	11.4	3.1
2	219	85	27	24.7	17.6	8.1
3	194	101	39	21.9	20.7	11.8
4	180	124	65	20.3	25.5	19.9
5	110	122	187	12.3	24.9	57.0
Average	178	97	65

Source: PIHS (1998–99).

^1/Benefit of primary public education spending per capita for expenditure quintile k is calculated as (total public expenditure on primary schooling/total number of public primary school students in population) x (number of primary public school students in quintile k/total population in quintile k); similarly for secondary and tertiary spending.

G. Quality of Public Social Spending

72. Public social spending in Pakistan is not only insufficient, but also utilized inefficiently. A recent World Bank study of local public expenditures for Punjab, the most populous province in Pakistan, is useful to highlight some of the systemic problems.³⁴ The study indicates that the province’s poor social indicators result not only from low spending on the social sector, but also from inefficiencies in the use of the limited resources thus provided.

73. Punjab’s educational budget, at about 2.1 percent of provincial GDP, is about two-thirds of what is spent in neighboring India and Sri Lanka. Actual allocations are even less than these budget targets indicate, falling short by as much as a quarter in recent years. Despite the explicit aim of the Social Action Program (SAP) to boost expenditures, average real spending per student was stagnant during the 1990s. The amount allocated to nonsalary inputs such as teaching materials, a critical determinant of school quality, has also remained very low—in 1997–98, 97 percent of the elementary education budget was spent on teacher salaries. Moreover, restrictions on the use of the nonsalary budget have resulted in underspending of the already limited budget allocations for nonsalary expenditures.

74. Punjab’s health expenditure of approximately 0.5 percent of provincial GDP is similarly low by international standards—the average expenditure for all low and middle income countries is roughly 2 percent of GDP. At about a third of total expenditures, allocations for nonsalary inputs are insufficient, with the result that government health facilities routinely run out of medicine and other supplies. For example, in the last quarter of 1999, half of the primary health care facilities in the province reported that supplies of three essential drugs had been completely exhausted.

75. Institutional obstacles have played a key part in reducing the quality and efficiency of social spending in Pakistan over the years; notably so in the case of the country’s SAP, which to date represents the most concerted effort by its government and donors to address the social gap. SAP was launched in 1992/93, with the aid of donor financing and technical assistance, with the objective of social development in four target areas—elementary education, basic health care, family planning, and rural water supply and sanitation. The program has had some successes: improvements have occurred in some health indicators, access to related infrastructure; immunization; and availability of Lady Health Workers—health workers who focus on female and child health. However, the gains have been marginal, and especially so in education, which has been the major area of focus.

76. In explaining the lack of success of SAP, it is important to note that it appears to have focused more on accelerating construction of facilities than on increasing the supply of educational materials, medicines, and the on-the-ground delivery of services. Evidence also suggests that the mechanisms through which SAP was sought to be implemented provided powerful vehicles for patronage, to the detriment of community participation and often in direct conflict with the planned goals.³⁵ For example, while many local landowners were willing to provide land for a school in their village, the motivation in most cases was that they could then hire teachers for the school as an act of patronage. This resulted in the phenomenon of “ghost schools”—schools that exist on paper, but do not have any teachers—widely reported in some areas, and other forms of less extreme patronage. The extent of patronage in the program likely had serious exclusionary effects on those communities that did not belong to the right political faction, giving rise to stark inter and intra-district disparities. The experience of SAP underlines the difficulties of an approach that focuses primarily on infrastructure-building, without adequately addressing severe institutional obstacles or demand-side constraints to social progress. Addressing these problems will require a close look at the political economy related factors that are responsible for distorting the incentives to provide quality public services.

H. Pakistan’s Devolution Reforms: Significance for Service Delivery

85. Improving the accountability and incentive mechanisms of public service delivery is one of the primary objectives of the comprehensive plan of devolution being implemented in Pakistan. The plan envisages creating full-fledged district governments with legislative and financial powers, serving below the federal and provincial levels. Yet this devolution effort can be expected to succeed only to the extent that it solves fundamental governance problems that have bedeviled earlier efforts, like SAP, to improve service delivery. In particular, it will succeed if local government officials exhibit a greater interest in improving the provision of public goods than in targeting private goods.

86. To date, there is reason for being somewhat optimistic about devolution boosting official interest in improving the provision of public goods. The optimism stems from the possibility that the institutional changes introduced by devolution are likely to reduce incentives for patronage. Newly elected local officials will confront greater political costs in undermining education and health provision in order to generate patronage opportunities, relative to provincial and national government officials who have controlled these sectors in the past.

87. The second reason for optimism is that with devolution, there are potentially more checks operating on officials who try to provide patronage. Until now, the highest district officials have been able to make decisions in a strictly hierarchical fashion. Under devolution, the District Nazims can be checked by the district councils, provided that the councils and Nazims be independent of each other (that the elections at the local level be competitive).

88. However, two important issues regarding service delivery are not likely to be solved by devolution. First, there are severe distributional inequities in the provision of health and education, extending across districts. Inequities in access to services also arise from social obstacles to service delivery that are exacerbated by local governance failures. Qualitative studies have found that interaction of caste relationships and public services can in fact produce a range of outcomes—from scenarios where properly functioning public facilities tend to eradicate caste-based differentials, to those where existing social hierarchies compromise the very functioning of these public services. In the latter scenario, the local government typically lacks the ability or incentive to overcome social barriers in providing universal access to service delivery, and addressing the problem would require attention at higher levels of government. Second, there are significant demand-side problems—difficulties in encouraging families to take full advantage of the services that are made available. This appears to be especially true in the context of parental resistance to girls’ education in rural areas.

89. Experiences in other countries suggest that when incentives of local governments are weak or even perverse, due to social barriers to reform, the involvement of higher-level governments becomes necessary. For example, addressing demand-side issues like resistance to girls’ education may require interventions in the form of incentives, monetary, and otherwise, to parents. The widely implemented Bangladesh Food-for-Education and Female Education Scholarship programs link food transfers and scholarships to poor households to primary school enrollment of their children, particularly girls. In Pakistan itself, Food for Schoolgirls run by the World Food Program (WFP) has been implemented on a limited scale in selected girls’ primary schools in rural Balochistan and NWFP, with some success.

90. Another possible intervention at the federal or provincial level could occur through fiscal transfers to districts. For instance, cross-sectoral incentives to districts can be devised, whereby monetary support for the provision of goods (such as infrastructure) that are heavily demanded are linked to better performances in the social sector. There may also be a need for central government monitoring to ensure that informal incentives and greater local powers do not subvert the new formal rules of political competition.

I. Inducing Private Provision of Education and Health Services

91. An additional element in future strategies to increase access to health and education should be to recognize the already important role of the private sector. As noted before, there has been considerable growth in private schooling since the denationalization of 1979. Since 1990, there has also been a qualitative shift in the establishment and operation of private schools leading to broader access.

92. From 1990 to 2000, the proportion of private schools established in rural areas has increased from 20 percent to about 50 percent, although enrollment in urban private schools is still three times that in rural private schools. Moreover, recent findings call into question a number of prior beliefs about the elite nature of private schools, hi particular, it appears that tuition fees in private schools are not set so that they cater only to the wealthy. Private schooling actually turns out to be cheaper than public schooling, in terms of total resources spent per student.³⁸

93. There is also some evidence that private schools have a positive impact on female enrollment. As mentioned before, a recent study of private schooling points up the advantages that private schools seem to enjoy over public schools; gender differences in their enrollments are found to be low, primarily because these mostly coeducational schools do not restrict girls’ participation, but also because these schools have been able to employ large numbers of women as teachers. The private school experience suggests lessons for strategies for schooling provision in general. It appears that to improve female enrollments, it may be more important to locate schools admitting girl students closer to communities, rather than to focus on single-sex institutions that cannot be universally provided. This might also help create local virtuous cycles for female education; the analysis suggests that on the one hand, increasing the number of female teachers encourages girls schooling, and on the other, an increase in the number of educated women in the community raises the local supply of private schools. In this respect there therefore appears to be a unique opportunity for Pakistan to radically improve the status of female education.³⁹

94. The rapidly expanding role of the private sector in educational provision in Pakistan has obvious implications for educational policy in the country. Accordingly, the government of Pakistan’s Education Sector Reform (ESR) program recognizes the opportunities embodied in this growth of private education, and rightly places a high priority on strengthening public-private partnerships in the delivery of educational services.

95. Measures proposed by the ESR, including fiscal incentives such as concessional rates on land and utilities and increased endowments for the Education Foundations, are welcome in light of the government’s questionable ability to quickly extend universal access. Further, a possible future reform to consider would be to provide vouchers to parents for enrolling children at private schools, or as direct subsidies to private schools. The Quetta Urban Fellowship Program is one interesting example of the use of such subsidies, whereby private schools controlled by communities in poor neighborhoods of Quetta were encouraged to establish new facilities for girls through subsidies paid directly to the schools. While boys could also enroll in the fellowship schools, they could not make up more than half the total enrollment, and schools received no subsidy for enrolling boys. An evaluation of the program reveals that it had a positive impact on female enrollments, increasing girls’ enrollment in the target neighborhoods by about 33 percent. Interestingly, boys’ enrollment rose as well, partly because boys were allowed to attend the new schools, and partly because parents would not send their girls to school without also educating their boys.⁴⁰

96. Notably however, subsidies to private schools or vouchers to parents entail complicated choices. The arguments in favor of subsidies are that private schools are more efficient and that public-private competition tends to improve quality. These need to be weighed against counter-arguments that contend that scarce public resources would be better spent in improving the public school system, which has more universal reach. The nonstandardization of private educational provision imposes additional problems, since parents find it difficult to distinguish between low and high quality schools, which can lead to inefficient outcomes if poor quality institutions can get away with charging high prices. A proper regulatory framework is crucial to address these potential informational problems, with the important caveat that this framework not be so burdensome that it forces private schools to raise their fees in response to higher costs.

97. One key intervention in this context would be to assess how private schools’ test assessment outcomes compare to public schools, and whether these test outcomes correlate positively with prices in the private sector. The absence of a price-quality relationship would indicate that households face problems in learning about the quality of a school. In that case, a national assessment mechanism with published test results can help in providing public information on quality and greatly facilitate informed parental choice that is critical for a successful voucher program. A thorough evaluation of such issues would address the important question of whether using the private sector and providing educational subsidies to poor households can be an efficient policy lever, to some extent supplanting complete reliance on the public sector to expand primary education.

98. Private-public sector partnerships can also be advanced in health, as noted by the government’s Health Policy. The measures considered include requirements that every medical college in the public and private sector adopt at least one district hospital or primary health facility in addition to the teaching hospital affiliated to it. There are also regulatory reforms directed at the private sector, specifically with regards to the accreditation of private hospitals/clinics, and at improvements in the government’s capacity for quality control of drugs.

J. Conclusion

99. The discussion in this chapter has underscored the need for a dedicated effort to extend to the poor the benefits of government provided public goods: to raise people out of poverty by enhancing the potential for growth. The legacy of past failures in this direction can be seen in Pakistan’s social indicators, in terms of both its ranking relative to countries with comparable incomes, and the steep inequities evident across its internal rural/urban, rich/poor, and gender divides. In addition to signifying an absolute deficit in human welfare, the poor social indicators also lower the growth potential of the economy and its ability to service its high debt.

100. The fact that Pakistan’s economy has grown respectably in the past should not mean that these concerns are over-stated. In the light of recent experiences of slowing growth and persisting poverty, past performance in fact suggests that a certain degree of development and growth was attainable with the help of a skilled elite, unskilled workers, and a public-sector-led development strategy. However, over time this strategy ran into diminishing returns as underlying institutional problems undermined the growth in the country’s aggregate stock of human capital and discouraged private investment.

101. Combined with falling growth rates, growing debt in Pakistan has also acted as a critical constraint. The decade of the 1980s saw a rapid widening of the fiscal deficit, and as growth declined during the 1990s, the burden imposed by debt increased, creating a vicious cycle of falling growth rate and increasingly burdensome debt. Closing the fiscal gap must thus be a priority for public policy. That said, expenditure reductions to reduce debt must not reinforce the fiscal bias against the social sector that has contributed, in the first place, to the country’s current predicament. Moreover, promoting human development, especially given the tight constraints on spending that must be imposed, will critically require improving the efficiency of social spending by focusing on institutional reforms that correct underlying incentives for effective service delivery.

102. This chapter has made the case for such reform by highlighting political economy factors that have contributed to the failures of government and donor efforts in the past. The lack of accountability that undermines social and economic development can likely be improved by increased democratization, decentralization, and transparency. The ongoing devolution efforts represent significant opportunities in this direction, with the potential to create incentives for public officials that take into account broad needs, including those of women and socially disadvantaged groups.