Thursday, April 23, 2020

Incomes of Pakistan's Poorest Rising Faster Than Richest Pakistanis'

Pakistan Living Standards Measurement Survey (PSLM/HIES) of 2018-19 has revealed that the incomes of the poorest Pakistanis are rising much faster than the those of their richest counterparts. The survey measures changes in incomes, expenditures and living standards of the population by quintiles on a periodic basis. The survey provides detailed outcome indicators on education, health, population welfare, housing, water sanitation and hygiene, information communication and technology (ICT), food insecurity experience scale (FIES) and income and expenditure.

Average Monthly Income Growth By Quintiles. Courtesy: Bilal Gilani of Gallup Pakistan

PSLM/HIES 2018-19 compares incomes with those reported in PSLM/HIES 2015-16.  It shows that the average household monthly income in Pakistan has jumped 16.5% to Rs. 41,545.  It also shows that the average monthly income of the lowest quintile (Q1) in Pakistan rose 17.5% and that of the second lowest quintile (Q2) grew 22%, significantly faster than 11.7% for the middle quintile (Q3) and 12% and 5.1% for the top two quintiles (Q4 and Q5) respectively.

The average monthly income of Q1, the poorest quintile, stands at Rs. 23,192 in 2018-19. The second-lowest quintile’s income is Rs. 29,049. The middle-income group (Q3) is Rs. 31,373. The higher middle-income group’s average monthly income has increased to Rs. 37,643. The average monthly income of the top income group (Q4) is estimated at Rs. 63,544.
Monthly Household Incomes By Provinces. Source: PLSM/HIES 2018-19

Average monthly household income in Balochistan is Rs. 36,387, the lowest among the provinces. However, it has grown 21.2% since 2015-16,  much faster than Punjab's 18.3%, KP's 11.4% and Sindh's 15.1%.

Change in Share of Income From 1990 To 2015 in Poorest (Left) & Richest (Right) Quintiles. Source: UNESCAP

Pakistan's latest PSLM/HIES survey confirms long term trend of the lower quintiles gaining an increasing share of the national income.  Earlier in 2015, the United Nations Economic and Social Commission for Asia and Pacific (NESCAP) Statistical Yearbook for 2015 showed that the share of national income of Pakistan's poorest 20% of households increased from 8.1% to 9.6% in 1990-2015.  It was the highest share of income for the bottom income quintile reported in the region.

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Mayraj F. said...

Interesting- income of those in KP higher than in Sindh and Balochistan

Riaz Haq said...

Mayraj: "Interesting- income of those in KP higher than in Sindh and Balochistan"

KP's households are larger than Punjab's and Sindh's but smaller than Balochistan's

Years 2015-16 2018-19

Pakistan 6.31 6.24
Urban 6.03 5.97
Rural 6.47 6.40
Punjab 6.04 5.78
Sindh 6.22 6.23
KP (Excluding Merged Areas) 7.34 7.41
KP (Including Merged Areas) 7.52
Balochistan 7.84 8.12

Mayraj F. said...

I remember reading a paper by Arif Hasan about migration that mentioned KP sends more migrants to Gulf countries. The money they send back could also be helping income capacity for those at home.
Migration and small towns in Pakistan

Riaz Haq said...

Mayraj: "I remember reading a paper by Arif Hasan about migration that mentioned KP sends more migrants to Gulf countries. The money they send back could also be helping income capacity for those at home."

PSLM/HIES 2018-19 says foreign remittances account for 5% and domestic remittances 4% of household income in Pakistan.

It's possible that the share of remittances in KP is larger than in other provinces.

Anecdotally, there appears to be disproportionate representation of Pathans than other ethnic groups in construction and transport sectors. It's probably true in both Karachi and Dubai.

nayyer ali said...

Are these income gains just due to high inflation or are they after inflation numbers?

Riaz Haq said...

NA: "Are these income gains just due to high inflation or are they after inflation numbers?"

These are inflation adjusted.

The figure of 16.5% average income increase for Pakistan from 2015-2016 to 2018-2019 corresponds with about 5% real GDP growth compounded over 3 years.

Riaz Haq said...

"Belt & Road Economics": 2019 Report by the World Bank

Pakistan’s GDP to increase by up to 6.43pc till 2030, if one is to take only the investment on transport infrastructure under CPEC into account. However if one includes the impact of some policy measures like reducing border delays and reduction in tariffs that the World Bank proposes, Pakistan can add as high as 14.06pc to its GDP.

“The impact of a more ambitious set of reforms could magnify the gains from the new infrastructure network. For instance, if in addition to an improved infrastructure network also border delays were reduced by half, BRI economies could double the GDP gains coming from infrastructure investment alone. As all countries, BRI and non-BRI, are subject to border delays we find that non-BRI economies benefit as well from trade facilitation reforms. Low-income countries, which trade intensively with countries or tend to have long border delays, would disproportionately benefit from better border management. Better border management would allow firms located in low-income countries to access cheaper inputs increasing their competitiveness in foreign markets. As a consequence, demand for labor would increase pushing nominal wages up. Finally, a more efficient use of intermediate inputs and lower transport costs would lead to a decrease in prices of final goods.”

“As a second exercise, we simulate a 50pc reduction in applied tariffs among BRI
economies. Average tariffs in BRI countries are relatively high compared to tariffs in advanced economies. Applied tariffs in BRI countries vary between around 14pc in Sub-Saharan Africa and 2pc in East Asia and Pacific compared to applied tariffs of below 1pc in G7 countries. This trade rade policy could have a substantial effect on countries in South Asia that could increase the impact of infrastructure improvement alone by a factor of 5.
Interestingly, countries located in the Middle East and North Africa and in Europe and Central Asia would benefit more by combining infrastructure investment with trade facilitation policies rather than combining it with trade policies. This result is explained by relatively high border delays in these regions and by the fact that they rely disproportionately more on non-BRI countries in terms of inputs for their production. The effect of combining both a reduction in preferential tariffs and border delays would increase the benefits for both BRI and non-BRI members more than individual complementary policies alone.”

“Our results show that BRI transport infrastructure projects increase GDP for BRI
economies by up to 3.35pc. The model also shows that BRI-related transport projects could increase GDP for non-BRI countries by up to 2.61pc and for the world as a whole by up to 2.87pc. These numbers are larger than typical findings for regional trade agreements such as NAFTA using a similar methodology. Contrary to regional trade agreements, which decrease tariffs within a narrowly defined set of countries, the BRI is expected to decrease trade costs between a very large number of countries, including many economies that are not part of the initiative but whose trade flows will benefit from the improved transport infrastructure network when accessing (or transiting through) BRI countries.” the report stated.

Riaz Haq said...

"Belt & Road Economics": 2019 Report by the World Bank

Southeast Asian countries are also perceived as having relatively good road quality.
But only Malaysia and some Gulf countries are perceived as having high-quality
roads, as in Western European countries. The quality of rail infrastructure mirrors
the quality of road infrastructure (figure 1.7b). The Russian Federation, Kazakhstan,
Ukraine, the Slovak Republic, and the Czech Republic form a corridor of relatively
good rail infrastructure, while most Southeast Asian countries and the countries
southwest of China, such as the Kyrgyz Republic and Pakistan, are perceived as having
some of the lower quality rail infrastructure. Across corridor economies, logistics
professionals perceive gaps in rail infrastructure as more prevalent than gaps in road
infrastructure. Seaport and airport infrastructure receive higher marks for perceived
quality (Wiederer 2018).


Even though China is closer to Southeast Asia and South Asia than to Europe, the
physical connectivity with the Asian regions is weaker. Due to poor-quality land
infrastructure and level of service, almost all freight between China and Southeast
and South Asia goes by sea. The transport infrastructure in Myanmar is so poor that
virtually no traffic flows overland to it. China’s only land connectivity with South Asia
is through the Himalayas. China connects with Pakistan by road over the Khunjerab
Pass at an altitude of 4,600 meters, but the road is open only for seven months of the
year. China–Nepal–India connectivity is very limited due to the poor infrastructure in
Nepal and the need for four transshipments along the route


• Times to comply with regulatory and border requirements for imports are higher than
global averages on all corridors except the New Eurasian Corridor, and times to export
are higher than the global average on all corridors except the New Eurasian and China–
Pakistan corridors (figure 1.13). The gap between import and export times is higher than
the global average on all but two corridors (the China–Mongolia–Russia Corridor and
China–Indochina Peninsula Economic Corridor), suggesting a disproportionate burden
for traders importing in corridor economies


Expected BRI investments are very large for some countries. Some 66 percent of the
total BRI investment is expected to accrue to seven countries, with Indonesia, Malaysia,
Pakistan, and the Russian Federation accounting for 50 percent of the total. Scaled by
2017 GDP, the median BRI investment amounts to under 6 percent of GDP, an amount
that is not large in relation to the investment needs of many countries, especially if
disbursed over several years. For example, median annual BRI financing in the WIND
database would amount to slightly more than 1 percent of GDP if disbursed over the five
years until 2023. But in some countries estimated investment surpasses 20 percent of 2017
GDP (figure 1.18).


Using this approach, Reed and Trubetskoy (2019) assessed the value of 68 BRI projects.
Half of them generate little value when built in isolation because they connect only
smaller cities or do not add new least-cost paths between cities. But when the entire
network of projects is built, the share falls to around one-third, confirming that the
value of each project depends on other projects. The most valuable projects connect
highly populous cities to the network, such as the Kunming–Kolkata High Speed Rail
(Bangladesh, India, and Myanmar), the Tehran–Mashhad rail electrification in the Islamic
Republic of Iran, and the expansion of the ML-1 Karachi–Hyderabad–Lahore–Peshawar
railway in Pakistan. This analysis points to the importance of project selection and appraisal
to ensure the success of BRI investment.