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November 23, 2017



The reality of Sindh’s poverty

A recent report by the State Bank of Pakistan was used by sections of the media to assert that “rural Sindh is the poorest region in Pakistan because the bank deposits [are low] when compared [with] other parts of [the] country, except Balochistan”. The decline in bank deposits from Rs89.8 billion in December 2016 to Rs82.3 billion till the end of June 2017 does not show, in any way, that poverty has increased or decreased.
It would be wrong to use such data to measure the poverty ratio and conduct a comparison as this is a flawed basis of reaching any conclusion. The State Bank’s report itself doesn’t draw that conclusion. It cannot and will not draw any conclusions as it gave up the responsibility of documenting the state of social development in Pakistan a long time ago. Its annual report on the country’s economy is now published without a chapter on social development rankings. Perhaps the bank’s management doesn’t see any value in spending resources on such research.
Bank deposits cannot serve as a basis of poverty mainly because the poor don’t have enough to have savings in banks. Those who do have deposits tend to be sufficiently mobile, moving from city to city for the education of their children and in search of better housing. There is no study on the non-formal banking sector that operates in the country, especially in the rural areas. After the Ishaq Dar-led finance ministry imposed a tax on bank withdrawals, people lost the incentive to save in banks. The rural population, who already have limited opportunities of earning money, wouldn’t want to give a large portion of their money to the government in form of taxes.
Pakistan’s poor are burdened by unjustified indirect taxes. An example of this was recently disclosed by lawyer and economist Dr Ikramul Haq. Mobile phone companies are levying a 13-percent advance income tax on consumers. Around 90 million people in the country are paying income taxes. This runs contrary to

the fact that there are less than three million taxpayers in the country.
The unjust taxation system is one of the major factors that have contributed to poverty in the country. It has deprived the low-income population of their hard-earned money and has been viewed as an attempt to loot and plunder their resources. Successive governments have not paid attention to the demands of the taxation policy review. While tax refunds are given, they are mostly reserved for rich businessmen instead of low-income taxpayers.
For years, Pakistan’s economists have suggested that indirect taxes should be reduced as it reflects bad economics, serves as an obstacle to capital formation and blocks the growth of small business. The examples of many countries have been cited in this regard, including that of India, where the ratio of indirect taxes is less than 35 percent. It is over 65 percent in Pakistan. Instead of providing subsidies on food and medicines, the government is collecting GST on both key items. The government’s policies are adding to the miseries of the people. In the US, eight out of 10 tax filers take tax refunds. Of these, 84 percent make less than $50,000 per annum.
Poverty – rural or urban – is not a natural state. It is a consequence of economic policy and a direct result of public policy. Big businesses tend to get bailout packages. The current accountability process of a few business people reveals how much government land has been leased to influential people and how crony capitalism has served the political elite’s business interests.
Poverty in rural Sindh is not a myth; it is a reality that has been perpetuated by the policies of the central government. There has been endless propaganda that suggests Sindh’s own ruling class and provincial government keep people in a state of deprivation.
This is partially true. But poverty is a structural problem. Nowhere in the country except in Sindh was land given to non-locals after the construction of new barrages. A large part of the 1.6 million acres of land around the Kotri Barrage and the 1.1 million acres surrounding the Guddu Barrage has been allotted to non-Sindhis, who are mostly from Punjab. The land has been allotted on an installment basis and at extremely low prices fixed by the federal government. The price was fixed at Rs350 per acre in the Kotri Barrage and Rs550 per acre in the Guddu Barrage. That is why the number of landless peasants is higher in Sindh than anywhere else in the country. A huge mass of people do not own any means of production. How much money do they even make to have bank deposits?
The formation of West Pakistan under the One Unit Policy was the basis of structural exploitation in Sindh. The province had not always been sidelined. Before Sindh was deprived of its provincial status in 1955, it was the only province in West Pakistan with a surplus budget. Khairpur had six boarding schools and a surplus budget of Rs40 million. However, things changed when authoritarian central governments started establishing extracting structures – a practice that continues without being challenged.
In the 1990s, Dr Feroze Ahmad, an intellectual, wrote in his book that Sindhis are, in terms of dispossession, worse off than Palestinians. Political economy and public policy, along with a strong central control, have established conditions of perpetual poverty in the rural areas of Sindh.
We are witnessing the country’s premier institutions, like the State Bank, showing an unwillingness to study, analyse and share details on social development because such data creates discomfort. This is because ten districts, which fall within the bottom tier in terms of social development, show a negative pattern – an inconvenient truth. No one in Islamabad wants to hear this truth as it invites protest and uncovers the growing regional disparity in the country.

Email: mush.rajpar@gmail.com
Twitter: @MushRajpar