INTRODUCTION

The word poverty comes from Latin word pauper which means poor. The meaning of poverty, we says that not having access to food, basic needs and services like clean water, nutritions, clothing, shelter, or health care etc. we can says that Pakistan is the one of the country which is facing this problem since many times, about the report of World Bank 40% percent peoples of Pakistan living below the line of poverty and it is increasing year by year 10% to 15% and according to the UNDP (United Nation Development program) the 65.5 population of Pakistan earn less than 2$ per day which is not enough for basic needs.

WHAT IS POVERTY

Poverty is a condition in which a person or community is deprived of, or lacks the essentials for a minimum standard of well-being and life. Since poverty is understood in many senses, these essentials maybe material resources such as food, safe drinking water, and shelter, or they may be social resources such as access to information, education, healthcare, social status, political power, or the opportunity to develop meaningful connections with otherpeopleinsociety. Poverty may also be defined in relative terms. In this view income disparities or wealth disparities are seen as an indicator ofpoverty and the condition ofpoverty is linked to questions ofscarcity and distribution ofresources and power. The definition and measurement ofpoverty have evolved over time. The periodic changes inthe definition stem from the variation both across time and space in the description of what constitutes socio-economic well-being. The ability of meeting the costs ofminimumnutritional requirements is the most important component of the basic needs approach to the measurement of poverty. This definition has been strengthened by including socio-economic indicators of well being such as high rates of morbidity and mortality, prevalenceofmalnutrition, illiteracy, high infant and maternal mortality rates. Most elements of these aspects ofpoverty are based mainly on economic considerations. Consequently, many of these indicators are quantifiable.Recently, the definition ofpoverty has been furtherbroadened. Newdefinitions incorporate problems of self-esteem, vulnerability to internal and external risks, exclusion from the development process and lackof social capital. The new additions to the definition ofpoverty capture the qualitative aspect of socio-economic well being. These definitions also influence the design of pro-poor policies for economic growth, public expenditures, safety net programs and tools for assessing the impact of programs and projects on poverty reduction. Generally poverty is a result ofmany and often mutually reinforcing factors including lackof productive resources to generate material wealth, illiteracy, and prevalence ofdiseases, natural calamities such as floods, drought and manmade calamities such as wars. With increasing urbanization expected in the coming decades, the number of poor in urban areas, mainly the unemployed and those engaged in the informal sector, will grow faster and thus turn poverty into an urban nightmare from the currently observed rural phenomena. Atthe international level, an unequal economic and political partnership, as reflected in unfavorable terms of trade and other transactions for developing countries is also a major cause ofpoverty in developing countries. Some causes of poverty are not direct, for example, traditionsand norms which hinder effective resource utilization and participationin incomegenerating activities.

Poverty in Pakistan is a major economic issue. Nearly one-quarter of the population is classified poor as of October 2005. The declining trend on poverty in the country seen during the 1970s and 1980s was reversed in the 1990s by poor Federal policies and rampant corruption.The government of Pakistan has prepared an "Interim Poverty reduction Strategy Paper" that suggest guidelines to reduce poverty in the country. According to the World Bank, the program has tangible success, with the World Bank stating that poverty has fallen by 5 percent since 2000.Incidences of poverty in Pakistan rose from 2226% in the Fiscal Year 1991 to 3235% in the Fiscal Year 1999. They have subsequently fallen to 25-28% according to the reports of the World Bank and UN Development Program reports. These reports contradict the claims made by the Government of Pakistan that the poverty rates are only 23.1%3. The CIA fact book places the 2006 poverty rate at 24 percent.For many people in developing countries, poverty means difficulty in living, as well as lack of basic services in health and education. In Pakistan lack of access to credit, training to income generating activities, basic social services and infrastructure are the critical factors behind the persistence of substation poverty. Poverty is widely spread in Pakistan and is pre dominating the rural phenomenon. Nearly about two third of the population of Pakistan live in rural areas, in 1970s to 1980s the poverty rate of Pakistan fell down but again in 1990s it rose up, According to the Government of Pakistans poverty reduction strategy papers, currently about 10 percent of the population is chronicallypoor, but a much larger portion of the population[for about 33 percent] is considered vulnerable and likely to sink in poverty.The incidence of poverty varies between rural to urban areas, and from one province to the next. In many other mountainous parts of the country where communities are small, isolated and where there are few major urban centers, poverty is widely and evenly disturbed.There is controversy between the government officials and independent economists about the statistics of poverty but both the segments are agreed that out of four Pakistani living under the poverty line THREE are women.In the last it is concluded that if a person who is living in Pakistan earns less than a dollar per day then he is in poverty net. On other hand if he has lack of facilities than it is poverty of opportunity. So we can say that more than 40% of the population of the Pakistan is living below the poverty line.

LITERATURE REVIEW

Ali and Tahir (1999) and Saboor (2004) estimate OLS regressions to determine the long-run relationships between these three variables using pooled data on Pakistan. The first study estimates the relationship from 1963/64 to 1993/94, using 14 Household Income and Expenditure Surveys HIES datasets comprising 28 observations (two observations, i.e., urban and rural from each survey). The second study estimates the same from 1990/91 to 2001/02, including seven HIES datasets using 28 observations (one observation for each of the four provinces in each survey for rural Pakistan). Ravallion and Chen (1997), Adams (2004), and Ram (2007) estimate OLS regressions to determine the long-run relationship between poverty, income inequality, and growth using cross-country data. The first two studies show that growth plays a key role in reducing poverty; the third shows that the elasticity of poverty with respect to growth is smaller than the elasticity of poverty with respect to inequality. Wodon (1999) and Lombardo (2008) estimate fixed effects and random effects models using pooled data on Bangladesh and Italy, respectively, and find that the growth elasticity of poverty is larger than the inequality elasticity of poverty. Wodon shows that the net growth elasticity of poverty is smaller than the gross elasticity of poverty with reference to growth. Deolalikar (2002) also estimates a fixed effects model using pooled data on Thailand; the studys results reveal that the inequality elasticity of poverty is larger than the growth elasticity of poverty. Wu, Perloff, and Golan (2006) estimate a random effects model using pooled data for 50 US states for the period 1991 to 1997, to determine the role of taxes, transfers, and welfare programs on income inequality. They show that taxes play a more important role in redistributing income in urban than in rural areas, while transfers and welfare programs are more effective in rural areas than in urban areas. Fosu (2009) estimates a random effects model to find out how inequality affects the impact of income growth on the rate of poverty change in sub-Saharan Africa (SSA) compared to non-SSA, based on an unbalanced panel of 86 countries over 19772004. The study shows that the impact of GDP growth on poverty reduction is a decreasing function of initial inequality. Income growth elasticity is substantially less for SSA. Janjua and Kamal (2011) also estimate a random effects model to examine the impact of growth and education on poverty using a panel dataset for 40 developing countries for the period 1999 to 2007. Their study shows that growth plays a moderately positive role in poverty reduction, but that income distribution did not play a key role in alleviating poverty in the sample overall. The study also shows that the most significant contributor to poverty alleviation was education.

Powers (1995) adopted a consumption based approach to measure poverty in the United States. Analyzing data from 1959 through 1992, she found a robust and relatively large positive relationship between inflation and the consumption poverty rate. Powers argues that inflation affects the poor directly through a decline in their real wages owing to the short-run rigidity of nominal wages.Son and Kakawani (2006), in the context of Brazil between 1999 and 2006, found that if food prices increased by 1%, the poverty head count ratio would increase by 0.42%. If non-food prices increased by 1%, the head count ratio increased by 1.02%. Thus, they found that if the overall prices increased by 1%, the poverty head count ratio increased by 1.44%.Chani, et al. (2011) have analyzed the impact of macroeconomic parameters on growth and poverty in the context of Pakistan. Covering time series data from 1972 through 2008, they find that inflation is positively correlated with poverty. Quantifying the effect of inflation on poverty, they found evidence that one percentage point increase in the CPI is expected to raise the head count ratio of poverty by 0.38% next year.A study by the Asian Development Bank (2011) noted that global food prices increased by more than 30% in the first 2 months of 2011, and domestic food inflation averaged about 10% for a number of regional economies. The study further found that a 10% rise in domestic food prices in developing Asia risks creating an additional 64.4 million poor people, or increasing the percentage of poor by 1.9 points. So a 30% increase in global food prices would increase the percentage of poor by 5.7%.

References Ali, S. S., & Tahir, S. (1999). Dynamics of growth, poverty and inequality in Pakistan. Pakistan Development Review, 38(4), 337858. Ravallion, M., & Datt, G. (1992). Growth and redistribution components of changes in poverty measures: decomposition with applications to Brazil and India in the 1980s. Journal of Development Economics, 38, 275295. Ravallion, M., & Chen, S. (1997). What can new survey data tell us about recent changes in distribution and poverty? World Bank Economic Review, 11(2), 357382.Wodon, Q. T. (1999). Growth, poverty and inequality: A regional panel for Bangladesh (Policy Research Working Paper No. 2072). Deolalikar, A. B. (2002). Poverty, growth and inequality in Thailand (Working Paper No. 8).Wu, X., Perloff, J. M., & Golan, A. (2006). Effect of government policies on urban and rural income inequality. Review of Income and Wealth, 52(2), 213235. Fosu, A. K. (2009). Inequality and the impact of growth on poverty: Comparative evidence for sub-Saharan Africa. Journal of Development Studies, 45(5), 726745. Poverty, Income Inequality, and Growth in Pakistan 151Janjua, P. Z., & Kamal, U.A. (2011). The role of education and income in poverty alleviation: A cross-country analysis. Lahore Journal of Economics, 16(1), 143172. Powers, E. T. (1995). Inflation, Unemployment, and Poverty Revisited. Economic Review, Federal Reserve Bank of Kansas City. Qtr IIISon, H. H., Kakawani, N. (2006). Measuring The Impact Of Price Changes On Poverty. International Poverty Centre, United Nations Development Program, Working Paper 33.Chani M. I., Pervaiz, Z., Jan, S.A., (2011). Poverty, Inflation and Economic Growth: Empirical Evidence from Pakistan. World Applied Sciences Journal. Dubai, UAE. pp. 1058-1063.

THEORYCauses/Reasons of poverty in Pakistan

It is difficult to point out all causes of poverty in Pakistan but the major causes of are given below:1. Government PoliciesGovernment is not well aware of present conditions of country. The policies of government are based on the suggestions of officials which do not have awareness about the problems of a common man. After implementation of the policies do not get effective result. After the failure of one policy, government does not consider its failure and announces another policy without studying the aftermaths of last one. Heavy taxes and unemployment crushes the people and they are forced to live below poverty line. The suitable medical facilities are not provided to people and they are forced to get treatment for private clinics which are too costly.2. EducationEducation sector plays a very vital role in the progress of any country. Unfortunately, the condition of education sector in Pakistan is very miserable. The lack of quality education our country is unable of dealing with the challenges of the 21st century. Due to poverty people are unable to afford quality education for their children. In addition, governments negligence is frustrating the situation further. Even though various steps taken by different governments for the promotion of education, literacy rate lingers at 56% over the decade. Owing to low investment, government run schools are poor of basic facilities like proper classrooms, water and sanitation facilities, electricity. Private sector is doing an admirable job in this regard. But the money making objective of this sector, education has been beyond poors reach. The primary completion rate in Pakistan given by UNESCO is 33.8 % in females and 47% in males, which shows that people in the 6th largest country of the world are unable to get the basic education.3. OverpopulationPakistan is facing the dragon of overpopulation. The growth rate of Pakistan is very high and is among the highest in the world. Since 1947, the population has become more than triple. Pakistan is almost touching 180 million marks. Population expansion has been a real issue of concern for all governments. With limited resources it is very difficult to control the growing population. There is a great economic disparity among the people. Poor are committing suicides out of hunger while rich are busy in buildup more and more wealth. These social problems directly affect the masses. The massively increasing population has almost outstripped the resources in production, facilities and in job opportunities.4. UnemploymentPakistan is poorly faced with the problem of unemployment. The existing unemployment rate is 15%. Thousands of young doctors, engineers and other educated people are out of job. There are no opportunities for youth to utilize their capabilities or abilities in right direction. Pakistan is facing the problem of brain drain due to unemployment because we are unable to utilize their precious hands in the progress of the country. The most horrible part is that it is rising every year it will show to be risky for the economy of Pakistan. It has negative impact on society. It creates frustration and revengeful attitude. It leads to an increase in the incidences of crimes.6. Poor governance Owing to poor governance, the government is losing control over law and order situation. When individuals put themselves in front of institutions, they set a bad example. Suicide attacks, target killing, robbery and other crimes have become norm of the day. And government seems helpless in this regard.7. CorruptionCorruption has become a major threat to Pakistani society because of four important reasons. First, the image of Pakistan has enormously suffered in the past few decades or so as the corrupt practices while awarding contracts, the launching of foreign funded projects and money laundering done by high level officials earned a bad name for the country.In 1996, transparency international a Berlin based civil society organization, rated Pakistan as the second most corrupt country in the world. The report TI was a source of great shame for Pakistan was it not shattered the countrys image but also discouraged foreign donors to support Pakistan in its developmental projects. When the culture of greed resulting into taking commission from foreign companies and agencies deepened, the trust and confidence of the world diminished. According to TIs national corruption perception NCP Survey 2010 there occurs widespread corruption in Pakistan from 195 billion rupees in 2009 to 223 billion rupees in 2010.Some of the most corrupt institutions and areas in Pakistan identified by TI are: police, power sector, land administration, communications, education, local government, judiciary, health, taxation and custom. According to TIs survey, there has taken place manifold increase in corruption in the present government than the previous one. Neither foreign national nor over-seas Pakistanis who may be interested in investing in this country are simply discouraged when they encounter large-scale corruption in the shape of bribery and kickbacks.8. Division of Agricultural LandPakistan is an agricultural country. Most of people are farmers by profession. One has land which is fulfilling the needs of his family but he has to divide the land into his children when they got young. After division the land is not sufficient to support a family. Now the families of his children are suffering and spending their lives below poverty line.9. MaterialismIn our society social bonding are gradually becomes thinner and thinner. A race of material object has been started even no one tried to understand the problems of others. Everyone is gradually changing from human to a bioman which only know about his needs and have no concept about the limitations of others. People are not ready to help each other. At last everyone has lost his trust on others which affect our social and economic system and it is another cause of poverty.10. Large Scale ImportThe import of Pakistan is greater than export. Big revenue is consumed in importing good every year, even raw material has to import for industry. If we decrease import and establish own supply chains from our country natural resources the people will have better opportunities to earn.11. Law and OrderThere are lot of problems regarding law and order. Terrorist attacks create uncertainty in stock markets and people earning from stock are getting loss due to which the whole country faces uncertain increase in commodity prices.

12. Fluctuated Foreign investmentForeign investor comes to local markets. They invest millions of dollars in stock markets and stock market gets rise in index. Then the investor withdraws his money with profit and market suddenly collapses. The after math always is faced by poor people.13. PrivatizationGovernment is unable to manage the departments and country has low reserve assets. So the meet the requirements some companies run by government are sold to foreign investors. The commodities or services provided by the companies are becoming costly. For example if government sold a gas plant then prices for gas in country rises.14. Moral CultureThe main reason for poverty is the social dishonesty and irresponsible behavior of people. Everyone is trying to get rich by using unfair means. A shop keeper is ready to get whole money from the pocket of customer. People doing jobs are not performing their duties well. In society the man considered brave or respectful who do not pay taxes or continuously violate the laws. This irresponsible behavior continuously increases and produces loss for county.15. Political InstabilityPakistan has been facing political crisis from its birth (1947) till now. From 1947 to 2010,In this long period many government changed but unfortunately they all could not Maintain the political environment stable, after ruling 1, 2 or three year that governments politically instable. Political instability is a situation when the uncertainty among the government structure expand due to some basic causes and it eventually end up the current government1. Armys frequent interventions have never given democracy a fair chance to flourish in our country. Our political leaders are also responsible for this predicament. They have always tried to achieve their vested interests in the garb of politics. They have never respected the norms of democracy. Judiciary has also been the victim of such political instability. Thats why; our country has failed to develop healthy political institutions, a lasting democracy and impartial judiciary.

ROLE OF ASIAN DEVELOPMENT BANK

ABOUT THE ASIAN DEVELOPMENT BANK:ADB is a multilateral development bank owned by 67 members, 48 from the region and 19 from other parts of the world. ADBs main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance (TA). Over the last 4 years (20042007), ADBs annual lending volume averaged $7 billion, with TA averaging $218 million and grant-financed projects $616 million. In 2007, lending volume was $10 billion, with TA at $243 million and grant-financed projects at $673 million.

ABOUT PAKISTAN AND ADB;Pakistan is the ninth largest shareholder in ADB among its regional members. Overall, Pakistan is the 13th largest shareholder.ADB MembershipJoined 1966Shares held 77,080 (2.17%)Votes 90,312 (2.04%)Marita MagpiliJimenez is the Executive Director and Sibtain Fazal Halim is the Alternate Executive Director representing Pakistan on the ADB Board of Directors. Peter Fedon is the ADB Country Director for Pakistan. The Pakistan Resident Mission (PRM) was opened in 1989 and provides the primary operational link between ADB and the government, private-sector, and civil-society stakeholders in its activities. PRM engages in policy dialogue and acts as knowledge base on development issues in Pakistan. The Pakistan government agencies handling ADB affairs are the Ministry of Finance and the Ministry of Economic Affairs & Statistics.

Pakistan has received about $18.59 billion in loans since joining ADB in 1966, with about $12.3 billion disbursed as of the end of 2007. The lending program in 2007 was a record that included almost $2.0 billion in loans and $20.2 million for technical assistance grants. ADB is working with the Government and the private sector to improve the countrys infrastructure , energy security , and basic public services . Aligned with national development objectives, ADBs partnership priorities aim to attract investment, create champion industries and jobs, and improve the quality of life of citizens.A new Country Partnership Strategy (CPS) for that is currently being finalized , and is scheduled for consideration by ADBs Board of Directors in 2008 , aims to support Pakistans strategic objectives of prosperity and poverty reduction.

ADB AND PAKISTAN

ADB and Pakistan have enjoyed a longstanding development partnership. As of 31 December 2003, ADB's cumulative assistance to Pakistan totaled $13.55 billion in the form of 228 public sector loans. In addition, ADB has provided $109 million in grants for 273 technical assistance projects. Fifty one percent of the total assistance provided by ADB to Pakistan has been through the Asian Development Fund (ADF) window. Besides these, ADB has provided a total of $467 million for private sector development in the country. The year 2003 was another eventful year in Pakistan. Pakistan's economic performance(as mentioned earlier) continued to improve and stabilize during 2003, and key macroeconomic fundamentals at the beginning of 2004 were better than at any time in the past decade.

The Pakistan Resident Mission (PRM) consolidated its operations in Pakistan in 2003. Amongst the main achievements during the year, the Country Strategy Program Unit

(CSPU) for Pakistan (2004-2006) has been finalized and approved by the ADB Board. In terms of lending assistance, 5 Projects totaling $870.7 million were approved. In addition, technical assistance (TA) grants for a total of $10.028 million were approved.

POVERTY REDUCTION STRATEGY:HIGHLIGHTS OF ADB'S POVERTY REDUCTION STRATEGY

In ADB's view, poverty is a deprivation of essential assets and opportunities to which every human is entitled. Everyone should have access to basic education and primary health services. Poor households have the right to sustain themselves by their labor and be reasonably rewarded, as well as have protection from external shocks. Beyond income and basic services, individual and societies are also poor, and tend to remain so, if they are not empowered to participate in making decisions that shape their lives. Poverty is better measured in terms of basic education health care nutrition water and sanitation income employment and wages empowerment The primary responsibility for finding solutions to poverty lies with countries themselves, but success will depend on the united efforts of Government and civil society, and on strong and sustained support from the international community.ADB's poverty reduction strategy is anchored on pro-poor economic growth social development good governance

POVERTY REDUCTION PARTNERSHIP AGREEMENT (BETWEEN THE GOVERNMENT OF PAKISTAN AND THE ADB)This Partnership Agreement between the Government and the Asian Development Bank sets out a shared vision for reducing poverty in Pakistan, and key priorities for joint development cooperation between the Government and ADB to realize this vision. This Agreement reflects the Governments vision and goals for poverty reduction and key priorities of the ADBs Country Strategy and Program (CSP) which was formulated based on the findings of ADBs Poverty Analysis and High Level Poverty Forum. The Agreement also serves to focus on attainment of the Millennium Development Goals (MDGs) for 2015. These goals and targets will be reviewed as required to allow the Agreement to remain current and responsive to changing needs. There are agreed measures for monitoring the implementation of this agreement. The Agreement recognizes the vital and complementary assistance provided by other aid agencies in support of the Governments poverty reduction efforts, and the need for an effective partnership among development partners to achieve the goals, strategy and actions.