Magic ‘line’ that makes us rich or poor
(WALK the LINE is a monthly column for the Development Page of the Business Times contributed by CEPA, an independent, Sri Lankan think-tank promoting a better understanding of poverty related development issues. CEPA can be contacted by visiting the website www.cepa.lk or via info@cepa.lk)
The presidential declaration of 2017 as the ‘Year of Poverty Alleviation’ has revitalised discussions on poverty among policy makers, researchers, practitioners, media and the general public. The appointment of a Special Committee on Poverty Alleviation comprising prominent parliamentarians representing different political parties has further augmented energy on the subject. Poverty measured on the basis of real expenditure has reduced drastically from 23 per cent (in 2002) to 6.7 per cent (in 2012/13). After struggling for many years as a Low Income Country, Sri Lanka finally scraped its way to the Middle Income Country (MIC) status in 1997. MIC is a classification of a country’s economy by the World Bank when per capita income lies between US$1,036 and $12,615. In 2010, the International Monetary Fund (IMF) listed Sri Lanka as a Middle Income Emerging Market and graduated Sri Lanka from the list of Poverty Reduction and Growth Trust (PRGT). Statistically, Sri Lanka performs extremely well in arresting poverty. With poverty incidence under 8 per cent of the population, Sri Lanka compares well against its neighbours, Bangladesh, Nepal and India, where approximately 40 per cent, 30 per cent and 28 per cent of the population respectively, are identified as poor.
However, poverty and poverty statistics seem very different from each other.
Sri Lanka’s poverty statistics are drawn on the basis of an ‘absolute poverty line’ which is derived by calculating the cost of a basket of basic needs. This ‘basket’ consists of food items required to meet the minimum nutritional requirement of 2030 kilocalories per day per person, and other non-food basic needs. In 2012/13, this was translated to Rs. 3,624 per person per month, and households whose per capita expenditure fell below this amount were identified as poor. Income and expenditure, however, have long been criticised as being unsatisfactory measurements of quality of life while the new Multidimensional Poverty Index (MPI) championed by the UNDP aims to address this shortcoming in money metric measures by directly measuring outcomes in health, education and living conditions. The index is equally weighted across the three dimensions reflecting indicators for the health dimension (such as calorie intake less than 80 per cent of the requirement, the head of the household being chronically ill or disabled); for the education dimension (households where no one has completed 5 years of schooling, primary age children who are not enrolled in school), and for the living conditions dimension (houses without electricity, no access to clean water, sanitation, etc).
This snapshot of poverty may, however, hide a number of troubling characteristics. In Sri Lanka, poverty has a spatial characteristic which becomes clear when looking at the incidence of poverty by district. Here severe regional disparities exist. Poverty levels in the districts of Mullaitivu and Moneragala are 28.8 per cent and 20.8 per cent with Mannar (20.1 per cent) and Batticaloa (19.4 per cent) not far behind. In contrast, Colombo, Gampaha and Vavuniya districts have a poverty incidence of less than 5 per cent (all figures based on 2012/13 HIES). While 2.6 million people are estimated to have escaped poverty in the last 20 years, they may still be dangerously close to the poverty line and vulnerable to falling below it due to any number of shocks such as illness, inflation, natural disasters, etc. A small adjustment to the poverty line, to increase it by just 10 per cent, results in an additional 800,000 people being identified as poor. Similarly, the MPI adjusting the deprivation cut off from 30 per cent to 20 per cent results in an additional 1.9 million people being identified as poor.
What does this mean for
understanding poverty and
deprivation in Sri Lanka?
Clearly, relying entirely on a point measure of poverty, such as the poverty line, will give us at best, only a partial picture. It raises questions about the adequacy of Rs. 3,624 per person per month, which translates as just Rs. 120 per day, to meet a person’s minimum requirements of food, clothing and shelter, not to mention energy and health needs. Point measures of poverty should be supplemented by data on distribution across the population, as small changes in the poverty line substantially changes the poverty situation in the country.
Poverty data should be triangulated with other methods and sources of data collection to ensure that we approximate the true picture. For example, the MPI shows low incidence of deprivation in terms of the health dimension in the estate sector, which is borne out by several smaller studies in recent years. On the other hand, there is a sharp reduction in money metric poverty in the estate sector from 32 per cent in 2006 to 10.9 per cent in 2012/13, probably impacted by a two-fold increase in wages negotiated by the Collective Agreement of 2009. However, the sector still lags behind other sectors in income and multi-dimensional poverty. Overall, while we should celebrate the reducing poverty trend over the last 20 years, the concentration of population in the lower income groups suggests that more work is required to ensure that sustainable poverty alleviation is achieved in the country.