Budget debates on development come and go, but poverty remains in spite of the rhetoric of economic objectives being to reduce poverty. The development policy of the Mahinda Chintanaya places considerable emphasis on poverty reduction and reduction of urban rural income differentials through overall economic growth, rural development agricultural strategies and development of rural infrastructure. Yet there are some concerns as to whether the implementation of the plans will in fact reduce poverty significantly.
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The emphasis on large investments on economic infrastructure and the limited expenditure on education and health in the budget are reasons for this scepticism. Overall economic growth no doubt reduces poverty, yet the trickle down effect could be inadequate. The recent experience of economic development in India illustrates this: poverty has increased in India despite spectacular economic growth that has benefited mostly urban areas. The experiences of Malaysia and other East Asian countries have however been different. Their poverty levels have declined drastically with economic growth. The underlying reason for this is that programmes to uplift the conditions in rural areas have gone in tandem with large urban and industrial development projects.
The lesson to be learnt is that it is not economic growth per se that matters but the nature of the process of economic growth. The Mahinda Chintanaya has a two pronged strategy to benefit rural areas while pushing towards a high trajectory of growth. Yet the funds allocated to get the rural economy moving and improving social infrastructure may be inadequate. This is seen in the insufficient funds for education and health and under funding of agricultural research.
Between 25 to 40 per cent of the population of Sri Lanka is estimated to be in income poverty. If the World Bank criterion of less than US$1 per day per capita is used the incidence of poverty is 6.6 per cent but the rate of poverty rises sharply to about 45 per cent when the cut off point is income below US$2 per day. It is this latter figure that is disconcerting as they are really poor. The highest incidence of poverty prevails in the estate sector. Poverty is also high in the rural sector and especially in some regions in the country. The highest incidences of poverty are in Uva, Sabaragamuwa and Southern areas. Wayamba and Central provinces too harbour much poverty. There are wide variations in the poverty incidence in the country and chronic poverty is endemic in many regions.
Poor economic and social infrastructure and limited non-agricultural income opportunities in some rural areas too account for the higher continuing incidence of poverty.
The hinterland is more prone to poverty as income generating opportunities are limited. The main thrust on poverty reduction would necessarily have to be in the rural sector where the incidence of poverty as well as the largest number of the poor reside. Structural weaknesses in the agrarian economy mainly account for this higher incidence of poverty. These are, inter alia, the ownership and cultivation of small sized holdings, low productivity, ineffective extension services, inadequate institutional credit and inefficient marketing systems for food crops.
If a significant improvement in poverty is to be achieved, agricultural productivity has to be improved. Investment in research is a pre-condition for agricultural development. Yet this is one of the areas where there has been under spending. This year’s budget too has inadequate funding for agricultural research. Often the stringency of funds makes the release of the funds uncertain or delayed and this has affected research capacity. The number of experienced scientists in agricultural research is declining. The inadequate funding for research in agriculture and other scientific areas is partly due to a lack of appreciation of the importance of research in increasing productivity.
Expenditure on research does not bring returns immediately. However, it is widely recognized the world over that agricultural research brings impressive returns over the long run. Increases in yield can be achieved only if research develops high yielding varieties of crops adapted to our soil and other climatic conditions, finds out the correct amounts of inputs and develops methods of preventing crop losses through diseases and pests. Research institutions must be adequately funded to achieve these; research staff trained and sufficient and laboratory facilities properly equipped. The neglect of research is an important reason for the lack of any significant breakthrough in developing new high yielding varieties recently. The rhetoric of emphasizing agricultural development is empty without funding for advances in agricultural research.
The North and East of the country are no doubt suffering the worst deprivations owing to the disruption of economic activities due to two and a half decades of armed conflict. However no precise figures of the entire region are available. Scattered data from limited areas provide evidence of chronic poverty, food insecurity and malnutrition. With peace and restoration of economic activity there would no doubt be an improvement in incomes. Yet there is a generation of persons who are ill equipped to undertake income generating activities or find employment. Special programmes to rehabilitate these persons as well as welfare programmes are needed.
These imply large amounts of resources that the government’s public finances are hardly able to cope with. Foreign assistance from governments and NGOs are needed to make a dent in this problem. Especially important for future poverty reduction is the improvement of school education in remote rural areas. It is through education that the rural and urban poor can rise above their endemic poverty. There should have been higher funding for education to achieve this result.
There is a need to implement a big thrust for agricultural development with a special emphasis on improving agricultural technology, improving the link between research and extension, and improving marketing channels for agricultural produce. Developing agriculture-based industry and agricultural processing facilities would provide gainful employment for the underemployed rural poor. Revitalizing the extension services on new effective lines using modern methods of communication are essential to increase agricultural productivity. Finances currently wasted in politicized, inadequate and very poorly targeted programmes are hardly likely to reduce poverty.
The reasons for the persistence of poverty are fundamental and structural. Palliatives cannot remove these. Certainly overall economic policies and economic growth have important contributions to make to poverty reduction. Yet the nature and extent of poverty are such that only reforms that fundamentally change the access to resources, improve the quality of those resources and enhance income-earning capacities can eradicate poverty.
An economy that does not grow at a rapid pace would be unable to alleviate poverty effectively. Yet the nature of the growth strategy, fundamental structural reforms, social development expenditure and government interventions are needed to impact on poverty reduction. |
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