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8 June 2012

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Special Report

www.ips.lk/talkingeconomics

Eradicating Poverty in Sri Lanka:


Strong Progress but Much Remains To Be Done
Wimal Nanayakkara
Senior Visiting Fellow IPS

Sri Lanka has achieved the Millennium Development Goal (MDG) on poverty 5 years before the target year Sri Lanka has achieved the MDG on poverty, by halving the incidence of Income Poverty (IP), well before the target year (2015) in Figure 1: Income Poverty Headcount - 1990/91 to 2009/10 all sectors except in the 45 Estate sector. The latest 40 Household Income and 35 Expenditure Survey 30 (HIES-2009/10) 25 conducted by the 20 Department of Census 15 and Statistics (DCS), 10 shows that the Estate 5 sector is showing a 0 significant improvement 1990/91 1995/96 2002 2006/07 2009/10 and providing the Sri Lanka 26.1 28.8 22.7 15.2 8.9 present trends continue, Urban 16.3 14 7.9 6.7 5.3 this sector will also Rural 29.4 30.9 24.7 15.7 9.4 achieve the MDG target Estate 20.5 38.4 30 32 11.4 on poverty before 2015.
Source: Household Income and Expenditure Surveys (HIES, 1990/91 to 2009/10)

Income Poverty Headcount (%)

Although around one million poor escaping poverty between 2006/07 and 2009/10, a large proportion of them are still at risk of slipping back The number of poor people on a national level has declined from 2.8 million (or 15.2%) in 2006/07 to 1.8 million (or 8.9%) in 2009/10, showing a significant reduction in poverty during this period. However, many people who have escaped poverty are still at risk of slipping back, as a large proportion of them remain just above the poverty line. As a result, for example, if the poverty line was to be raised by 10%, the proportion of poor increases to 12.8% (HIES 2009/10) - which amounts to an increase of around 800,000 people. This also means that any economic shock, due to whatever reason, may push nearly a million people back in to acute poverty. Hence, it is important to develop suitable strategies to prevent them from regressing and to ensure that their living conditions are improved further so that they are able to support themselves better.

MDGs on poverty have been achieved at sub-national level as well, although there are significant disparities between regions
In all the districts (excluding those in the Northern and Eastern Provinces for which estimates are not available for the year 1990, for comparison) the incidence of poverty has been halved, thus achieving the MDG target on poverty. However, although Sri Lanka has made a remarkable progress in the overall reduction of poverty, there remain significant regional disparities (Figure 3), which need the attention of policy-makers and regional planners if the benefits of growth are to be enjoyed by all the people in the country.

Inequality has declined marginally, but effective strategies are needed to bring it down further
Although poverty has declined in Sri Lanka, Income Inequality still persists. It is, however, encouraging to note that both the Gini Coefficient and Quintile Ratios, both widely used inequality indicators (computed for the real per capita expenditure), show that there is a marginal reduction in inequality in 2009/10. For the past three to four decades, the per capita expenditure Gini remained at 0.4 or above. In 2009/10, it declined marginally to 0.38 at national level. This declining trend is observed in all the provinces except in the Western Province. The Quintile Ratio (ratio of expenditure share of top 10%to bottom 10%) of per capita expenditure has also declined from 5.2 in 2006/07 to 4.1 in 2009/10 at national level. Effective policies may have to be formulated to reduce the inequalities further, in order improve the living conditions of poorer segments in society. WHAT IS MULTIDIMENSIONAL POVERTY?
Multidimensional Poverty Index (MPI) is a new measure of acute poverty which reveals the combination of deprivations that batter a household at the same time. A household is identified as multidimensionally poor if and only if it is deprived in some combination of indicators whose weighted sum exceeds 30%. MPI offers an essential complement to Income Poverty, as it measures deprivations directly. It can be used as an analytical tool to identify the most vulnerable people, showing aspects in which they are deprived and can help to reveal the interconnections among deprivations. This can help the policy makers to target resources and formulate policies more effectively to reduce the regional variations further. The MPI does not use the income or expenditure levels of the people directly and therefore there is no necessity to draw a poverty line to measure the levels of poverty, like in the case of Income Poverty, which has on occasion, been criticized.

Three Dimensions and ten Indicators of Multidimensional Poverty: The United Nations has recommended three dimensions to compute the MPI: Health, Education and Standard of Living. In turn, these three dimensions are measured through ten indicators Health: 1. Nutrition: At least one member of household (HH) is malnourished; 2. Child Mortality: One or more children in the HH have died; Education: 3. No one in the HH has completed five years of education; 4. At least one school-aged child not enrolled in school; Living Conditions: 5. HH has no electricity; 6. HH has no access to clean drinking water; 7. HH has no access to adequate sanitation; 8. HH has a dirty floor; 9. HH uses firewood as cooking fuel, but does not have a separate kitchen; 10. HH has no car and does not own more than one of the following: Radio, TV, Telephone, Bicycle, Motor-cycle or refrigerator.

Figure 2 - Contribution (%) to Multidimensional Poverty from the Ten Indicators - 2009/10
Living Conditions: Having a Dirty Floor Living Conditions: No Electricity 6% 8% 25% 3% Living Conditions: No Access to clean drinking water Living Conditions: No Access to Adequate Sanitation Living Conditions: Inadequate Assets Living Conditions: Shanty/ Linerooms Education: At least one schoolage child not enrolled in school Education: No one has completed 5 yrs of Schooling Health: Head of HH Chronically Ill/Disabled Health: Not receiving at least 80% of energy requirement & Food Ratio>60%

Contribution to Multidimensional Poverty

7%

8%

3% 28% 6% 6%

Source: Household Income and Expenditure Survey-2009/10, Department of Census and Statistics

Analysis based on the Demographic and Health Survey-2006/07 (DHS-2006/07) conducted by the Department of Census and Statistics (DCS), which provide the required data to compute the above mentioned indicators, showed that 7.0% of people in Sri Lanka were multidimensionally poor, while 15.2% were in Income Poverty (based on Household Income and Expenditure Survey-2006/07).

The health dimension made the highest contribution to multidimensional poverty in 2006/07 The DHS-2006/07 showed that the contribution to multidimensional poverty from the two health indicators were 41.0% (Nutrition: 30.0% and Child Mortality: 10.8%). DHS-2006/07 did not cover the Northern Province. The Household Income and Expenditure Survey 2009/10 (HIES-2009/10), on the other hand, covered at least two districts in the Northern Province (Jaffna and Vavuniya). However, this survey does not provide the necessary data to compute the two UNrecommended health indicators. As it is not possible to disregard the Health Dimension (as contribution from health dimension to multidimensional poverty is high) two proxy indicators were used in place of the recommended indicators: 1. Nutrition: (i)Calorie (energy) Consumption of the Household is less than 80% of the requirement and (ii)Food Ratio (percentage expenditure on food) of the Household is more than 60% and, 2. Health: Head of the Household is chronically ill or disabled. Another proxy indicator under Living Conditions had to be used in place of Indicator 9 - Household use firewood as cooking fuel and no separate kitchen, as HIES-2009/10 does not indicate whether the household has a separate kitchen or not. As a result, the proxy indicator used was whether the household is living in a Shanty/ Line room, as such units are less likely to have a separate kitchen and are more likely to use firewood for cooking. Multidimensional Poverty declined from 7.0 to 4.7%1, while Income Poverty declined from 15.2 to 8.9% between 2006/07 to 2009/10 The analysis based on the HIES-2009/10 showed that 4.7% of the population in Sri Lanka was Multidimensionally Poor and the contribution from the health component was as high as 53.0%, which confirms the findings of the DHS-2006/07, although the two indicators used are completely different, as already explained. Disability and/or chronic illnesses of the Head of the Household, has a very high contribution to acute poverty in Sri Lanka The contribution to Multidimensional poverty, due to Disability or chronic illnesses of the Head of the Household is 28%, which indicates that this is one of the main factors affecting the households in acute poverty.

Note that these two figures are not directly comparable as three of the ten indicators used are different

Figure 3 Income Poverty Headcount vs Multidimensional Poverty Headcount HIES-2009/10


25

Income Poverty Headcount within District (%)

20
Ampara -Hidden behind Matara

Kurunegala Trincomalee ( Hidden behind Kurunegala) Monaragala *Badulla *Matale

*Batticaloa

15
Galle Kegalle

*Jaffna

10 Hambantota
Kalutara

*Matara Matara *Ratnapura *Nuwara Eliya

*Puttalam

5
*Gampaha

Polonnaruwa Colombo 0 0 2

Kandy -Hidden behind Ratnapura

Anuradhapura Vavuniya 4 6 8 10 Multidimensional Poverty Headcount within District (%)

12

14

Both surveys show that, inadequate energy (calorie) consumption and malnutrition are two other are, factors, faced by many people in acute poverty While Malnutrition2 makes a 30 contribution to multidimensional poverty in DHS 2006/07, 30% Inadequate Energy Consumption3 makes a 25% contribution to Multidimensional Poverty in HIES Inadequate 2009/10. As such, both surveys confirm the importance of the nutrition factor to those in acute poverty. The DHS-2006/07 shows that more than 20 of the children in the country under 5 years of age are ows 20% underweight, while in the Estate sector the percentage of underweight children in this age group is nearly 30. Although overall multidimensional poverty has declined at a national level, as well as in some of the districts, regional disparities still persist al Although there is an overall reduction in multidimensional poverty at national level and in some of the l districts, there remain some regional disparities. In 2009/10, the two districts in the bottom left corner of le the bubble chart (Figure 3), Gampaha and Colombo show the lowest levels of both Income and Multidimensional Poverty,, followed by Kalutara, Hambantota and Anura hapura Districts, which are Anuradhapura Districts clustered together. Ampara, Galle, Kegalle, Matara and Vavuniya Districts, which are vertically more or Districts, less in the same line (ranging from 3.5% to 3.9%) records the same level of multidimensional poverty, although the income poverty in Vavuniya is much less than in the other three districts. The two districts
2 3

Malnutrition - At least one member of household (HH) is malnourished malnourished-DHS 2006/07 Inadequate Energy Consumption - Calorie (energy) Consumption of the Household is less than 80% of the requirement and

Food Ratio (percentage expenditure on food) of the Household is more than 60% 60%-HIES-2009/10

in the top right corner of the bubble chart, Jaffna (11.5%) and Batticaloa (11.3%), have the highest level of Multidimensional poverty in 2009/10. With the rapid development of infrastructure and other facilities, as well as improvements in the services that are taking place in the Northern and Eastern Provinces, the incidence of poverty in these two districts is expected decline, like in the case of Monaragala and Nuwara Eliya, which were the poorest districts in 2006/07. The size of each disc represents the share of multidimensionally poor people in each district out of the total number of multidimensionally poor people in the country. The Kurunegala District has the highest share (9.8%) of multidimensionally poor people, although the percentage of multidimensionally poor people within the district is 5.9%. Hence, it is important to consider both the percentage of poor (or Poverty Headcount Index) within the each district, as well as the share of the poor in each district, out of the total number of poor people in the country , when developing strategies to minimize regional disparities. In some district the Poverty Headcount Index could be low, but the total number of poor people could be high. Such districts should also get the attention of the authorities, especially when targeting the acute poor, in social welfare programmes.

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