SRI LANKA Poverty and Welfare in Sri Lanka: Recent Progress and Remaining Challenges February 5th, 2016. Sri Lanka: Major Gains against POVERTY but is PROGRESS SUSTAINABLE? The poverty assessment (PA) is a key Sri Lanka has made encouraging progress in reducing poverty in recent years. instrument of the World Bank’s country Excluding the formerly conflict areas of Northern and Eastern provinces, the engagement strategy. It is designed to poverty rate fell from 22.7 percent to 6.1 percent between 2002 and 2012/13. The assess the extent and causes of poverty in reduction has been particularly striking in the estate and rural sectors, where the a given country and to propose a strategy poverty rate dropped from 30 percent to 10.9 percent and from 24.7 percent to 6.8 to ameliorate its effects. It reviews levels percent, respectively. of and changes in welfare over time and 10 Conflict's "Second "Third Ceasefire Final Peace 100% across regions in poverty indicators, early days and India's Stage" Stage" Stage 8 intervention 80% assesses the impacts of growth and Headcount Poverty Rate Real GDP Growth (%) public actions on poverty and inequality, 6 60% and reviews the adequacy of a country’s 4 28.8% 40% 26.1% 22.7% poverty monitoring and evaluation 2 13.5% 20% 7.4% 6.1% arrangements. PAs generally feed into 0 0 country-owned processes to develop -2 -20% strategies to reduce poverty, help build in- 2014 1984 1986 1988 1990 1992 1994 1996 2000 2002 2004 2006 2008 2010 2012 1998 country capacity, and support joint work GDP Growth Poverty with national line and partnerships. Increase in ownership rates of Increase in share of cell- Increase in share of refrigerators for the bottom phone owners for the bottom population purchasing 40% of the population 40% of the population electricity 2006/7 - 2012/13 2006/7 - 2012/13 2002 - 2012/13 15 percentage points 63 percentage points 25 percentage points Increased Labor earnings was the primary factor accounting for the decline in poverty Smaller household size 13% Increased labour earnings 60% 27% Increased non-labour income *Increases in international remittances and higher returns to education were important secondary factors accounting for the reduction in poverty. *The decline in Samurdhi transfers, after adjusting for inflation, slowed the rate of poverty reduction by 10 percent. While it is difficult to identify the underlying LIVING STANDARDS ARE STILL LOW causes of this poverty reduction, four potential factors likely contributed: (i) The economy’s gradual structural transformation out of agriculture into more productive sectors, 40% (ii) Urbanization and agglomeration around key urban areas, (iii) Rising international prices for food and tea that raised earnings in agriculture, and population living under (iv) Strong domestic aggregate demand that has boosted economic $2.75 a day in 2005 PPP growth. terms, or Rs. 225 a day Of these four factors, growth in domestic * This is equivalent to $4.75 consumption and increased international food prices per day in 2011 PPP terms are unlikely to be sustainable in the years to come POCKETS OF SEVERE POVERTY REMAIN No. of poor people Jaffna Jaffna 6,500 - 18,500 4,500 - 6,500 3,500 - 4,500 Kilinochchi Kilinochchi 2,500 - 3,500 500 - 2,500 0 - 500 Mullaitivu Mullaitivu Mannar Mannar Vavuniya Vavuniya Trincomalee Trincomalee Anuradhapura Anuradhapura Polonnaruwa Polonnaruwa Puttalam Puttalam Batticaloa Batticaloa Kurunegala Matale Kurunegala Matale Kandy Ampara Ampara Kandy Gampaha Kegalle Kegalle Gampaha Nuwara EliyaBadulla Nuwara EliyaBadulla Colombo Colombo Moneragala Moneragala Kalutara Ratnapura Kalutara Ratnapura Poverty rate (%) 35.0 - 60.0 25.0 - 35.0 Galle Hambantota 15.0 - 25.0 Galle Hambantota 5.0 - 15.0 Matara Matara 0.0 - 5.0 The left map shows the poverty rate in each DS division. The right map shows the number of people that are poor in each DS division. The Estate sector, despite sharp declines in AND INEQUALITY HAS BEEN monetary poverty, remains disadvantaged ON THE RISE Poverty in the Estate Sector Inequality Percentage of estate 2002-2009 Poverty incidence population in the Inequality in consumption Inequality 19 percentage points bottom 40% of the in income 2002-2012/13 national population 60% 2009-2012/13 Inequality in consumption Inequality in income Asset ownership Below national average 46.4 44.4 50 43.2 43.1 40.2 39.9 38.9 36.3 40 Housing Conditions 2012/13 Gini Coefficient 30 Percentage of estate poor that own a house 6% 20 Percentage of estate near poor that own a house 11% 10 Percentage of national poor that own a house 83% 0 Consumption Income Inequality Inequality Percentage of rural poor that own a house 90% 2002 2009/10 2006/07 2012/13 Access to Clean Water Pakistan (2007/08) Percentage of estate poor with access to clean water 55% Nepal (2003/10) Percentage of estate near poor with access to clean water 49% India (2004/09) Bhutan (2003/10) Percentage of rural poor with access to clean water 84% Bangladesh (2005/10) Percentage of national poor with access to lean water 83% Sri Lanka (2009/10) -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 Annualized Change in Gini Coefficient Moving Forward To ensure the continued improvement of living standards and shared prosperity, Sri Lanka could provide additional support to poor households. Devoting more generous resources to social assistance, better targeting the poor, and developing a broader social protection strategy to confront an aging population will help poor households invest in the next generation. Further progress also depends on accelerating the country’s structural transformation by connecting poor workers to more productive employment opportunities. Potential measures to boost the structural transformation include: ∫  Investing in urban infrastructure to keep pace with increasing urbanization. ∫  Providing more cost-effective power generation to support further productivity growth. ∫  Ensuring effective governance of cities to help workers take advantage of job opportunities in and around urban areas.