Despite the country’s poverty rates declining, poverty persists in many areas of the country and in many forms. While the rich are getting richer and the poor are getting less poor, the disparities in incomes are increasing. Furthermore, poverty is multi-dimensional and many facets of poverty remain serious problems in the country.
Sri Lanka’s poverty declined from 8.9 per cent in 2009/10 to 6.7 per cent in 2012/13. Extreme poverty reduced to around 3 per cent in 2012/13 from 13 per cent in 2002. According to the World Bank, almost 15 per cent of the population lived below the poverty line of US $ 3.1 a day in 2012/13. The bottom 40 per cent of the population has increased their real per capita consumption annually by 2.2 per cent between 2006/07 and 2012/13. The highest monthly mean household income was in Colombo District, while the lowest was in Mullaitivu, according to Central Bank.
Although Sri Lanka has risen to a lower-middle-income country and per capita incomes have risen to US $ 3924 in 2015 from as low as US $ 981 in 2003, there are significant pockets of poverty in the country. The issue of poverty and inequality in all its forms has not been fully resolved, even though positive growth rates during recent years have led to significantly reduced poverty rates and improved living standards.
Amidst the decline of extreme poverty in Sri Lanka, it is observed that moderate poverty is still a problem in many regions. The lessening of poverty is especially due to Sri Lanka moving from a predominantly agricultural economy towards a more diversified economy, and creation of more labour market opportunities. This is supplemented by poverty reduction programmes like provision of Samurdhi, subsidies, food, and livelihood support programmes.
The lowest decile (ten per cent) has remained below 2 per cent in its share of household income, while that of the highest decile has remained around 38 per cent continuously from the period 1990/91 to 2012/13. The Gini coefficient of household income that indicates the degree of inequality has risen to 0.49 in 2006/ 07 from 0.43 in 1990/ 91, and it is at 0.48 in 2012/13.
High-growth rates and rising per capita incomes do not necessarily reveal how rich or poor a country’s citizens are. Numerical measures are just absolute, merely focusing on income poverty. Poverty is multi-dimensional. The ‘poor’ should also be inclusive in terms of education, access to safe drinking water, sanitation, nutrition, healthcare and linkages with labour market. The same argument is applied to inequality. It is income inequality we often talk about, but inequalities with regard to the above are several facets of the issue.
Getting Sri Lanka out of poverty is hindered by several factors. As per the World Bank, Sri Lanka has one of the lowest tax to GDP ratios in the world which restricts the capacity to invest in health and education. The large public sector with mismatched skills and competencies required for the labour market, as well as limited job opportunities, further aggravate the issue of poverty and inequality. Therefore, it is essential for Sri Lanka to be competitive in the world market in order to get more incomes, and to create a favourable investor climate to promote Foreign Direct Investments.
It is vital to ensure proper targeting of poverty reduction programs so that the most vulnerable are included. Job opportunities should be made available to allow for income growth of poor deciles. To reduce income inequality, female labour participation in the economy could be increased. The current inadequate employment opportunities for females imply that Sri Lanka has a large potential in future to utilize this idle resource. Suitable jobs for educated young women need to be created. Industries favouring female workers should be promoted, there has to be an attitudinal shift regarding employing females, part-time employment opportunities could be increased, and flexible working arrangements should be in place to allow female re-entry to work force after child bearing.
The country should be considered as a whole in her strategies towards reducing poverty and income inequality. Targetted rates of economic growth should be pro-poor and inclusive. The measures of poverty and inequality should not be absolute, but relative. Social policies and interventions are equally important to ensure that economic growth is inclusive. Poverty reduction policies should focus on education and health, since it is by these two that generational poverty could be reduced, and income distribution made more egalitarian.
Fiscal policies, too are essential in reducing inequality. There should be adequate revenue to spend on education and health, while there should also be adequate welfare expenditures on the poor that would generate them higher incomes. Then again, tax reforms are essential in order to collect more revenue from the affordable, and to allow for a more equitable distribution of incomes. The issue we encounter at present is that the rich are getting richer while the poor are getting less poor, resulting in a great disparity in the incomes of the two.