The social protection programs should help the poor to come out of poverty. It should not only be for their survival, which has been the goal of many social welfare initiatives in the country, said a poverty analyst.
“The ‘Aswesuma’ program has helped poor families only to survive rather than helping them to get out of poverty. It is also marred with exclusion errors, Senior Advisor to CEPA (Centre for Poverty Analysis), Former Director, Asian Development Bank, Former Professor, University of Peradeniya, Dr. H.M. Gunatilake said.
He said social protection programs should be redesigned to minimise exclusion errors and it should have empowerment elements to move people out of poverty.
The CEPA poverty study asserts that exclusion errors can be as high as 64%. Taking care of around 50% of the population is an enormous burden for a bankrupt country. Frequent poverty monitoring and a proper graduation program should be part of the design of the social protection program.
“What we experience today is crisis driven poverty; many economically active non-poor families were pushed into poverty. A poverty reduction strategy should put these “new poor” back to a productive economic life.
The poverty reduction strategy should have two major elements; (i) social protection, and (ii) economic growth. A large proportion of the population now live below the poverty line and the government should help them survive the crisis and move out of poverty,” Dr. Gunatilake said, adding that a long-term strategy to reduce poverty will sustain economic growth.
“However, structural reforms including reducing waste and corruption, state own enterprise reforms, labor market reforms, tax and fiscal reforms, trade liberalisation, limiting the government interventions in areas where the market fails and relevant sectoral reforms in agriculture, industry, health, education, transport are necessary to ensure more investments, both domestic and foreign, for sustaining growth,” he said.
He said crony capitalism in the country prevented structural reform because the big businesses were able to influence the ruling class to protect their selfish interests and to prevent reforms that ensure competitive markets. Courage to undertake the right type of structural reforms will not only determine the fate of the poor people in the country but also the success/failure of the government.
However, he said there has been remarkable progress in poverty reduction in Sri Lanka since the 1990s with poverty incidence dropping from 26.1% in 1990 to about 4% by 2016. The impact of the Covid-19 and subsequent economic crisis led to a reversal of this trend with the poverty level increasing again to about 22% in 2022 eroding the gains in poverty reduction efforts over the years.
Poverty level in a country is determined by the combination economic growth and redistributive policies related to social protection, free health and education, agricultural and rural development. Growth in the Sri Lankan economy started to slow down since 2015 due to overall economic mismanagement over a long period of time. When economies slow down people lose jobs and income earning opportunities and that increases poverty.
The poverty level in Sri Lanka increased from 4.4% in 2016 to 15% in 2019 through this process. Many people lost their jobs and income earning opportunities, further increasing poverty. The economic crisis that followed intensified the job and income earning opportunity loses.
The high inflation experienced in 2023 reduced the real value of income and increased the cost of living. Sharp currency devaluation increased the prices of imported goods. Prices of imported inputs such as fertiliser also increased substantially resulting in higher food prices. Economic reforms such as tax increases reduced disposable income and electricity price increase further added to the cost of living. Infamous wrong policies like ban on chemical fertiliser further added to the process of impoverishment.
As a result he said the poverty level increased to 26% by 2022. It further went up to 31% by mid 2023. Study by CEPA showed that the poverty level as of the end of 2024 is about 48%-52%.
However, there are some signs of poverty levels coming down as a result of economic stability, Dr. Gunatilake noted.
According to CEPA estimates of expenditure poverty in early 2024 was about 60% and by the end of the year poverty had come down to about 48%.
