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2.7m more Sri Lankans pushed into poverty, rate doubles to new high
View(s):By Kapila Bandara
Sri Lanka’s economic meltdown is worsening and it has pushed 2.7 million more people into the misery of poverty between last year and this year.
The rate of poverty has doubled to its highest level from more than a decade ago.
The Government revealed this week that an additional 867,696 Sri Lankans (including 117,101 elderly) are expecting welfare benefits. This appears to show that more Sri Lankans have fallen into the ranks of helpless and the hopeless. There are 1.76 million Samurdhi recipient families already, Central Bank of Sri Lanka data show. In 2021, Rs 55.4 billion was spent.
These latest findings on the rising level of poverty in Sri Lanka and the swelling ranks of the “new poor’’ are a part of a comprehensive update by the World Bank this week.
Urban poverty has tripled from 5% to 15% between 2021 and 2022, and half the population in estate areas is now living below the poverty line. Mullaitivu continues to be the poorest area (57% poverty in 2022), followed by Kilinochchi and Nuwara Eliya.
Sri Lanka’s rate of poverty has doubled from 13.1% to 25.6% (US$3.65 per capita, 2017 purchasing power parity) between 2021 and 2022, the ‘Sri Lanka Development Update’, by the World Bank notes. It is a twice a year update.
Having piled up unsustainable debts and while unprecedented levels of corruption strangled the economy under the Rajapaksa Inc regime and successive corrupt governments that veered off macroeconomic fundamentals, Sri Lanka’s economic collapse was set in motion well before the coronavirus disease pandemic and the rate of poverty had already increased from 11.3% in 2019 to 12.7% in 2020.
That increase in poverty alone translated into more than 300,000 “new poor people’’ in 2020, the World Bank says.
Sri Lanka is now experiencing its highest poverty rate since 2009, or from 13 years ago. Steady gains made in welfare between 2006 and 2019 are being eroded.
World Bank Country Director for Maldives, Nepal and Sri Lanka, Faris H. Hadad-Zervos, said: “In the face of the economic crisis, poverty estimates doubled to 25.6% between 2021 and 2022, increasing the number of people living in poverty by 2.7 million. Sri Lanka will need to expand employment in industry and services and recover real value of incomes to mitigate the impacts of the crisis, and build long-term resilience of its people.’’
Mr Hadad-Zervos underscored the need for a coordinated approach to support the poor and vulnerable.
The World Bank says Sri Lanka must build resilience against further shocks.
‘The Sri Lanka Development Update’ outlines important economic developments over the past 12 months, places these in longer term and global contexts, and updates the outlook for the economy. It also provides a deeper examination of selected economic and policy issues. The report was produced by International Bank for Reconstruction and Development/The World Bank.
Sri Lanka’s real economic output, or GDP, is expected to decline by 9.2% this year and a further 4.2% in 2023, amid projections, (or assumptions), this week by the Central Bank of Sri Lanka of a “recovery’’ in 2023. Forex reserves are at about US$300 million. Net foreign assets in August were a negative US$2.03 billion.
In the first half, the real economy is estimated to have declined by 4.8% from the year before, data from the Department of Census and Statistics show. Agriculture shrank by 7.6%, the most among the important sectors.
In another report, the ‘South Asia Economic Focus, Coping with Shocks: Migration and the Road to Resilience’, World Bank’s Chief Economist for South Asia, Mr Hans Timmer, notes that Sri Lanka in “going through the historically largest contraction in its economy,’’ and solutions can be charted by “looking at global experiences such as the crisis in Latin America in the 1980s and the Asian Financial Crisis of 1997’’.
“The East and Southeast Asian countries regained momentum by implementing sound reforms, which provide lessons for Sri Lanka to build back better.”
Just as the poverty data came out, Sri Lanka Podu Jana Peramuna politician, Shehan Semasinghe, the state minister of finance, asked this week for hundreds of thousands of poor to register with the Welfare Benefits Board for assistance.
The Samurdhi ministry and its politicised staff are notorious for not fully spending its allocations and its multi-billion rupee recurrent spending on salaries.
The World Bank has often assisted Sri Lanka in providing emergency benefits to Sri Lankans through the Samurdhi programme.
Mr Semasinghe told a briefing that a “massive’’ number of Sri Lankans in addition to those who already are recipients, are expecting welfare.
He said 867,696 are expecting welfare benefits. Among them, 726,449 are expecting Samurdhi. And 117,101 are seeking the elderly allowance. There are 21,459 Sri Lankans expecting the disabled allowance. Also, 2,687 chronic kidney disease patients are awaiting welfare anew.
Clearly indicating there are many other Sri Lankans needing financial help, Mr Semasinghe said there “could be more”, (meeta amatharawa inna puluwan). This, he noted, would be in addition to the data he made known, and existing welfare recipients.
A decision has been made to assist all, he said. The registration period had been extended to October 15 from end September. He hopes to wrap up registrations by year end.
The Household Income and Expenditure Survey of 2019 reveals that about one in six Sri Lankans is multidimensionally poor.
A World Bank study in 2000 showed there is large-scale mis-targeting and exclusion by the Samurdhi program. Based on qualitative data, political factors, including party affiliation or voting preferences appear to influence who gets grants.
The Welfare Benefits Act No. 24 of 2002 lays out the legal basis for ‘welfare services,’ and the Samurdhi Act No. 1 of 2013 (which replaced the Samurdhi Authority Act No. 30 of 1995) covers the social assistance programme.
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