Sri Lanka forerunner in Asia Pacific - Poverty reduction

Sri Lanka was hailed for being a fore runner in the key poverty ratio indicators in the whole of Asia Pacific region at the recently concluded Economic Forum on Inclusive Growth and Poverty Reduction in the New Asia and Pacific in Manila, Philippines organized by the Asian Development Bank(ADB).

Sri Lankan delegate the Director Economic Affairs for the Government Peace Secretariat Rohantha Athukorala said the Sri Lankan economy has experienced accelerated growth over the past two years despite adverse shocks such as oil price hikes, the tsunamis and the escalation of terrorism growth has averaged at 6.5% during the last 2 year and 4-5 per cent historically.

The per capita income rising above US $ 1355 has made it a middle income country. The higher economic growth has been accompanied by a declining unemployment to 6.4 per cent which has come about through successful structural and economic reforms implemented.

The private sector accounts for 85% of GDP and some blue clip companies listed on the stock exchange are highly competitive, profitable and financially strong and beginning to invest overseas.

Sri Lanka growth has outperformed countries in the region and has been rated as single B and BB. On the key poverty ratios of those earning a $1 and below coming down to just 2 percent and those earning $2 and below to 32.8 percent augurs well for the country Athukorala said.

The inflation observed through 2005 and early 2006 reversed due to the passing down to consumers the high oil prices to consumers. The high interest rate that has come into effect has become a drag to the economy. However, the growth momentum has been sustained.

The GDP growth as at 1st quarter 2007 is 6.1%. But it is a challenge seen around the world and how we manage our fiscal deficit to be kept at seven percent and below will be the key challege Athukorala went on to say.

ADB is currently discussing the concept of inclusive growth as its mission statement for the next decade. Inclusive growth is different to the pro-poor growth approach followed by the World Bank and other donors as it claims to address also inequity and exclusion. Inclusive growth means both creating economic opportunities through support to sustainable growth in the Asia Pacific region.

The focus of the conference was if ADB should focus on trade, infrastructure, new technologies and regional finance even though it may not be ADB's comparative advantage or should ADB take a more balanced approach of including pro-poor infrastructure, broad based financial services, labour market relevant education, appropriate health financing, social protection, addressing environmental poverty in the region and supporting pro-poor growth potential areas in the region through rural and urban development.

Athukorala said the challenge for Sri Lanka is that whist the GDP contribution of the Western province dominates at 51 per cent whist the rest of the regions economic growth lags on at 2-5 per cent for the last five years highlights the urban rural gap.

Latest research reveals that the average per capita consumption grew by 50 per cent for the richest consumption quintile but on 2 per cent for the poorest quintile. The Gini Coefficient of per capita consumption in Sri Lanka increased at an annual rate of 2 per cent, much higher than for East Asian Comparator countries with the exempts of China.

If the line coefficient for consumption inequality remains unchanged at the level of 2002 and growth continuous at the same rate as it did in 2004 and 2005, poverty will fall by more than 50% to 8.2% by 2015.

If however, consumption inequality increases - as it did in the last 10 years - poverty will fall to 14.8% from 26% in 1990/91 (World Bank, 2006) Further, urban poverty halved between 1990-91 and 2000, while rural poverty declined by less than 5 percentage points, and poverty in the Estates increased by about 50 per cent making this sector the poorest in the country.