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World Bank poverty figures disturbing

Aug 27, 2008

According to World Bank’s newly released estimates, there are 1.4 billion people in the developing world who are living in extreme poverty, of which about 600 million are in South Asia alone. With soaring food and energy prices, combating global poverty has become even more challenging.

Washington: The World Bank said on Tuesday more people are living in extreme poverty in developing countries than previously thought as it adjusted the recognised yardstick for measuring global poverty to $1.25 a day from $1.


It said there were 1.4 billion people – a quarter of the developing world – living in extreme poverty on less than $1.25 a day in 2005 in the world's 10 to 20 poorest countries.

Last year, the World Bank said there were 1 billion people living under the previous $1 a day poverty mark.

Pressure on donors

The new figures are likely to put fresh pressure on big donor countries to move more aggressively to combat global poverty, and on countries to introduce more-effective policies to help lift the poorest.

Even so, the new estimates show how progress has been made in helping the poor over the past 25 years. In 1981, 1.9 billion people were living below the new $1.25 a day poverty line.

"These new estimates are a major advance in poverty measurements because they are based on far better price data for assuring that the poverty lines are comparable across countries," said Martin Ravallion, director of the World Bank's Development Research Group.

While the developing world has more poor people than previously believed, the World Bank's new chief economist, Justin Lin, said the world was still on target to meet a United Nations goal of halving the number of people in poverty by 2015.

However, excluding China from overall calculations, the world fails to meet the UN poverty targets, Lin said.

The World Bank data shows that the number of people living below the $1.25 a day poverty line fell over nearly 25 years to 26% in 2005 from 52% in 1981, a decline on average of about 1% a year, he said.

No room for complacency

Lin said the new poverty data meant there was no room for complacency and added that rich donor nations need to keep their promises of stepped-up aid to poor countries.

"The sobering news that poverty is more pervasive than we thought means we must redouble our efforts, especially in sub-Saharan Africa," said Lin, a leading Chinese academic.

The new figures come ahead of an updated assessment of progress in meeting the UN's Millennium Development Goals, which will released late next month at a meeting of the UN General Assembly.

While most of the developing world has managed to reduce poverty, the rate in sub-Saharan Africa, the world's poorest region, has not changed in nearly 25 years, according to data using the new $1.25 a day poverty line.

Half of the people in sub-Saharan Africa were living below the poverty line in 2005, the same as in 1981. That means about 380 million people lived under the poverty line in 2005, compared with 200 million in 1981.

The bank has estimated that 100 million people could fall into extreme poverty due to soaring food and energy prices. But Ravallion said it would take up to two years before there is clarity on the impact that soaring costs have had on poverty.

However, he said early indications from survey data "are pretty convincing that we're going to see increases in poverty as a result of food and fuel prices."

Some key facts and analysis

This is the first major effort to update poverty data based on 2005 measures of purchasing power parity. The new poverty estimates are also based on data from 675 household surveys across 116 developing countries.

Over 1.2 million randomly sampled households were interviewed for the 2005 estimate, representing 96% of the developing world. But lags in survey data availability mean that the new estimates do not yet reflect the potentially large adverse effects on poor people of rising food and fuel prices since 2005.

The number of poor has fallen by 500 million since 1981 (from 52% of the developing world’s population in 1981 to 26% in 2005) and the world is still on track to halve the 1990 poverty rate by 2015. But at this rate of progress, about a billion people will still live below $1.25 a day in 2015. Also, most people who escaped $1.25 a day poverty over 1981-2005 would still be poor by middle-income country standards.

East Asia’s progress has been dramatic since 1981, when it was the poorest region in the world. In China, the number of people living on less than $1.25 a day in 2005 prices has dropped from 835 million in 1981 to 207 million in 2005.

The Bank’s earlier 2004 estimate had 130 million people living in China below $1 a day based on 1993 PPP.  Thus, the new calculations reveal more poor people than assumed earlier, but China's remarkable success in reducing poverty still stands.

In the developing world outside China, the $1.25 poverty rate has fallen from 40% to 29% over 1981-2005. However, given population growth, this progress was not enough to bring down the total number of poor outside China, which has stayed at about 1.2 billion.

South Asian scenario

In South Asia, the $1.25 poverty rate has fallen from 60% to 40% over 1981-2005, but again, not enough to bring down the total number of poor people in the region, which stood at about 600 million in 2005.

In India, poverty at $1.25 a day in 2005 prices increased from 420 million people in 1981 to 455 million in 2005, while the poverty rate as a share of the total population went from 60% in 1981 to 42% in 2005.

Source : Reuters
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