Wimal Nanayakkara February 5, 2020
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Sri Lanka was granted Upper Middle Income Country (UMIC) status in July 2019 as the country's Gross National Income (GNI) rose from US$3,840 per capita in 2018 to US$4,060 per capita in 2019. New World Bank (WB ) thresholds for UMIC are USD 3,996 – USD 12,375 GNI per capita. Sri Lanka has passed the demarcation line to enter the new UMIC threshold and is still at the lower end of the spectrum. As such, there is still a risk of relegating to lower-middle-income country (LMIC) status if the economy does not progress at the levels expected for UMICs.
Based on the World Bank's Global Poverty Line (GPL) for UMIC – US$5.50 per day per person (PKM 2011 or at 2011 prices) – 40.4% of Sri Lanka's population lives in poverty. But based on the National Poverty Line (NPL) currently used in Sri Lanka, only 4.1% lived in poverty in 2016. However, as long as the country has UMIC status, poverty levels should be measured using GPL US$5.50 per day per person (PPP 2011).
Although all countries have their own poverty measures to assess poverty at national and regional levels, it would not be appropriate to use the current NPL to assess poverty in Sri Lanka for the following reasons: (i) Sri Lanka has UMIC status; (ii) major changes in the economy and income distribution expected in the near future due to the rapid technological progress of the Fourth Industrial Revolution (4IR); (iii) currentNPLis based on the market value of a basket of goods and services based on the Household Income and Expenditure Survey from 2002; (iv) most UMICs and high-income countries use 'relative poverty' measures instead of the 'absolute poverty' measures used in Sri Lanka.
This blog presents some key points that statisticians, planners and policy makers should consider when developing methodologies and measures to assess poverty in Sri Lanka in the future.
Measuring poverty in Sri Lanka by UMIC status
With Sri Lanka's elevation to UMIC status, it is not appropriate to use poverty lines intended for LMICs for cross-country comparisons. A GPL of $1.90 per day is the poverty line used to assess extreme poverty and is typical of the world's poorest countries. This GPL is also used to assess extreme poverty in other countries. Based on this ($1.90 per day), in 2016 only 0.89% of Sri Lanka's population lived in extreme poverty. For international comparisons, Sri Lanka used US$3.20 per day (until the country was upgraded to UMIC status), below which 10.13% of the population lived in poverty in 2016. With the upgrade to UMIC status, Sri Lanka will have to use the GPL of US$5.50 per day.
In this context, Sri Lanka cannot continue to use the current NPL to measure poverty in the country. If the country wants to keep the UMIC status, the NPL must be reviewed. One of the main considerations would be whether to continue with the concept of absolute poverty or adopt the concept of relative poverty like most other UMICs. Relative poverty is a state in which the household income is a certain percentage below the median household income. For example, the relative poverty threshold can be set at 40%, 50% or 60% of the median household income. Relative poverty is useful for showing the percentage of the population that is left. Based on the HIES-2016 conducted by DCS, 7.8% of the population has below 40% of the median household income, 12.3% of the population has below 50% of the median household income, and 18.2% is below 60% of the median household income. It must be decided which threshold Sri Lanka should use and then an appropriate methodology must be developed to measure poverty in the future.
It is not possible to arbitrarily decide on the best method for measuring poverty in Sri Lanka in its new reality such as UMIC. For international comparisons it would be necessary to use GPL $5.50 per day. For poverty assessments at the national and regional level, it would be necessary for the UMIC country to develop an appropriate methodology/criterion. DCS may need to develop an acceptable methodology for assessing poverty in Sri Lanka in the future. In order to achieve this, it is important to enter into a dialogue with planners, policy makers and other stakeholders.
Sri Lanka's international poverty rate measured at $3.20 per person per day (in 2011 PPP terms) for lower middle-income countries declined from 16.9 percent in 2012/13 to 10.8 percent in 2016.What is the upper middle class income in Sri Lanka? ›
Sri Lanka achieved 'Upper Middle Income Country' (UMIC) status in July 2019, as the country's Gross National Income (GNI) increased from USD 3,840 per capita in 2018 to USD 4,060 per capita in 2019. World Bank's (WB) new threshold for UMICs is USD 3,996 – USD 12,375 GNI per capita.What are the 3 main measurements used in measuring poverty? ›
Official Poverty Measure
The OPM uses calculations of these three elements—income, threshold, and family—to estimate what percentage of the population is poor.
Sri Lanka Will Remain A 'Middle-Income' Country, President's Office Clarifies. Sri Lanka had a GDP of USD 3,815 in 2021, which currently places the country in the 'middle-income' category, according to the World Bank.How is poverty defined and recognized in Sri Lanka? ›
Q: How is poverty measured in Sri Lanka? A: In Sri Lanka, poverty figures refer to the share of individuals whose household per capita consumption falls below the official poverty line. This poverty headcount index is the standard measure of the incidence of poverty.What is the middle class income in Sri Lanka? ›
The literature defining the middle class by using an absolute approach, defines it as those earning some benchmark income range. For example, Bhalla (2021) defines middle class to be those earning more than US$ 3,658 (in 2020 prices) a year or US$ 10 a day in purchasing power parity terms.What is upper middle class in Sri Lanka? ›
The upper middle class in Sri Lanka consists of educated professionals.What is the upper middle class lifestyle in Sri Lanka? ›
The upper middle class in Sri Lanka consists of bourgeois and educated professionals who generally come from educated background, having been educated at public or private schools and local or foreign universities.What is considered upper middle income? ›
Many have graduate degrees with educational attainment serving as the main distinguishing feature of this class. Household incomes commonly exceed $100,000, with some smaller one-income earners household having incomes in the high 5-figure range.What are the 2 ways of measuring poverty? ›
- Headcount index. Headcount index (Po) is a widely-used measure, which simply indicates the proportion of the poor population. ...
- Poverty gap index (P1) ...
- Squared Poverty Gap Index (Poverty severity index, P2) ...
- Sen index. ...
- Sen-Shorrocks-Thon Index. ...
- Asset-based measures. ...
- High-frequency poverty measures.
There are two primary sources for U.S. poverty statistics: the Current Population Survey and the American Community Survey. The official annual estimates of national poverty levels are calculated from the Annual Social and Economic Supplement to the Current Population Survey (CPS ASEC).Is Sri Lanka a rich or poor country? ›
OVERALL PROSPERITY. Sri Lanka is 91st in the overall Prosperity Index rankings. Since 2011, Sri Lanka has moved up the rankings table by 8 places.Why is Sri Lanka a low income country? ›
Sri Lanka faces an unsustainable debt and severe balance of payments crisis, which is having a negative impact on growth and poverty. According to the latest South Asia Economic Focus and the Sri Lanka Development Update, Sri Lanka's real GDP is expected to fall by 9.2 percent in 2022 and a further 4.2 percent in 2023.What is the main source of income in Sri Lanka? ›
The service sector is the largest of the Sri Lanka economy, employing 45 percent of the workforce and contributing roughly 60 percent of GDP. Tourism, banking, finance, and retail trade are the major components of the service sector. The country is endowed with many natural resources.Is poverty a problem in Sri Lanka? ›
There is clearly a high concentration of poverty in South Asia despite poverty levels varying greatly within the region. Sri Lanka has been widely appreciated for its declining poverty rates, especially through the last two decades.What are the types of poverty in Sri Lanka? ›
The study thus argues for a new approach in the context of Sri Lanka to recognise four poverty types, namely 'extremely poor', 'poor', 'vulnerable non-poor' and 'non-poor', along with calculations of poverty incidence based on these new criteria.What is the poorest part of Sri Lanka? ›
Colombo and its neighbor Gampaha remain the least poor; while Moneragala is still has high poverty incidence.What income category is Sri Lanka? ›
2 As per some classifications, Sri Lanka is caught in a so-called middle income trap. Economists use this term to represent a scenario where countries that move with speed into middle income levels failing to continue such growth momentum so as to reach high income levels.How many people in Sri Lanka are low income? ›
Spatial inequalities remain a key concern. Urban and rural poverty are estimated to have tripled and doubled, to respectively 15 and 26 percent in 2022, but more than half of population in estate areas still lives below the $3.65 poverty line.What is the best income in Sri Lanka? ›
- Head of the Legal Department Management. ...
- Judge Law & Legislation. ...
- Pilot Transport, Haulage, Logistics. ...
- IC Design Engineer Information Technology. ...
- Marketing Director Top Management. ...
- Finance Manager Management. ...
- DevOps Engineer Information Technology. ...
- Technical Director Top Management.
In the United States, the upper middle class is defined as consisting mostly of white-collar professionals who not only have above-average personal incomes and advanced educational degrees but also a higher degree of autonomy in their work.What is the difference between middle class and upper middle class? ›
The lower middle class is often made up of less educated people with lower incomes, such as managers, small business owners, teachers, and secretaries. The upper middle class is often made up of highly educated business and professional people with high incomes, such as doctors, lawyers, stockbrokers, and CEOs.What is the gap between rich and poor in Sri Lanka? ›
The top 1 percent of Sri Lankans, own 31 percent of total personal wealth in the country, whereas the bottom 50 percent own less than 4 percent of total wealth, so that gives you a snapshot of how unequal the country is.What is the social class system in Sri Lanka? ›
The caste systems of Sri Lanka were historically not tied to the religious establishment but rather a tool to service the ruling elite - a model more reminiscent of feudalism in Europe. At least three major, parallel caste systems exist in Sri Lankan society: Sinhalese, Sri Lankan Tamil and Indian Tamils.What is the economic situation in Sri Lanka? ›
According to the Sri Lankan finance ministry, the country's foreign reserves had grown by 23.5% from US$1.7 billion in September 2022 to US$2.1 billion in February 2023, representing a US$400 million increase. Sri Lanka teeters on the edge of financial insolvency and has halted repayments on its international debts.What is the living quality in Sri Lanka? ›
Sri Lanka often referred to as the 'pearl of the Indian ocean', is claimed by both locals and expats alike as a truly great place to live and work. A country of many facets, Sri Lanka offers a spectrum of experiences, cultures and places for those who enjoy diversity and variety.What are examples of upper middle class? ›
They include such occupations as lawyer, physician, dentist, engineer, professor, architect, civil service executive, and civilian contractor. Many members of the upper-middle class have graduate degrees, such as law, business, or medical degrees, which are often required for professional occupations.What are the characteristics of upper middle class? ›
- High salary in a specialized field of work. ...
- Good health and a long average lifespan. ...
- Real estate investors. ...
- Emphasis on university for their children. ...
- Autonomy at their workplace.
Upper-income households had incomes greater than $145,500; Middle-income households fell into a range between those two numbers.Why is it difficult to measure poverty? ›
There is no right or wrong measure of poverty. Different measures of poverty capture different things, and trends in these measures can vary over time. No single figure about poverty tells the whole story so context is really important when drawing comparisons of poverty over time.
Therefore, A common method used to measure poverty is based on income level and consumption level.What are the 4 approaches to measure the concept of poverty? ›
Four approaches to the definition and measurement of poverty are reviewed in this paper: the monetary, capability, social exclusion and participatory approaches.Are there alternative ways to measure poverty? ›
use families' post-tax income; include earned income tax credits and the value of near-cash benefits (such as food stamps and housing assistance); and. subtract the cost of work- related expenses (such as child care and transportation) and medical care.Why is it important to measure poverty? ›
Poverty measurement provides us essential information about how well the economy is performing overall. It helps us understand financial hardship and the effects of poverty on government, communities, and families.Why is income poverty only one measure of counting the poor? ›
It is not only because of its extremely narrow definition of 'who is poor' and the debatable methodology used to count the poor, but also because of a more fundamental assumption underlying it. It exclusively relies on the notion of poverty as insufficient income or insufficient purchasing power.Is Sri Lanka the poorest country in Asia? ›
According to the Yahoo Finance website, Sri Lanka has been included among the 20 poorest countries in Asia due to the economic crisis. This ranking has been done based on the per capita GDP of 2021. Accordingly, it is reported that Sri Lanka has the 17th place among the 20 poorest countries in Asia.Is Sri Lanka one of the poorest countries in the world? ›
In terms of World Bank estimates of per capita GDP Sri Lanka is a poor country indeed: twenty-fifth from the bottom of their list of 125 countries.At what rank is Sri Lanka for the richest country? ›
Worldwide gross domestic product in 2021 was at about 12,183 USD per capita. GDP in Sri Lanka, on the other hand, reached USD 4,014 per capita, or 88.93 billion USD for the whole country. Sri Lanka is therefore currently ranked 67 of the major economies.Is Sri Lanka underdeveloped? ›
This is Sri Lanka's worst economic crisis since independence in 1948. Sri Lankan economic growth was unexpectedly lower in the past few years. The country's real gross domestic product (GDP) was reported to be -3.6% and 3.7% in 2020 and 2021, respectively. The GDP growth for the first half of 2022 was -4.8%.What are the current problems in Sri Lanka? ›
Sri Lanka is experiencing an economic crisis stemming from an unsustainable debt load and perennial deficits on both the international balance of payments and the government budget, resulting in a severe shortage of foreign currency exchange (forex).
With rice comprising approximately 40 % its total crop production (FAO 2014a), Sri Lanka provides an interesting example of a country with a long-standing, national self-sufficiency policy.What is Sri Lanka mostly known for? ›
Sri Lanka is famous for its exotic beach resorts, flavorful cuisine, tea production, and incredible biodiversity amongst diverse landscapes. Sri Lanka is a South Asian country formerly known as Ceylon. It is an island that lies in the Indian Ocean, therefore has no bordering countries.What is Sri Lanka's most valuable resources? ›
Natural resources include limestone, graphite, mineral sands, gems, and phosphate. Agricultural products include tea, rubber, coconuts, rice, and spices. Industry consists of textiles and garments, chemicals and petroleum products, food processing, wood and wood products, basic metal products, paper and paper products.What is the average income of Sri Lanka? ›
Sri Lanka Annual Household Income per Capita reached 1,422.182 USD in Jun 2019, compared with the previous value of 1,385.427 USD in Jun 2016. Sri Lanka Annual Household Income per Capita data is updated yearly, available from Jun 1981 to Jun 2019, with an averaged value of 577.877 USD.How is poverty measured? ›
To calculate total family income, the incomes of all related family members that live together are added up to determine poverty status. If an individual or group of individuals (such as housemates) are not living with family members, their own individual income is compared with their individual poverty threshold.How is poverty measured in a country? ›
More than two centuries later, the same concept underpins definitions of poverty around the world. Countries identify a minimum level of income required to meet basic needs such as food, clothing and shelter. Those who have less are considered poor. Unsurprisingly, these thresholds vary by country.What is poverty how it is measured? ›
This way of measuring poverty includes the consideration that expenditure on food in households is a constant proportion of total expenditure. The poverty line is fixed by multiplying the value of the basic food products by the reverse of the proportion that food expenditure signifies for total expenditure.What are the two methods to estimate poverty line? ›
In conclusion, both income-based and multidimensional methods are used to estimate poverty. Income-based methods rely solely on income, while multidimensional methods consider a range of factors that contribute to poverty.Is Sri Lanka a poor country or not? ›
The report said that Sri Lanka is one of the poorest Asian countries based on GDP per capita as of 2021.