Bridging income inequalities, a growing challenge

Channa Kasturisinghe

POVERTY REDUCTION: The outgoing World Bank Country Director Peter Harrold yesterday said that although Sri Lanka's per capita GDP is growing at a reasonable rate much has to be done in order to reduce the gap between the rich and poor and also the regional disparities.

"The growth of per capita income is nothing much to cheer about because the gap between the rich and poor has been growing rapidly. The fact that inequality between urban and rural areas has been also widening with people in rural areas being left out of benefits from economic development is also a cause for concern," Peter Harrold said.

Addressing the media in Colombo yesterday Harrold also said that statistics show that during the 12 years starting from 1990 and 2002 per capita consumption increased by 29% in real terms.

"The disturbing factor is that the average consumption for the richest 20% of the population increased by 50%, while that for the poorest 20% barely increased by 2%.

Almost all of the growth during this period occurred only in the Western Province. The rest of the country, which is mainly rural, remained virtually stagnated," Harrold said.

According to statistics the country's per capita GDP is currently estimated at around US$1,030. During the last 20 years the country's per-capita GDP grew at over 3 percent a year.

However, about 23% of the population still live under the national poverty line. Disparity between Western province and other regions has also widened during this period. The Western Province's share of GDP went from 40 to 50 percent in the 1990s while the development of other provinces stagnated.

Harrold also said that although peace is vital for development it should not be ignored that eradicating rural poverty is also of equal importance to achieve long lasting peace.

"We cannot satisfy ourselves by saying that we have achieved a better rate of economic growth or the per capita income growth. If the number of poor is rising it can be a major obstacle in achieving peace," he said.

He said that the World Bank's poverty reduction programme will be implemented in harmony with the development programme proposed under the Mahinda Chinthana.

Naoko Ishii, who will be assuming the role of World Bank Country Director for Sri Lanka from September 1 said that one of her priorities will be to guide the country team in formulating a new results-based Country Assistance Strategy.

"Our main objective is to help Sri Lanka to reduce poverty and ensure a faster economic growth. We will be supporting the Government's development initiative to reduce imbalances in income," she said.

Ishii, a Japanese national, has been a Director in the Japanese Ministry of Finance since 2002 where she has been responsible for working on Japanese policy on development assistance, including policies pertaining to multilateral development institutions.

She said her other priorities will be to support the Government in strengthening donor harmonisation efforts and to lead the Bank's efforts in assisting the country's tsunami and conflict related reconstruction activities.