Calculating the Poor

The Reality of Measuring Poverty in Ethiopia

Poverty can be described as living with an income level below some minimum level necessary to meet basic needs. This minimum level is usually referred to as the “poverty line”. However, what is necessary to satisfy basic needs varies across time and societies; therefore, poverty lines vary depending on time and place, and different counties use different values for their poverty line which are appropriate to their own level of development, societal norms, and needs. According to the World Bank, the content of needs is more or less the same everywhere. Poverty is hunger, lack of shelter, an inability to access healthcare, education, and job opportunities. Furthermore, poverty is having fear of the future because one is simply living one day at a time. Ultimately, poverty is characterized by powerlessness, lack of representation and freedom. All of these things show that poverty extends itself into material, psychological, political and social dimensions.

According to estimates by the World Bank, 21Pct of people in the developing world lived at or below USD1.25 a day. That’s down from 43Pct in 1990 and 52Pct in 1981. It means that 1.22 billion people lived on less than USD1.25 a day in 2010, compared with 1.91 billion in 1990, and 1.94 billion in 1981. One of the poorest regions in the world, Sub-Saharan Africa, was able to reduce its USD1.25-a-day poverty rate to 48Pct in 2010 from 52Pct in 1981. Despite these achievements, even if the current rate of progress is maintained, some 1 billion people will still be living in extreme poverty in 2015.

The Ethiopian government has claimed a double digit economic growth in the last decade; yet independent observers have been critical of this assertion. Be that as it may, it is important to examine the poverty reduction implications of whatever growth has been achieved because all type of growth is not necessarily poverty – reducing. Using the official income – based measure, the latest official figures show that in 2010/11, 30Pct of Ethiopians (about 25 million people) are poor -a significant fall from 38.7Pct in 2004/5. According to another, more recent report by the Ministry of Finance and Economic Development (MoFED), this number has further declined to 26Pct in 2012/13. Poverty is shown to be slightly higher in rural areas (30Pct) than urban areas (26.1Pct). Over the same period of 2012/13, the poverty gap (how far below the poverty line the poor are) fell from 8.3Pct in 2004/5 to 7.8Pct in 2010/11, indicating a substantial reduction in the intensity of poverty.

The official level of poverty in Ethiopia is based on ETB3,781 per year per adult equivalent. This is equivalent to ETB10.50 per day, per adult equivalent (about USD0.50), with the food poverty line being ETB5.4 (USD0.27). This means if an adult is earning below ETB10.5 per day he/she will be considered as living below the poverty line (if this is below ETB5.4 he/she will be taken to be food poor – i.e. he/she can not afford the proper amount of food necessary to function healthily). What is worrisome in Ethiopia is that the income poverty, even using the official poverty line and data, is very pervasive. Given the galloping inflation in the country since 2005-which largely resulted from the government’s excessive domestic borrowing (through money printing) — ETB10 is an extremely small amount of money to attempt to cover a person’s basic needs (food and non-food items alike), even by Ethiopian standards. Thus, assuming that income has relativly normal distribution (though recent evidence shows otherwise, especially in urban areas), it is easy to see that if USD one per day is used instead, those below poverty will be about 60Pct of the population (more that 48 million Ethiopians).

Despite official decline in poverty in Ethiopia, the poor are still vulnerable to further poverty if eradication resources and programmes do not specifically target and reach the chronically poor – those who hardly meet their daily food requirements. In short, the pervasiveness and enormity of poverty levels should be obvious as the calculations are based, as I have noted above, on ETB10.75 per adult per day. This figure which is used by the government of Ethiopia is half of the one dollar a day figure that is usually used internationally. This figure has been proven to be insufficient not only by the fact that this amount of money will not even cover the daily food required for an adult but also by the fact that it is half the amount generally used by the international community when drawing the poverty line.

Notwithstanding the picture that could be drawn from the official sources as described above, the Ethiopian literature on poverty seems to suggest the pervasive and chronic nature of poverty in the country, regardless of its generally declining trend over time. The literature also shows significant difference on the levels of poverty depending on the official government data and the data from other institutions like the Department of Economics of Addis Ababa University [AAU] (although it should be noted that the sample used in the AAU study is very small).

This suggests the need to scrutinize the official poverty indicators as they could be as contestable as the growth figures (where the government data and the forecast of international institution markedly differ). Such critical examination of the data would discern the most probable state of poverty in the country, without bias. When we do this, the officially reported poverty figures do not seem to accurately show the current level of poverty in the country. More importantly, if we move from this income based poverty to multidimensional poverty indicators and attempt to take all aspects of the life of the poor. The level of poverty in the country will undoubtedly be shockingly high.

2nd Year . November 2013 . No9

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