While there has been a reduction in poverty figures along with Sri Lanka’s gradual restoration of macroeconomic stability following the economic crisis, much work remains to be done to empower vulnerable populations to break free of the cycle of poverty.
Poverty rates, as per the official poverty line measured by the Department of Census and Statistics (DCS), have declined from a high of 28.8% in 1995/’96 to 4.1% in 2016.
According to the DCS, Sri Lanka’s official poverty line, defined as the minimum expenditure per person per month to fulfil basic needs, has fallen from Rs. 16,524 in December 2023 to Rs. 16,191 as of December 2024, which is nevertheless an increase from Rs. 16,017 in November 2024 and Rs. 15,994 in October 2024.
Accordingly, the minimum required monthly income for a family of four to meet basic needs is Rs. 64,764.
The DCS notes that the official poverty line increased due to the lower National Consumer Price Index (NCPI) value reported in December 2024 compared to preceding month.
University of Peradeniya (UOP) Department of Economics and Statistics Professor of Economics Dileni Gunewardena highlighted that Sri Lanka had been following a standard methodology to calculate the poverty line and to estimate poverty since 2002.
“In addition, in 2019, the official poverty line was updated and is based on 2012 spending patterns, which are not vastly outdated. The poverty line is updated monthly based on the cost of living index, and to the extent that this is accurately measured, there is no concern about the accuracy of poverty figures.
“The World Bank (WB) also provides estimates of poverty based on higher poverty lines, which gives us a sense of the incidence of poverty if we use a more generous definition of poverty.”
While the Centre for Poverty Analysis (CEPA) notes that Sri Lanka has achieved substantial reduction in monetary and multidimensional poverty in the last 25 years, aspects of poverty also undergo changes, for instance following the recent the Covid-19 pandemic.
Prof. Gunewardena told The Sunday Morning that based on WB poverty estimates, there had been a slight reduction in poverty figures, which “makes intuitive sense given that the economy has been picking up between 2022 and 2024”.
“The main source of poverty estimates since 2019 are the WB analyses, which are based on 2019 data with some assumptions about how prices have changed and how the distribution of income has changed,” she noted.
Accordingly, the estimates of the headcount index (percentage of the population that is poor) are as follows:
- 2019 – 11.3%
- 2020 – 12.7%
- 2021 – 13.1%
- 2022 – 25%
- 2024 – 23.4%
When contacted, the World Bank referred The Sunday Morning to its Sri Lanka Development Update of October 2024, which notes that while positive growth, low inflation, a steady exchange rate, and improved fiscal and external balances throughout 2024 have contributed to greater stability and a nascent recovery, poverty remains high and Labour Force Participation (LFP) continues to decline. As such, the WB notes that poverty is projected to have tripled in urban areas.
Contributory factors
Leading to the present conditions of poverty, according to Prof. Gunawardena, are the rising cost of living; job losses that followed the economic crisis, especially in the informal sector; and the somewhat sluggish recovery in 2023.
“What we know from studies done during Covid-19 and during the economic and political crises of 2022 is that food insecurity was high. Families were cutting back on food, health, and education.
“We can also expect that children born during 2021-2023 are also likely to have higher malnutrition than in typical years, because of the poorer nutrition of their mothers during pregnancy. These are the effects of the rise in poverty that are pernicious and have long-term consequences,” she said.
The World Bank similarly notes: “Human development outcomes have deteriorated in the face of high poverty and falling LFP. Households’ budgets have shrunk since 2019, leading to increases in malnutrition and child mortality. The effects of the crisis have been felt across the country and affected households not considered vulnerable before 2019.”
Moreover, in addition to worsening job losses, wages have contracted by 16.9% and 22% in the informal private and public sector, respectively, between July 2021 and 2024, leading to generalised worsening of living conditions, including deteriorating health outcomes.
The WB also points out that while reforms were undertaken to restore macroeconomic stability, they nevertheless imposed additional burdens on the poor, meaning that
“crisis-induced poverty increased by 9.6 percentage points between 2019 and 2023”.
Poverty alleviation
Meanwhile, speaking to The Sunday Morning, Minister of Rural Development, Social Security, and Community Empowerment Upali Pannilage stressed that the Government’s priority in terms of addressing poverty was to tackle rural poverty and empower these communities while moving away from dependency on subsidies.
Explaining the Government’s policy stance, he said: “As a policy, we have identified rural poverty as a priority. In order to eliminate rural poverty, the rural economy must be strengthened. To this end, we will soon be launching a national programme; the basic plan has been formulated and it has been presented to Cabinet.”
However, Pannilage pointed out that there would continue to be vulnerable segments among these communities which would be difficult to empower, such as the elderly, who would continue to receive subsidies.
“We are providing relief to targeted segments – the poorest of the poor. Programmes are also operational to eradicate poverty in general, since it cannot be done through subsidies alone. However, since people have been suffering due to the economic crisis for some time, many have been stricken by poverty,” he stated.
Accordingly, he pointed out that the Government had increased the ‘Aswesuma’ monthly benefit allowance currently granted to poor and extremely poor categories from Rs. 8,500 to Rs. 10,000 and from Rs. 15,000 to Rs. 17,500, respectively.
Moreover, since the transitional poor are yet to emerge from their poverty levels, the benefit period has been extended by three months until 31 March.
Addressing further relief measures, Pannilage noted that the Government had also taken steps to provide fuel subsidies to fisheries communities, increase allowances for pensioners, and provide relief to schoolchildren.
“In this manner, relief measures are ongoing, targeting the poorest in society. Alongside this, our main target is empowering the families that have been identified as extremely poor through the Samurdhi Development Department, moving away from the mentality of depending on subsidies alone,” he noted.
According to the Minister, this programme has commenced and the Government’s aim is to empower 400,000 families through it this year, helping these individuals to rise from poverty through various programmes that will facilitate foreign employment, self-employment, etc.
Addressing what is needed to ensure sustained poverty reduction, Prof. Gunawardena outlined the need for policymakers to consider both programmes to alleviate poverty as well as broader policies to strengthen the economy and to broad-base economic growth.
According to her, reforms aimed in this direction need to focus on improved revenue mobilisation, improved targeting of welfare benefits, and structural reforms aimed at job creation and increasing LFP.
“In terms of ‘Aswesuma’ or any similar welfare benefit scheme, the Government needs to find ways of reducing the mistargeting that has very clearly taken place in the past. The best way to do this is to minimise the need for human intervention and let poor people communicate their poverty through their expenditure patterns.
“In addition, strengthening the economy by encouraging foreign direct investment as well as service sectors like hospitality and tourism will generate the kinds of jobs that engage people from low-income households,” she said.
Prof. Gunawardena further highlighted the importance of improving both physical and social infrastructure to “make good use of the best resource we have, which is our people”.
“To release our well-educated female labour force from unpaid household work, we need to improve care infrastructure – childcare and elder care as well as for care for persons with disabilities,” she asserted.