New data reveal increasing poverty in developing countries

Business Materials 27 August 2008 00:50 (UTC +04:00)

There are more poor people around the world than previously thought, the World Bank said Tuesday, following a major overhaul of its past estimates of global poverty, dpa reported.

Following an upward adjustment of the cost of living in poorer countries, the bank said about 1.4 billion people - or one in four - in the developing world lived below the new reference point of 1.25 dollars a day, which is benchmarked to 2005 rather than 1993 prices.

The World Bank's earlier estimate of 985 million people living below the international poverty line of 1 dollar a day was based on cost of living data from 1993.

However, lags in survey data mean that they do not reflect the potentially large adverse effects on poor people of rising food and fuel prices since 2005.

The bank's latest update on the world's poor drew on 675 household surveys for 116 developing countries, representing 96 per cent of the population.

While the developing world is poorer than earlier thought, the World Bank's economists said there was also evidence of successes in the fight against poverty.

"The new data confirm that the world will likely reach the first Millennium Development Goal (MDG) of halving the 1990 level of poverty by 2015," said Justin Lin, the Bank's chief economist. This means that even in 2015, about 1 billion people will be living in extreme poverty.

"However, the sobering news that poverty is more pervasive than we thought means we must redouble our efforts, especially in sub-Saharan Africa," he said.

The international poverty line is not arbitrarily selected, but is based on average national poverty estimates for the poorest 10-20 countries. The new data reveal sharp regional differences.

While the number of poor in east Asia dropped from 80 per cent living below 1.25 dollars a day in 1981, to 18 per cent in 2005, in sub-Saharan Africa the poverty rate has persisted at 50 per cent over the quarter century between 1981 and 2005.

The number of poor almost doubled in sub-Saharan Africa from 200 million in 1981 to 380 million in 2005. If the trend persists, this region will have a third of the world's poor by 2015.

Chief economist Lin said: " China managed to reduce poverty in the last 30 years because of market-oriented reform. There are lessons here for other developing countries."

He also admitted that if China were taken out of the equation the world would not be on track to achieve the goal of halving poverty by 2015.

China had 207 million people living in poverty in 2005, a decrease from 835 million in 1981.

In South Asia, the poverty rate fell from 60 to 40 per cent between 1981 and 2005, but the total number of poor people in the region was about 600 million.