The government must consider an alternative, growth-friendly strategy for poverty alleviation and pay a reasonable allowance for vulnerable families, enabling them to satisfy basic needs.
by Sirisena Amarasekara
Though the terminology was not used, Sri Lanka had paid attention to poverty alleviation since the pre-independent era, much before the initiatives of the donor community. The government implemented several national programs aimed at reducing poverty. Some of them were dry zone colonisation programs, village expansion schemes and facilities provided to the landless under the Land Development Ordinance, rural development initiatives under Rural Development Societies, free health and education, guaranteed price for paddy, irrigation schemes, rural roads, rural water supply, social security allowance (Pin Padiya), and rice subsidy.
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| Houses and Apartment Complexes seen from the top of Colombo, Sri Lanka, on August 7, 2023. The current metro area population of Colombo in 2023 will be 633,000, a 1.12% increase from 2022. The metro area population of Colombo in 2022 was 626,000, a 1.13% increase from 2021. The metro area population of Colombo in 2021 was 619,000, a 0.98% increase from 2020. (Photo by Thilina Kaluthotage/NurPhoto) |
2.1 Universal Rice Subsidy
Among the above, quantity rationing and price subsidy for rice, the staple food to ensure food security, was introduced in 1945. From time to time, the quantity of the ration and the subsidy element had been revised. Later, during the Dudley Senanayake government, this was changed to one measure of rice-free and no second measure. The rice subsidy was available for all citizens of the country regardless of their income level. In 1970, a second measure was provided at seventy-five cents in addition to the free measure. However, income taxpayers were excluded from the rice subsidy at this juncture. In addition to rice, from time to time, essential food items such as sugar, wheat flour, kerosene oil, etc., were also included in the subsidy scheme. As a significant share of rice was imported, the subsidy and quantity rationing of rice was vital to prevent starvation of the poor.
2.2 Targeting the Food Subsidy
In 1978, an island-wide survey was conducted to identify families below the official poverty line of Rs.3600 per annum. The rice ration book was replaced with a food stamp scheme, and the value of the food stamps per family had a marginal adjustment according to the family size. By doing so, nearly 50% of the population became ineligible for rice subsidies. For the first time, food subsidies have targeted people experiencing poverty. Toward the late 1970s, the food subsidy scheme cost was around 14% of the government expenditure; however, after the introduction of the food stamp scheme, it came down to 7% in 1980, leaving a large share of the national budget for investment.
It shows that the non-targeted food subsidy scheme for over 40 years drained a substantial amount of government resources, which otherwise could have been invested in growth-oriented programs such as physical infrastructure, agriculture, industry, and the tertiary sector. Instead of reducing the income gap between the rich and poor, the universal food subsidies reinforced the difference by leaking a significant share of it to well-to-do people. The food subsidy scheme did not have any activity to elevate the poor above the poverty line. However, it relieved the poverty-ridden people who could have starved otherwise. Moreover, the food subsidy was a bribe to the voters to gain or keep power by all political parties that have ruled the country since independence.
2.3 Beyond the Poverty Relief
In 1989, The Janasaviya program was launched by the Premadasa government to reduce the widening income gap between the poor and rich by transforming the poor households into sustainable economic units through increased cash and food grants and credit entitlements for self-employment. This was an innovative approach from poverty relief to sustainable poverty alleviation. Initially, it was begun in 28 Assistant Government Agents ‘divisions as a pilot project intending to expand island-wide based on the experience gained. With the assassination of President Premadasa, the programme lost its political patronage and did not fully implement its original concept.
In 1995, this concept was further changed, elaborated with new components, and implemented as the national poverty alleviation program island-wide, named ‘Samurdi’. The sustainable poverty alleviation concept (Income transfer, credit for self-employment, infrastructure rehabilitation, social welfare, awareness building, etc.) has been implemented for over three decades. As of 2020, 35% of the households (1.8 million) were receiving Samurdi benefits. Parliament revealed that according to a survey conducted in 2023, the eligible number has increased to 2.8 million families, which is nearly 50% of the families in the country. While the number of families below the official poverty line reached 4% by 2020, Sumurdhi relief recipients remained at a remarkably high level of 35% of the total families. Now, it will exceed 50%. According to the Department of Census and Statistics, the national official poverty line has been revised to Rs.13,138 monthly income. At a meeting held in April 2023, the Committee on Public Accounts revealed that 33% of the Samurdi beneficiaries are ineligible for such assistance. It is unclear to what extent the Samurdi has contributed to bringing down absolute poverty to 4%. The major contributor to this is the overall economic development, not the Samurdi.
In addition to the Samurdi Programme, there are many safety nets, such as allowance for older adults and kidney patients, food baskets for pregnant mothers, the Triposha programme, etc. The selection of beneficiaries in many programmes has been politicised. While many families are denied the benefit, non-eligible families receive help from the Samurdi programme. Most welfare programmes, including Samurdi, have created a dependency syndrome, and no one wants to exit from these programs. Also, there is no regular exit and entry mechanism for the benefits.Moreover, Samurdi beneficiaries have developed a separate identity and a social sub-culture. They proudly represent themselves as a unique social group at weddings, funerals, and other social events and display banners such as ‘’Samurghi Labeenge Pranamaya” to show solidarity. It is a way of life, and they wish to remain Samurdi Beneficiaries forever. The government’s recent (June 2023) effort to revise the beneficiary list under a new tagline of “Aswasuma” was objected to by many recipients. There may be some mistakes in the selection due to political interference. However, the critical issue that should addressed by the policymakers is the social attitude toward dependency on handouts and reluctance to get out of it. The public officers who engaged in the programme also wished to be in that forever and mobilised the recipients to protest against the change. The Poorest 4% could be the group who remain in poverty due to a lack of economic opportunities or inability to participate in employment due to various constraints.
In many developing countries, people stay poor as there are no employment and income-generating opportunities. Still, many sectors in the Sri Lankan economy are suffering without labour. The issue is the mismatch between the high-demand labour categories, skills, and aspirations of the unemployed. The young generation (school leavers) who don’t have employable skills try to have a sophisticated lifestyle by spending the hard-earned income of their parents, which is possible due to a plethora of welfare programmes. Though there are many opportunities to earn sufficient income/wage, they are ashamed to work and prefer to be unemployed until they find a job according to their aspirations. At least they do not give a helping hand to the parents’ income-generating activities. For them, employment means a decent salary with other benefits without or with little work. So, widespread poverty in Sri Lanka is an issue of social attitudes than a lack of economic opportunities. However, most people living in remote villages are under-employed as economic options are limited in such areas. Therefore, under-employment and wilful unemployment should not be mixed up in poverty alleviation initiatives.
2.4 Experience in Self-employment.
When I was the director of the Matara District Integrated Rural Development Project in the 1980s, a credit programme was implemented for self-employment, followed by strong social mobilisation, savings mobilisation, and awareness building. The programme was vigorously monitored by a group of frontline voluntary workers called Social Mobilisers. This was implemented in targeted poverty pockets called backward villages. After three years of implementation, a 100% survey was conducted to assess the achievements and found that only about 5% of the beneficiaries have come out of poverty. They are the people who have some ability, technical skills, resource base, and entrepreneurial interest. For the balance of 95%, it was just a survival strategy. Loan repayment was near 100%, but borrowing was cyclical to sustain self-employment as a survival strategy.
As experienced in the above program, self-employment would be an answer for people with high-demand skills, such as carpentry, masonry plumbing, electrical works, etc. However, People in those categories can also find wage employment if they emigrate to other areas. High-value agriculture, like greenhouse and drip irrigation, is also possible for those with access to land and other resources. Market niches such as petty trading, food processing, transport, and other services in the agricultural, fisheries and urban sectors are already filled by some people. Under the open market economy, niches for cottage industry products are limited, and imported products with attractive looks at lower prices are available. Unless the economy is expanded to create more market niches, entering more people into existing ventures will lead to sharing limited opportunities, putting everyone into poverty. Once a self-employment credit or grant scheme is introduced into a community, mushrooming cottage industries and service enterprises appear simultaneously. Still, most find natural death after some time, leaving a few.
Much of the rural poor are the agricultural proletariat, who have no resource base or skills needed by the modern sectors of the economy. Along the coastal areas, artisan fishermen and helpers to fishermen are under-employed. It is challenging to find self-employment avenues for such people. If at all, self-employment would be a supplementary income in their survival strategy, not sustainable full-time employment. Most urban poor are also casual workers who need modern skills. Unlike the rural poor, income is not a significant issue for the urban poor. Most of them find gainful employment but are trapped in social poverty due to complicated social and political reasons. Decent shelter is a significant issue as they do not own the land. Urban People with the opportunity and the capacity are already engaged in self-employment, such as petty trade, making and selling food items, three-wheeler driving, etc. Providing further self-employment assistance to the urban poor will increase the competition, and already employed people may also become deficient. Some clever people are engaged in brokering, pickpocketing, drug deals and illegal and antisocial activities, which are highly remunerative. Hence, self-employment credits and grants are not a solution for them.
According to many media reports, many poor people, especially women, have been trapped in indebtedness due to the self-employment credits provided by various financial institutions. Over the years, some people have borrowed from multiple schemes and defaulted, disqualifying them from further borrowings. Therefore, self-employment assistance for the widespread poverty is a myth because most people are born to be employees, not employers. Therefore, manypoor need wage employment to come out of the poverty line, not consumption subsidies, grants, and loans for self-employment. If a proper strategy is introduced, they could join the labour market and contribute to the economy while earning a decent living without burdening society.
2.5 Reinforcing the Dependency Syndrome
As a condition for the IMF 17th loan, the government is revising the Samurdi allowance and the list of beneficiaries as a social safety net to face the shock of the 2022 economic crisis. However, its ultimate result could be entering more families into the Samurdhi Scheme and increasing cash allowance to match the present-day cost of living. As discussed above, the coverage will be about 50% of the families. According to the proposal, Rs15,000 will be paid to people under the ‘extremely Poor’ category and Rs. 8,500 to the ‘Poor ‘category. However, Rs.15,000 is inadequate to meet the basic needs of most vulnerable families. Most in the ‘poor’ category are in the workforce and can engage in productive work. Most economic activities in many areas suffer due to the scarcity of labour. Therefore, the poor, who belong to the labour force, must be encouraged to find gainful employment instead of depending on the Samurdhi allowance. For them, Rs 8,500 is less than one week’s wage but a significant cost to the national budget. The government spent 52.47 billion on samurdhi relief payments in 2020, which accounts for 0.35 % of the GDP. Under these circumstances, increasing and expanding the Samurdhi programme is only another phase of the blunder. Instead, the government must consider an alternative, growth-friendly strategy for poverty alleviation and pay a reasonable allowance for vulnerable families, enabling them to satisfy basic needs.
to be continued
Sirisena Amarasekara is a Sri Lankan public servant and diplomat. He is the former Sri Lankan High Commissioner to South Africa, Mozambique, Namibia, Zambia, Zimbabwe, Lesotho, Angola, Botswana, and Eswatin. He had functioned as the secretary to the Prime Minister on two occasions, and as the secretary to the Cabinet of Sri Lanka. Having completed more than 50 years of public service, Amarasekara is one of the most senior Sri Lankan public servants.
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