13 December 2023 12:01 am Views - 2393
Azusa Kubota, Resident Representative, UNDP in Sri Lanka officially handing over a copy of the Regional Human Development Report to Anura Dissanayake, Secretary to the Prime Minister
Fragile and uneven economic recovery has further exacerbated income and wealth inequalities in the country, placing Sri Lanka among the top five most unequal countries in the Asia Pacific, according to the United Nations Development Programme (UNDP).
“In the aftermath of the COVID-19 pandemic and economic crisis, unmet aspirations are born.
In the context of Sri Lanka’s economic crisis, multiple assessments and simulations speculate that previous poverty reduction gains may now be lost,” said Dr. Vagisha Gunasekara, Country Economist from the UNDP Policy and Engagement Team.
Even before the economic crisis, the country was grappling with prevalent disparities and enduring structural exclusions, including entrenched inequality, gender biases, and a sizable informal sector.
These challenges were further exacerbated by the pandemic and economic crisis, compounded by rising inflation resulting from geopolitical conflicts.
On top of this, the region and Sri Lanka are facing a triple planetary crisis— climate change, pollution, and biodiversity loss, which are hitting the most vulnerable populations the hardest.
Dr.Gunasekara highlighted that high income and wealth inequalities, which remain persistent, specially after the pandemic and economic crisis, are major concerns for the country.
“Sri Lanka is a country with fairly high income inequality; we are in the top one third of the highest unequal countries in the world, and wealth inequality is also very high. For example, the top one percent of Sri Lankans own 31 percent of the total personal wealth in the country, while the bottom 50 percent only owns less than 4 percent of the overall wealth in the country. This provides us with a snapshot of how unequal our country is,” she noted.
These remarks were shared at the national launch of UNDP 2024 Asia-Pacific Human Development Report, titled ‘Making Our Future: New Directions for Human Development in Asia and the Pacific,’ held in Colombo yesterday.
According to the report, Sri Lanka is among the top five countries exhibiting the highest wealth inequality, as measured by the wealth share of the top 10 percent, along with Thailand, China, Myanmar, and India.
Although Sri Lanka scored 0.782 in the Human Development Index (HDI) in 2021, gaining 0.002 points over the previous year with a rank of 73, Dr. Gunasekara pointed out that the country loses 10.6 percent points when the HDI is adjusted for inequality.
Meanwhile, she also expressed concerns about the looming indebtedness of the population, with 33.4 percent of the populace grappling with vulnerability and deprivation concerning debt-related metrics.
As of June this year, household debt accounted for 7.4 percent of the country’s Nominal GDP.
The primary catalysts behind incurring debt included economic activities (42.5 percent), housing construction or repair (32.8 percent), and basic consumption of food, fuel, and other household expenses (19.3 percent).
For households seeking funds for consumption, the primary sources of debt include pawning (31.1 percent), money lenders (24 percent), and banks (23.5 percent). In particular, urban areas had a higher proportion of households that borrowed for basic consumption (26.2 percent) compared to rural areas (17.9 percent).
The UNDP report recommended mainstreaming human development, recalibrating growth strategy, and making change happen as the way forward.
To make this happen, Dr. Gunasekara stressed that the government needs to expand people’s choices by focusing on governance, enhancing civic engagement, and eliminating discrimination, while enhancing human security through social protection programmes and insurance and risk finance tools, and accelerating the transition towards carbon-neutral and climate-resilient development.