William Seitz: The declared poverty line is slightly higher than in countries with a similar income level as in Uzbekistan

William Seitz: The declared poverty line is slightly higher than in countries with a similar income level as in Uzbekistan

Today, on May 31, during the press conference of IMCA a preliminary estimate of the cost of the minimum consumer spending of the population in Uzbekistan was announced.

During the event, World Bank economist William Seitz told how poverty levels measured in the world and in Uzbekistan, what are the features of the national poverty line, how it is calculated and how important it is to introduce this indicator.

When President Mirziyoyev announced last year that the government would be systematically measuring poverty and setting high standards for poverty reduction, he focused his ambitious reform agenda on society’s most vulnerable people.

The World Bank was invited to work with the government in reviewing the alternative approaches to measuring poverty and examples from other countries. After careful deliberation, the authorities selected the most established and the most widely used approach, called the “cost of basic needs” method. It is especially common among middle-income countries like Uzbekistan.

It is a new approach for Uzbekistan when you get into the details and has many strengths. It is evidence based and uses the real conditions of people and households in the country.

The line was developed and will be monitored using a new national survey especially designed for these purposes. While closely following international standards, methods, and norms, the results are specific and appropriate to Uzbekistan's situation.

Setting the line at an appropriate level is very important. And the question of the “right level” is inseparable from how it is used. The purpose of a poverty line is to focus society’s energies and attention on people who are in special need of help.

If a poverty line is set too low, there is a risk of society not doing enough to combat serious deprivation. But poverty lines are also typically not used to define what is enough for a comfortable or “middle-class” lifestyle. If a line is used in that way, it can dilute the attention and resources focused on people who are in greatest need.

For this reason, the team working on developing the poverty line have been very thorough and also benchmarked the results to established practice elsewhere.

The new poverty line announced today is somewhat higher than is typical of counties with similar levels of income as Uzbekistan. The new poverty line puts Uzbekistan in the top third of countries measured as a share of Uzbekistan’s GDP per person. This means that it is more ambitious than among peer countries, and that the authorities are setting their goal relatively high.

But it is also important that the line keeps up with changing circumstances. This means that the line needs to rise with prices and the cost of living and should especially focus on the most important goods in poor people’s budgets, like food and other necessities.

For this purpose, the authorities have endorsed a formula to automatically increase the line as prices rise. This is best-practice, particularly in periods of uncertainty like we now face during recovery from the COVID-19 pandemic.

Given the novelty of the new approach, it is also advisable to review how well it is suited to its task over the coming year.

One of the most exciting things about finalizing the poverty line is that the energy society has put into measurement can be shifted to action, and toward concrete policies to reduce poverty.

Here I wanted to raise two crucial considerations as the poverty line gets put into practice: first, is ensuring that the government can identify and support poor people, some of whom have not yet been identified are have not yet received help.

The second is expanding opportunities for people to permanently exit poverty. This is partially about social transfers.

But if we look global experience, another extremely important driver of lasting poverty reduction is job creation and rising wages, and especially making sure those opportunities are available to vulnerable and excluded groups.

We are extremely grateful for the chance to work together with the government and other partners on such a pivotal reform, and we are especially looking forward to putting this new measure to use as we work together to reduce poverty in Uzbekistan.

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