Monday, July 22, 2024

Is Botswana’s poverty rate 14.5% or 63.5%?

In terms of what the World Bank itself recommends, the country shouldn’t still be using the universal threshold – which yields a much lower (and more politically favourable) level of poverty

In the early 1960s, an American economist and statistician called Mollie Orshansky developed what the world now knows as the poverty threshold. The latter is a measure of the income that a household must not exceed to be counted as poor. Three decades later, the World Bank refined Orshansky’s scholarship to develop the international poverty line (IPL) which measures extreme poverty in all countries by the same standard.

Originally $1 a day, the current IPL is $1.90 a day in 2011 purchasing power parity (PPP) dollars. PPP refers to the main data used to convert different currencies into a common, comparable unit in order to account for price differences across countries. PPP rounds have been conducted in 1985, 1993, 2000, 2005, 2011 and 2017. Elaboration on this point by Lillian Mogami, who is the Manager of Communication, Documentation and Dissemination at Statistics Botswana, is that these rounds are conducted by a process called the International Comparison Program. Statistics Botswana is the national statistics authority.

All along there has been recognition of the fact that the IPL is too blunt a statistical tool to cut cleanly across the mass of poverty data. It uses the same metric to measure poverty in countries whose economic strength is dissimilar and is significantly lower in value than how most of the world defines poverty. The World Bank assigns the world’s economies to four income groups—low, lower-middle, upper-middle, and high-income countries. The IPL is most relevant for measuring poverty in low-income countries. For the record, Botswana graduated out of the low-income sub-group in 1994, during the presidency of Sir Ketumile Masire, when diamond money started flooding in in historically strong waves.

In an attempt to resolve this problem, the World Bank Chief Economist convened the Commission on Global Poverty in 2015. The Commission was tasked to report on the best ways to measure and monitor poverty around the world as well as help the World Bank achieve its twin goals of ending extreme poverty by 2030 and boosting shared prosperity.

In the resulting report, the Commission recommended the introduction of two new sets of poverty lines at higher thresholds—$3.20 per day for upper-middle economies and $5.50 per day for high-income economies (in 2011 PPP dollars) that would better construct a more complete picture of poverty. Calculated the same way as the IPL, these lines use the median national poverty lines of lower middle-income and upper middle-income countries. The Commission also recommended a societal poverty line that increases in value as a country gets richer.

Global poverty lines are periodically adjusted to reflect differences in price levels across the world. Exactly one year ago, the World Bank updated these lines. In terms of the new adjustments, which are expressed in 2017 PPP dollars, the IPL is now $2.15 a day, the line for upper-middle economies is $6.85 per day and that for high-income economies is $6.85 per day.

When it published its annual economic outlook reports for African regions in August this year, and in line with World Bank recommendations, the African Development Bank (AfDB) departed from the norm of applying the IPL universally. Instead, it measured poverty incidence in individual countries in terms of poverty lines specific to them. The report is extremely bad news for the Botswana government – especially that a do-or-die general election is just a year away.

“By and large, high poverty and inequality remain endemic across the Southern Africa region. Madagascar and Zimbabwe have the highest poverty level within their income group. Poverty rate is hovering beyond 60 percent in South Africa and Botswana,” says the AfDB in its Southern Africa Economic Outlook 2023.

The source for “beyond 60 percent” is the World Development Indicators, a World Bank-maintained website that contains internationally comparable statistics about global development and the fight against poverty. AfDB did something that the Botswana government doesn’t ever do: rather than use the international poverty rate of US$2.15 day – which yields 14.5 as the percentage of Batswana living in poverty, the Bank used “the relevant poverty threshold” for Botswana’s income group, which is upper middle income. That threshold is US$6.85 – which yields 63.5 as the percentage of Batswana living in poverty. For South Africa, the threshold yields 61.6 percent as the percentage of people living in poverty.

On its website, the World Bank explicitly states that the IPL should only be used to measure extreme poverty: “This line is most relevant for measuring poverty in low-income countries. For richer countries, two higher lines are more relevant for measuring poverty. With 2017 PPPs, these lines are $3.65 for lower-middle-income countries and $6.85 for upper-middle-income countries.”

However, the Botswana government is in no rush to heed the recommendation of the IPL custodian and adjust its poverty figures accordingly. While a recommendation is not binding, the problem is that from here on out, there will be two wildly different figures about the country’s poverty rate. On such basis, Sunday Standard asked Statistics Botswana which poverty rate better reflects Botswana’s poverty incidence and should thus be used consistently – the international one, which applies to all income sub-groups, or the one specific to the country’s income sub-group.

In her response, Mogami stated the following: “The dollar-a-day international poverty lines are used to allow for comparison hence adoption of the dollar-a-day purchasing power parity. The minimum was initially set at $1.00, and progressively increased to $1.25 and $1.90 as and when the International Comparison Program was conducted at intervals. This is the standard used internationally for comparison of holistic populations as opposed to sub-groups of populations. However, for other purposes – for instance, if the interest is on population subgroups, the dollar-a-day metric can be used for in-depth investigation.”

As regards whether is any rule pertaining to what metric to use, Mogami explained that that depends on what the purpose of a particular study is.

“The principle is to apply the same standard and comparable metric for all entities/countries,” said, adding that metadata pertaining to how the new figures were calculated was lacking.

Explaining their own processes, Mogami said that Statistics Botswana typically analyses poverty at “aggregated income level”.

“There are, however, researchers who go down to disaggregated/grouped income populations.” Her elaboration of the latter process is that it looks into disparities across income groups and analyses income quartiles, quintiles and deciles – which are statistical concepts that are commonly used to analyse datasets.

In fairness to Botswana, many more countries across the globe are still sticking to the IPL – or applying (more politically) favourable poverty lines. One is China which in 2021 announced that it had eradicated poverty but was immediately faulted for subverting new statistical processes in order to manufacture a fraudulent and politically favourable result. In that year, the poverty line for upper-middle-income countries was $5.50 a day. While acknowledging that bringing more than 800 million people out of extreme poverty was impressive by any standard, some analysts have pointed out that China, which is an upper-middle-income country, had used the poverty line ($3.20 per day in 2011 PPP) for lower-middle-income countries.

The latter set of circumstances would lead Indermit Gill, a Brookings Institution economist, to remark: “Measuring progress using the official poverty lines of the world’s poorest countries as a benchmark may be the very definition of underachievement.” Elsewhere, Gill has observed that the IPL “is not a relevant threshold for an upper-middle-income country about to become an advanced economy.” As regards the latter observation, it is interesting to observe that Botswana’s aspiration, as stated in its Vision 2036, is to reach high-income status by 2036.

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