Dear Editor,
The legacy of colonialism has allowed poverty to become endemic in Guyanese and other post-colonial societies. It has also left Guyanese policy makers with massive challenges. Unfortunately, their apparent reliance on the country’s unprecedented GDP growth of 62.3% in 2022 and 37.2% in 2023 (projected), (and existing per capita GDP of US$18,990) to produce a significant reduction in moderate poverty (MPR) might not be on solid foundation.
Guyana’s MPR declined from 43.2% in 1993 to 30.0% in 2010 (PRSP). The extreme poverty rate (EPR) was reduced from 28.7% in 1993 to 17% in 2010. Apart from the Poverty Reduction Strategy Paper (PRSP) of 2015, there has not been any further study, except the one done for 2019 by the World Bank (WB), which put the poverty rate at 48.8%. Rather than continuing its decline, the MPR increased by 18.8 points (from 30.0% to 48.8%) between 2011 and 2019.
Why this dramatic reversal? Does this indicate that the PRSP had lost its momentum? Or was it due to different methodologies used in those studies? Part of this rise in MPR lies in the re-classification of Guyana as an upper middle-income country in 2015, which means that the MPR threshold has risen by 140%, from US$2.50 per day per person to US$5.50 or US$165 per month per person.
Analyzing GDP data, Econometrician Dr Ramesh Gampat observes: “Economic growth does not have a strong impact on poverty reduction.” Data for the period 1993 to 2006 show “at a 1% increase in real per capita income, poverty was reduced by a mere 0.14%.” And despite an increase in GDP of 40.3% (between 2011-2019), a per capita GDP increase of 30.4%, and a GDP average growth of 3.76% during the same period. The MPR did not decline, but rather increased from 30% to 48.8%. Of note is that the World Bank says: “Among the determinants of poverty, education level appears to have the strongest correlation with poverty reduction.”
A comment on income inequality. There is a hypothesis which states: the higher the income inequality, the higher the poverty rate, and the narrower the income inequality, the lower the poverty rate. There is no empirical evidence to suggest that a reduction of income inequality would lead to poverty reduction. Dr Ramesh indicates that, in Guyana, inequality had narrowed significantly in the urban areas by 28% between 1993 and 2006, compared with 11% for rural and 17% for interior areas for the same period. Yet the poverty level has remained high in rural areas, and for the hinterland, it was at 76%. However, it is plausible that with a booming economy, income inequality is likely to widen among groups, and between regions.
The chart shows that poverty and income disparity are a rural/hinterland problem. The poorest quintile of people (85.6%) lives in Region 1 and the richest quintile (28%) lives in Region 4.
In keeping with the Third UN Decade for the Eradication of Poverty (2018-2027), the PPPC Government is re-imaging education, reducing inequity, re-structuring the schools’ curricula, and making it more responsive to national economic development needs, as well as taking into consideration the World Bank’s theory that higher education has the greatest potential to lift people out of moderate poverty.
Focus is given here to three sectors: housing, education, and job creation. Education and skills training have continued to lift thousands of people out of poverty through such programs as GOAL scholarships (numbering 19,690), TVET skills training of 4,239 during 2020-2023, and BIT skills training of 4,527 people in 2022.
The grant of 10,873 house lots (41.7% of total house lots allocated between 2020 and 2023) to low-income families represents a subsidy to them of US$156.8 million, plus a subsidy of US$12.7 million was applied to regularize 883 house lots for squatting area residents. The job programs like ‘neighborhood workers’ numbering 13,000; the rehiring of 2,000 Amerindians CSOs and 3,000 sugar workers have also lifted thousands of people out of poverty. If private sector jobs in construction (N=25,000) and oil/gas (N= 3,163) are added, at least 95,000 people would have been lifted out of poverty between 2019 and 2023.
This translates into a current moderate poverty rate of 36.4%, a decline of 12.4 points from 2019, when ½ the population (389,791) was living on less than US$165 per month per person.
Sincerely,
Dr Tara Singh
