Friday, 1 December, 2023

Impacts Of COVID-19 On Poverty Alleviation

Uttam Maharjan 

Nepal’s decades of efforts to mitigate poverty has notched up remarkable success. In the past, the incidence of poverty in the country was horrendous. In 1995, the level of poverty in the country was put at 42 per cent, which was alarming. With constant efforts backed up by an improvement in key economic indicators, the level of poverty came down to 31 per cent in 2003 and to 25 per cent in 2010. The level of poverty further came down to 21.6 per cent in 2015. Now, the number of people living below the poverty line is 18.7 per cent.

In the meantime, the 2015 earthquake played havoc with the economy of the country, damaging or destroying private and public property and claiming about 9,000 lives. It is estimated that the natural catastrophe made 700,000 people poor, thus increasing the level of poverty in the country. The impacts of the earthquake are gradually wearing off when the COVID-19 pandemic hit the country in March. The coronavirus first appeared in Wuhan, China in late December 2019 and is now afflicting 214 countries and territories across the world.
The enforcement of lockdowns and prohibitory orders to contain the spread of the coronavirus has affected the lower-middle-income-class people the most. Those working in the informal sector like daily-wage workers and temporary workers have been badly affected with the loss of daily work or jobs. The coronavirus has made tens of millions of people poor across the world. As per the BBC survey of 27 coronavirus-affected countries, the people living in poor countries have lost 69 per cent income, while those living in rich countries have lost 45 per cent income. And six out of 10 people living all over the world have faced economic hardship, with women and underprivileged people hit the hardest. The coronavirus has thus affected the people living in various countries disproportionately.
The World Bank data blog of April estimates that 49 million people will be pushed into poverty due to the coronavirus. In South Asia, 16 million people will sink into the abyss of poverty, with India accounting for 12 million people. Likewise, as per the World Bank Global Economic Prospect Report of June, 71 million to 100 million people will be added to the poverty tally. The Asian economic crisis that emerged in 1997 also exacerbated the poverty scenario by affecting millions of people. As per the World Bank Report of July, one third of the people just above the poverty line may sink into poverty due to the loss of jobs or livelihood means. As per the Nepal Development Update, the biannual report of the World Bank, 31.2 per cent of the people living close to the poverty line are vulnerable. Such people earn USD 1.90 to USD 3.20 a day.
In a similar vein, according to the World Bank’s latest South Asia Economic Focus, the workers working in the informal sector without social security or assistance will be the most vulnerable lot. And informal-sector workers and self-employed people in urban areas will be more vulnerable than their rural counterparts. Rural people can resort to at least sustenance farming for their livelihood, whereas such an option is not usually available in urban areas.
No formal study has been conducted as to the extent of additional poverty in Nepal the coronavirus may redound to. However, as per some data, an additional 1.2 million people will fall into the category of poor people due to the coronavirus. According to the Nepal Rastra Bank study conducted in Jestha and Asadh, there would be a reduction of 22.5 per cent jobs, with 1.2 million workers having lost their jobs.
The coronavirus has played havoc with the economy of the country. The robust economic growth the country has been achieving for the last few years may take a hit. Although the government expects the economic growth to be around six per cent in this fiscal year, the World Bank has projected it at a meager 2.1 per cent in the best case scenario. There are looming apprehensions that the coronavirus may stifle the country’s efforts at alleviating poverty. Further, the possibility of reversing the country’s outstanding gains on the poverty alleviation front is also glaring.
Several countries have launched an income-sustaining scheme like the temporary basic income guarantee scheme in order to counteract the pushback of the coronavirus on the income of people. The USA has announced a package of USD 1,200 per month to its citizens. Japan has unveiled a grant of JPY 100,000 and an interest-free loan of JPY 500,000 with tenure of 10 years. Such relief measures will play a catalytic role in enabling people to live a normal life. Furthermore, such measures will jack up consumption and hence production and distribution, thus helping the economy to limp back to normal.

Relief measures
It is disappointing to note that relief measures are not effective in the country. A mechanism for collecting data of the people affected by the coronavirus has not been developed. The local bodies are working towards mitigating the effects of the coronavirus in their jurisdictions and helping out the coronavirus patients. The local bodies may be assigned the task of collecting data of the people affected by the coronavirus. However, they may have a shortage of manpower and resources. So the state and federal governments should help the local bodies. The analysis of the data on the number of the affected, the classification of the affected into various groups like children, women and underprivileged people and the extent of economic loss they have suffered may come in handy while formulating a strategy for economic recovery and preventing the level of poverty from escalating.

(Former banker, Maharjan has been regularly writing on contemporary issues for this daily since 2000.