Bhutan to End Poverty and Enter into Another Stage

photo credit: World Bank
photo credit: World Bank

Bhutan is about to end extreme poverty and enters into a new phase of poverty policy development. According to the latest Bhutan Poverty Assessment 2014 released by the World Bank this month, Bhutan has achieved a rapid poverty reduction for the past two decades. In terms of poverty headcount at $1.25 per day per capita (purchasing power parity basis), Bhutan realised only 4 per cent below the poverty line in 2010 although it started with nearly the same poverty level with other South Asian countries in 1990. This dramatic reduction was relatively also outstanding among the whole of South Asia whose poverty rate was about 30 per cent on average in 2010.

The report, however, points out the fact that there are a large number of populations just above the poverty line and vulnerable to shocks. It implies that those people likely face risks to fall back into poverty, particularly among households living on agriculture. “Female headed households (30 per cent of Bhutanese households are headed by women), despite matrilineal inheritance and a largely non-discriminatory labor market, are burdened with household responsibilities and are unable to take up better jobs. Bhutanese youth are at a comparative disadvantage in the job market due to lack of adequate skills.” argues the bank.

Having acknowledged the limitations of monetary poverty measures in capturing overall deprivation, the government also adopts the multidimensional poverty index (MPI), based on the Alkire and Foster method.

The comparison across the measurements shows the similar poverty level but identifies different people in poverty. In 2012, 12.7 percent of the country’s population was MPI-poor –not different from the 12 percent headcount ratio for consumption poverty but only 3.2 percent of the population was both consumption and MPI-poor at the same time.

Economic growth in Bhutan has been pro-poor but did not have positive effect on distribution. The overall Gini coefficient is estimated at 38.09 per cent in 2007 and 38.75 percent in 2012. The report analyses, “This pattern of distributional change suggests that, overall, the observed reduction in poverty was driven exclusively by the size effect.”

Given analysis, the report summarises that the long-lasting sustainable poverty reduction depends on addressing persistent shocks, engendering private sector led development and defining clear target groups for poverty reduction. It also suggests that formal social protection programmes be put in place to help individuals cope with adverse economic and financial shocks. At present, individuals cope with shocks mostly by drawing on own savings if they are non-poor, or by borrowing from friends, suppliers, and money-lenders if they are poor.

World Bank Press Release – Bhutan has achieved significant reduction in poverty levels
World Bank (2014) Bhutan Poverty Assessment 2014.
The Povertist – Measuring Poverty in the Post 2015 Agenda
Alkire & Foster (2011) Counting and multidimensional poverty measurement

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