Under-nutrition, income inequality hits economic growth: CB

The Central Bank (CB) has drawn attention to the dangers posed to economic growth from poverty and the high incidence of child under-nutrition and income inequality in Sri Lanka.

Addressing challenges in these three particular areas is necessary to improve the living standards of the people and achieve sustainable economic growth and development, its annual report for 2015 said. “Although Sri Lanka has been a success story in development policy circles, the on-going socio-economic transformation has given rise to concerns on the sustenance of such developments, especially in the areas of poverty, income inequality and child under-nutrition,” it said.

“The issues of poverty, income inequality, and child under-nutrition can severely undermine economic growth and result in social unrest,” he said.

The bank said despite the improvement in Sri Lanka’s annual per capita income to US $ 3,924 in 2015 from $ 981 in 2003, “significant income inequalities continue to persist.”

It noted, government surveys have found that the highest decile or 10 percent of the people held 38 percent of the household income in the country and the highest 20 percent held 53 percent of household income.

“In contrast, 50 percent of the households accounted for only 20 percent of total household income, reflecting a significant inequality in income distribution across the country,” the Central Bank report said.

Sri Lanka faces a “substantial burden of child under-nutrition”, with 13 percent of all children under five reported as stunted and 24 percent as underweight in 2012, the report said.

“Despite the steady pace of economic growth and rising living standards, improvements in this area in the past decade have been slow and marginal,” it said. The leading causes of the poor performance of Sri Lanka in nutrition indicators are poverty, food insecurity and the resultant poor health of mothers.

“Of these, the single most important modifiable cause in Sri Lanka is poverty and the food insecurity that results from poverty which in combination contributes to more than two-thirds of the incidence of LBW, child stunting and underweight.” The report said the “modest improvement” in under-nutrition indicators contrasts with the 5–6 percent annual growth in per capita income that has been observed in Sri Lanka since the 1990s. “This is partly attributable to the unequal sharing of economic growth. Most of the benefits derived from this high growth trajectory benefited the non-poor, with a poor trickle-down to the poor.”

Growing inequalities have caused a reduction in the share of income received by the poorest 40 percent of Sri Lankans, from 15.3 percent in 1996-97 to 13.7 percent in 2012-13.