New Poverty line and new numbers at the WB

​New Poverty line and new numbers at the World Bank

October 2015

Jane Carter, Gender & Social Equity Coordinator, HELVETAS Swiss Intercooperation

No doubt timed to follow the announcement of the UN's ratification of the SDGs, the World Bank released a report on 4 October stating that extreme poverty will be reduced to below 10% of the world's global population by the end of this year. This is in line with a commitment made back in April 2013 by the Bank's President, Dr Jim Yong Kim, to reduce extreme poverty globally to no more than 3% by the end of 2030. The rhetoric now goes further, to ending extreme poverty by that date.

With the announcement of a reduction in extreme poverty comes another: that the definition of extreme poverty has been revised upwards, from living on US $ 1.25 or less per day, to US $ 1.90 per day. This at first sight seems paradoxical. The reason for the new figure apparently lies in the manner of calculating PPP, Purchasing Power Parity, as well as new country-level data on living standards. It may be recalled that the Asian Development Bank also revised the way that it calculates extreme poverty in 2014, coming up with the figure of living on US $ 1.51 per day or less. The revisions made over the years are not due to inflation; essentially the banks have recognised that the vulnerability and particular difficulties faced by people living on tiny amounts of money warrant a higher cut-off point in defining extreme poverty. 

This noted, the World Bank is confident that the number of people living in extreme poverty – using its new definition - will have fallen to 702 million, or 9.6% of the global population, by the end of 2015. Nevertheless, it recognises major geographical differences – differences that have shifted over time. Thus in 1990, East Asia accounted for half of the world's people living in poverty (as then defined), with some 15% living in Sub-Saharan Africa. In 2015, this is almost exactly reversed, with Sub-Saharan Africa accounting for half of all people living in poverty around the world, and East Asia for 12%. The bank notes "deep concern" over the growing concentration of poverty in Sub-Saharan Africa, observing that this is deepening and becoming more entrenched in countries that are either ridden by conflict or heavily dependent on commodity exports. It also makes a clear link between poverty and rapid population growth, a topic further explored in the recently released Global Monitoring Report for 2015/16, produced jointly by the World Bank and International Monetary Fund.

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