IMF exposes the lie in PH poverty reduction

IMF exposes the lie in PH poverty reduction
THERE’S a quiet but real debate going on between the International Monetary Fund (IMF) and the Aquino government about the real poverty situation in the country.
At one end, there is President Aquino and Neda director-general Arsenio Balisacan, who claim that the government has succeeded in reducing poverty incidence through its policy of inclusive growth.

At the other end, there is the IMF and its country representative here, who believe that the government’s poverty reduction boast is at best a case of fudging the numbers, by employing a change of formula in computing poverty figures.

In his 2014 State of the Nation Address (SONA), President Aquino made the extravagant claim that three million Filipinos were taken out of extreme poverty in one year. He cited data showing that the poverty rate had been reduced from 27.9 percent in 2012 to 24.9 percent in 2013.

The magical anti-poverty solution, it turns out, is an official change in the computation of income data from the Family Income and Expenditure Survey (FIES) conducted every three years to the Annual Poverty Indicators Survey (APIS).

Economists say that data from these different formulas can’t be compared, because it would be like comparing apples and oranges.

Comparing figures using two different formulas resulted in an instant three million reduction in the number of poverty-stricken Filipinos.

The IMF, in its country assessment report of the Philippines, contends that, contrary to government claims, there has been little inclusive growth in the country and little poverty reduction.

The report says that, with the new formula in use, between 2013 and 2014, poverty rose again by around one percentage point.

The IMF believes that the jobs situation lies at the bottom of Philippine poverty.
“More than a third of the country’s jobs are in the low wage and low skill services sector,” it said.

“The overall lack of more and better jobs is the result of relatively slow economic growth and the country’s incomplete structural transformation, characterized by stunted agriculture and manufacturing, two sectors which typically create substantial number of jobs, in particular for the poor and less-skilled.”

The IMF said the stagnation in real wages in the country has made it difficult for the poor to take advantage of their most valuable asset, their labor, as a means to get out of poverty.

“As a result, out of the 1.15 million annual labor market entrants, as many as 200,000 find a job overseas,” it added.

The IMF report, however, indicated that if the current trend of high growth and poverty reduction continues, the government’s poverty target of 18 percent to 20 percent by 2016 would be attainable and poverty could be eradicated within one generation. “In the Philippine Development Plan (Midterm Update), the [Aquino] government seeks to reduce official poverty incidence to 18 percent to 20 percent by the time its term ends in 2016,” it said.

The IMF was kind enough to say that while Aquino’s target is ambitious, it is not unrealistic.

The IMF noted an encouraging momentum on poverty reduction saying that in 2013, corresponding to the significant decrease in poverty, the bottom 20 percent of the population saw a larger increase in their income, compared to the rest of the population.

“Part of what explains this is the massive growth of the domestic transfers component (which includes conditional cash transfer program) of their total income, which increased by almost 30 percent, compared to only four percent for the rest of the population,” it said.

The IMF said achieving the poverty targets by 2016 would require sustained economic growth at above six percent, while further scaling up and improving poverty-focused programs.

All this goes to show that the Aquino government really has only two weapons thus far in the fight against poverty:

First, the conditional cash transfers (CCT) that are administered by the Department of Social Welfare and Development (DSWD), and have reached stratospheric levels under Aquino after being introduced by then president Arroyo.

Second, the use of a formula shift in computing poverty figures.

In the first, direct government dole outs are used to help families inch out of poverty.

In the second, the government directly massages the numbers so they become more respectable and more manageable.

A great deal more needs to be done to wrestle down the poverty problem. The IMF country assessment report should be must reading for everyone running for president in the 2016 election.

Who knows, they might find there the poverty-reduction program that is absent in their policy agendas today./


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