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Kazakhstan: Challenges and Achievements in Poverty Reduction Sarosh Sattar The World Bank May 4, 2005 Outline of today’s presentation Changes in poverty over time Characteristics of the poor Linkage of poverty and economic growth Access to services Social Safety Net Conclusions 2 Changes in Poverty Trends in aggregate poverty National Poverty Trends 45 120 40 100 30 80 25 60 20 15 40 (in '000 tenge) (in % of populationa) 35 10 20 5 FBS HBS WB 2004 2003 2002 2001 2000 1999 1998 - 1997 - GDP per capita Sources: World Bank and National Statistics Agency. Note: NSA poverty estimates are based on Family Budget Survey (FBS) and Household Budget Survey (HBS). WB refers to World Bank estimates based on Household Budget Survey. 4 What averages can hide: Rural – urban poverty differentials Poverty Rates in Rural Areas and Cities 25 (in percent) 20 15 10 5 0 2001 Rural 2002 Small cities Medium cities 2003 Large cities Source: World Bank staff computations based on HBS 2003. 5 Oblast level poverty rates Oblast Poverty Rates in 2003 25 22 22 South-Kaz 26 Jambyl (in % of oblast population) 30 20 20 16 Kyzylorda Aktobe Kostanay Almaty 11 Atyrau 10 East-Kaz 8 9 Akmola 7 North-Kaz 6 Pavlodar 4 Mangystau 1 4 West-Kaz - 1 Astana City 5 Almaty City 10 9 Karaganda 15 Source: World Bank staff estimates based on Household Budget Survey (NSA). 6 …But poverty is multi-dimensional and widespread Consumption Housing 6% 5% 18% 1% .4% 2% 5% Education Poor=37% Source: calculations using KHBS 2003. 1/ The people over 15 who at most completed primary education 2/ The housing poor are those who live in crowded conditions (with less than 6 square meters per person) or take water from public water pumps or public wells that located more than 100 meters from their dwelling, or use of water from a spring, lake, pond, or river. 7 Characteristics of the poor Prevalence of poverty by age group (in percent of age group) Poverty Rates by Age Group 25 20 15 10 5 0 0-4 5-9 10-14 15-19 20-24 25-34 35-44 45-54 55-64 65-74 75 + (in years) Source: World Bank staff computations based on HBS 2003. 9 Some correlates of poverty Household size Average number of children Average number of prime-age adults Average number of elderly Households with children <6 years (%) Dependency ratio among households with any prime-age adults Headed by females (%) Source: World Bank staff estimates based on HBS 2003. Bottom 6.3 2.7 3.2 0.5 Top 3.1 0.7 1.9 0.5 Ratio of Bottom/Top 2.0 3.9 1.7 1.0 49 1.2 30 12 0.7 55 3.9 1.7 0.6 10 Escaping poverty The probability of being poor decreases if Urban resident in large city Head of household is employed Fewer children Small household size Higher education degree Own assets such as land or livestock 11 Poverty and Economic Growth International Comparison of Poverty International Comparison of Poverty and Income (Share of population below poverty line of $2.15 (PPP) 16,000 14,000 12,000 10,000 Russia 8,000 Kazakhstan 6,000 4,000 2,000 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Poverty Rates using $2.15 (PPP corrected) GDP per capita PPP Power (GDP per capita PPP) Sources: World Bank staff estimates and World Development Indicators. 13 Poverty is correlated with the level of economic development—usually Oblast Poverty and Income Levels Poverty in % of oblast population 30 25 20 15 10 5 - 200 400 600 800 1,000 1,200 Value-added per capita in '000 tenge Non-oil Oil Power (Non-oil) Source: World Bank staff estimates based on HBS 2003 and national accounts data from NSA. 14 Poverty reduction and growth in oblasts Economic Growth and Reduction in Number of Poor, 2001-2003 (in % change in number of poor) 40 20 0 -20 - 10 20 30 40 50 60 -40 -60 -80 -100 (in % change in average consumption per capita) Decrease in number of poor Linear (Decrease in number of poor) Source: World Banik staff computations based on NSA national accounts and HBS 2001-2003 data. 15 Human Development Life expectancy rates indicate a crisis Europe and Central Asia: Life Expectancy and Income 85 (in number of years) 80 75 70 Kazakhstan 65 60 55 50 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 GDP per capita in US$ PPP-corrected Source: World Development Indicators. 17 Infant mortality rates are correlated to poverty Poverty and infant mortality rates by oblast 40 Poverty rates (in %) 35 30 25 20 15 10 5 0 10 12 14 16 18 20 22 24 26 Infant Mortality Rates Source: World Bank staff estimates based on data from MOH and NSA (2002). 18 Education: School Dropouts Secondary School Dropouts (in % of age cohort) 25.0 20.0 15.0 10.0 5.0 0.0 18-22 23-27 Male Female All Source: World Bank staff computations based on HBS 2003. 19 Under-utilization of human capital (in percent of age and sector cohort) Unemployment rates by age and sector 25 20 15 10 5 0 20-24 25-29 Male Urban 30-39 Female Urban 40-49 Male Rural 50-59 Female Rural Source: World Bank staff computations based on HBS 2003. 20 0 Atyrau Kyzylorda Jambyl Kostanay North-Kaz East-Kaz Mangystau Karaganda West-Kaz South-Kaz Almaty Aktobe Pavlodar Astana City Akmola Almaty City (in % of 18-29 year olds by oblast) Human capital in limbo? Youth: Out of School and Out of the Labor Force 45 40 35 30 25 20 15 10 5 Source: World Bank estimates based on HBS 2003. 21 Access to Services Urban access to two essential services How many don't have access to key services in cities? 66 70 (in % of city's population) 61 60 50 40 28 30 20 20 17 12 10 Large cities Medium-sized cities Piped Water Small cities Sewerage Source: World Bank staff computations based on HBS 2003. 23 Urban access rates for sewerage is correlated with value-added per capita Value Added per capita and Urban Access to Sewerage 1,200 (in % of population) 1,000 800 600 400 200 - 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 (in KZT) Non-oil Oil Power (Non-oil) Source: World Bank staff computations based on NSA national accounts data and HBS 2003. 24 Access to infrastructure services Though the urban poor are less likely to have access to piped water and sewerage in their dwelling than the better off, many of the middle and upper class lack access as well Access to services in urban areas mirrors the general level of economic development for non-oil oblasts Rural sector access to infrastructure services is very low 25 Social Safety Net Three main criteria for success of a poverty reduction program Maximize coverage of the beneficiary group Minimize leakage of benefits to the non-poor Adequacy of benefits in raising people out of poverty 27 Coverage of social protection programs Social Protection Program Coverage (% of quintile receiving benefits) 40 35 30 25 20 15 10 5 0 Old Age Pension Targeted SA Housing Benefit Q1 Q2 Q3 Q4 State Allowances Speacial State Allowances Q5 Source: Staff estimates based on HBS 2002. 28 Poverty rates among program recipients Poverty Rates among Program Recipients (in % of recipients) 50 45 40 35 30 25 20 15 10 5 All SP Benefits Pensions Current Poverty TSA Housing Benefits State Social Allowances Special State Allowances Poverty in absence of program Source: Staff estimates based on HBS 2002. 29 Government financing of social protection programs, 2002 As a proportion of (in %) GDP Social spending Population Total social protection expenditures 5.4 100 Republican budget 4.4 82 Pension program 3.2 59 11.4 State social allowances 0.9 16 5.3 Special state allowances 0.1 3 0.9 Local Budgets Special state allowances Targeted social assistance Housing benefits 1.0 … 0.2 0.1 18 … 5 1 5.9 7.6 Number in '000 Recipients 1,691 792 134 874 1,137 Source: Ministry of Finance and Ministry of Labor and Social Protection 30 Conclusions 1 How to help the poor? Further develop targeted program of cash transfers (TSA Program) Provide basic infrastructure services in sewerage, clean water, and heating Economic development at the oblast level 31 Conclusions 2 Further work to be carried out Why is rural poverty falling relatively slowly? Why has urban poverty fallen so fast? How do the rural poor manage in terms of access to clean water, sanitation facilities, and heating? What are the developments in the demand for education? What are the causes of the low life expectancy rates? 32