Sunday, 16, June, 2024

Until spring 2024, Uzbekistan was one of the few countries in the world that lacked internationally comparable poverty estimates. For decades, the country had measured poverty in a way that could not be directly compared with the rest of the world, making it hard to understand how effective Uzbekistan’s progressive social and economic reforms were.

But starting in 2017, when the country began participating in the International Comparison Program – a global effort to develop comparable price data managed by the World Bank under the auspices of the United Nations Statistical Commission (UNSC) – Uzbekistan began overhauling its poverty measurement system.

Then in 2021, with assistance from the World Bank, the Government of Uzbekistan adopted a new methodology and set an ambitious national target to halve the poverty rate by 2026. This, taken with new household survey data now available, allows progress on poverty reduction in the country to be assessed by national standards and international ones.

New data reveals the dramatic poverty reduction achieved by Uzbekistan

The World Bank’s latest update of global poverty numbers, published in March 2024, includes new data from Uzbekistan for the first time, putting the country’s poverty reduction story in a global and regional perspective. The World Bank monitors global poverty using three different global poverty lines that apply to countries at different levels of economic development.

Uzbekistan, a lower-middle income economy, has successfully reduced its poverty rate – the share of the population living below the poverty line – to 5 percent by 2022 at the lower-middle income poverty line ($3.65 per person per day in 2017 PPP). 

With Uzbekistan’s aspiration to become an upper-middle income country by 2030, the upper-middle income (UMIC) poverty line ($6.85 in 2017PPP) is increasingly more relevant for assessing progress in poverty reduction in the country. And the new data reveal the story of sustained progress in poverty reduction (Figure 1).

The poverty rate of Uzbekistan at the UMIC poverty line is estimated to have been slashed from 36 percent in 2015 to 17 percent in 2022, falling at a faster rate than for the rest of Europe and Central Asia, which saw a decline from 13 to 8 percent during the same period. 

Rising household incomes have driven poverty reduction

What factors drove poverty reduction in Uzbekistan? To understand this, we need to look at the national poverty line, which provides a more precise metric of welfare based on the country’s context and can be unpacked to understand the drivers of poverty reduction.

This national welfare standard is new, but ever since it was established in 2021, poverty has fallen from 17 to 11 percent in 2023 – with a larger decline in rural areas (8 percentage points/pp) than in urban areas (4 pp) (Figure 2) - which meant close to 1.6 million people moved out of poverty. At this rate, the government looks set to succeed in its target of halving poverty between 2021 and 2026.

Household income growth has been the main driver of poverty reduction. Increased wage income accounted for 60 percent of the poverty reduction progress achieved. The next biggest driver was social benefits as the government has modernized and expanded key programs, with improvements in pensions having the largest positive impact amongst the different social benefits that households receive. 

But rising inequality gives cause for concern

Amongst all this good news, a note of caution. Poverty reduction would have been even stronger were it not for a simultaneous trend of rising inequality over the period. Income growth has been skewed in favor of the richer segments of the population.

For example, for the most recent period (2022-2023), the poorest 10 percent saw their incomes grow by 6 percent. However, for the richest 10 percent, incomes grew by more than 30 percent. The Gini Coefficient, a measure of income inequality, rose from 0.31 in 2022 to 0.35 in 2023. If not for rising inequality, poverty could have declined by 5.5 pp instead of the 3.1 pp decline during this period (Figure 3).

Sustaining Uzbekistan’s rapid pace of poverty reduction will necessitate additional efforts from the government to enhance the productive capacity of poor households. The data show that poorer households suffer from several disadvantages. They are less likely to be employed, more likely to have lower levels of education, and have more dependents. Reducing gaps in these dimensions between households will be critical for tempering the rise in inequality and further reducing poverty in Uzbekistan.

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