Profile and Dynamics of Poverty and Inequality, 2009

The Kyrgyz Republic:

Profile and Dynamics of Poverty and Inequality, 2009

Executive Summary

The Kyrgyz Republic is a low-income country with high levels of poverty, using either international or national poverty lines. An international comparison of the Kyrgyz Republic’s selected human development indicators shows that it is in a better position than other low-income countries but lags behind other developing countries in the ECA region. It appears that the Kyrgyz Republic is on track to achieve the majority of the Millennium Development Goals (MDGs), with the exception of those for maternal mortality and tuberculosis. In addition, the data show that primary school enrollment rates gradually declined between 1999 and 2009.

The World Bank estimates that the headcount incidence of absolute poverty was 31.7 percent in 2009, based on the national poverty line.[1] This translates to 1.7 million people in the country living below the poverty line. The extreme poverty rate was 3 percent in the same year. The poverty gap, which measures the depth of poverty, reached 6.1 percent and appears to be moderate.

Poverty had a strong sectoral and regional dimension. As in other agriculturally based economies, rural poverty dominated. The proportion of the rural population living below the poverty line reached 37.1 percent versus 22.0 percent for the urban population. In regional terms, the oblasts with the highest poverty rates are Issyk-Kul, Naryn, and Osh. In absolute terms, the largest numbers of poor are in Osh, Jalal-Abad, and Issyk-Kul, reflecting the large population base in those oblasts. As expected, the risk of poverty increased with the altitude zone and was reflected in higher poverty rates in high mountainous areas.

This report finds that household characteristics matter for poverty status. Poverty rates are high in larger households. Other demographic variables (age, dependency ratio, demographic and family composition, etc.) also play a significant role in defining the poor. By contrast, the correlation between the gender of the household head and poverty is unclear. It appears that for absolute poverty the incidence of male-headed households is higher while for extreme poverty, female-headed households predominate.

Internal migration (mainly from rural to urban areas) seems to be one of the strategies households pursue to get out of poverty, many doing so in search of better job opportunities. Yet there are no significant differences between poor and nonpoor households in the distribution of the unemployed. Predictably, however, poverty is indeed higher for unemployed heads of households. The survey data show that lack of education continues to be an important factor explaining poverty: the headcount poverty rate is two times higher for illiterate household heads than for those with technical professional degrees. In general, the poor and the extreme poor stop schooling after 16 years of age. The high cost of education may be part of the reason: the poor spend seven times less than nonpoor on education in absolute terms.

The importance of sources of income varies by group. The extreme poor are less reliant on income from employment and more reliant on pensions and social benefits than either the poor or the nonpoor. This underlines the importance of the social benefit system for reducing poverty in the most destitute group as well as the need to further improve the effectiveness and targeting accuracy of the social safety net.

In terms of poverty dynamics, the report shows that the reduction of poverty between 2006 and 2009 by 29.3 percentage points was associated with moderate growth rate in GDP, which averaged 5.7 percent in those years. In fact, the poverty rates to a large extent reflect changes in GDP, total consumption, and remittance growth rates. Thus, in 2009, when the country suffered from the impact of the financial crisis, the poverty rate stagnated, marking the end of the long declining trend in poverty observed in previous years. For the period under analysis, however, the extreme poverty rate continued to decline, albeit at a slower pace, despite stagnation in the absolute poverty trend.

The reduction in absolute poverty was experienced more in urban areas, whereas extreme poverty fell more quickly in rural areas. Similarly, the reduction in absolute poverty was experienced in all oblasts, whereas for the declining trend of extreme poverty there is one exception—Bishkek city, where extreme poverty actually increased from 0.6 percent in 2006 to 3 percent in 2009. The reduction in poverty was different for different oblasts; however one region stands out in terms of the significant pace at which poverty has declined. Between 2006 and 2009, the Jalal-Abad oblast halved the absolute poverty rate and showed considerable reduction in the extreme poverty rate.

The depth and severity of poverty followed the general poverty trends—that is, rapidly declining in the earlier period of high economic growth but stagnating in the later period for reasons related to the impact of the financial crisis and economic slowdown. The most recent growth decomposition of poverty rates between 2008 and 2009 shows that the dynamics in poverty rates in 2008–09 is to a large extent due to the distribution component rather than the impact of growth in consumption.

The trend in inequality was consistent with the trend in poverty rates. The inequality measure stagnated over 2008 and 2009 was after having declined in the earlier period. Overall, the Gini coefficient fell from 31.3 percent in 2006 to 25.5 percent in 2009. That decline was driven mainly by the reduction in rural inequalities; the urban Gini coefficient showed a slower rate of reduction, especially in recent years.

[1] The absolute poverty and extreme poverty lines are terms used by the NSC. They refer to the upper and lower poverty lines.