Russian poverty

Doug Henwood dhenwood at
Sun Apr 18 23:34:47 PDT 1999

Financial Times - April 19, 1999

Study puts 30m Russians in harsh poverty By Andrew Jack in Moscow

Up to a fifth of Russians may be living in extreme poverty by next year, the World Bank will warn next month.

The full effects of last August's financial crisis on economic growth and household incomes will continue to worsen this year and will increase poverty to a peak in early 2000 affecting up to 30m people, according to a preliminary analysis carried out by the bank due to be published in May.

It suggests that the worst-affected Russians will not be pensioners but families with children, particularly those living in small and medium-sized towns who have less access either to rural land to grow food or to large cities with alternative employment opportunities.

The World Bank analysis assumes a decline in the size of the Russian economy of 8.3 per cent in the current year - considerably beyond the forecasts of other organisations. It assumes inflation of 60 per cent.

But even its more modest projections suggest a growth of those in extreme poverty to 18.5 per cent in 2000. Extreme poverty is defined as those living on less than half the official subsistence minimum income, which stood at Rbs830 ($35) a month in February.

Reliable statistics in Russia are difficult to compile, with debate over the techniques used and many people reluctant to provide accurate information.

Russia has one of the highest differences in the world - of two-to-one - between the amount people say they spend and the income they claim to earn.

There is also a huge unrecorded "grey economy" of informal jobs that help people survive despite low wages and social security benefits - often paid late - estimated by the World Bank as up to 43 per cent of the Russian economy.

Michal Rutkowski, sector leader of the World Bank's social protection department, stressed that the poorest groups often did not have access to such alternative sources of income.

He added that there was already a trend towards an increase in extreme poverty in Russia well before the August crisis, from 11 per cent of the population in 1994 to 15 per cent in 1997.

Mr Rutkowski said the analysis showed the need for far more detailed targeting of government social programmes on those most severely affected by poverty. The World Bank has already launched pilot projects in three Russian cities and is discussing expansion to a further 25.

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