The rate, severity and depth of poverty increased in Moldova. Commentary by Info-Prim Neo

Experts [Business Consulting Institute (BCI)] finished “The Study concerning rural poverty in the Republic of Moldova in 2005”. According to the results of the research, in 2005, poverty rate increased in rural area by 4.8 percentage points comparing to the last year, reaching the level of 36%, a fact which mostly determined the growth of the rate on national dimension. Besides the growth of its rate, poverty became deeper and more severe. [A doubtful quality of social and economic policies] The GDP growth (7.1%) couldn’t entail the reduction of poverty in rural area at a desirable rate because the share of agriculture, which is the main activity in rural area, is of only 14% from the GDP. On the other hand, neither the GVA of just 1.8% for this sector could be sufficient for producing a reduction of poverty. This situation is also caused by the fact that inhabitants of villages, who mostly have incomes from individual farms, practice agriculture for subsistence and do not effectively participate in commercial exchanges. This is why, as BCI experts assert, economic growth in the actual structure of the economy cannot sufficiently contribute to the reduction of poverty rate in the rural area. The growth of the income differences, most probably led to the increase of the consumption discrepancy, which on the other hand would worsen poverty evaluation indicators. Thus, in 2005, a real growth of consumption and income had been registered. But this happened not for poor people but for reach ones. The greatest contribution to the growth of the poverty rate has been brought by households having their income especially from individual farming and social indemnities, including socio-occupational groups of farmers and employees in agriculture, as well as families having 3 or more children. Thus the poverty in villages can be associated with the agricultural activity and dependence on social indemnities, conclude the authors of the research. In the examined period, in rural area, medium real income per person grew due to the increase of income from paid jobs and social subventions. In the same time the rate of poverty could grow because of reducing incomes from individual farming, in the cases of households having a greater share of income from this source. A significant diminution of income from land renting is obvious, representing another factor which could influence the increase of the poverty rate. The occupation rate in urban area has higher (46.6%) in comparison to that in the rural one (44.5%). Thus, in 1999 agriculture covered 50% of the total employment relations, in 2005, though - only 40.7%. This structural modification is mostly determined by the work force migration processes from the rural area and not by the reallocation of the exceeding work force from agriculture to industry and services. All this factors lead to pressures over the Budget of state social insurances. [Villagers eat, heal and learn poorly] Poor’s structure of the consumption didn’t change very much, although, in general, there can be observed a certain difference between the consumption priorities adopted by the poor and the rest of the population. The greatest differences in this sense have been attested in the case of expenses for education, communal services, clothes and shoes. In the rural area - the poor have insignificantly reduced their consumption of alcoholic beverages, other categories have reduced their expenses for clothes and shoes and all the households considerably decreased expenses for education. Of about MDL 11.5 bln transferred from abroad, only MDL 139 mln become part of the incomes of rural households. Having these conditions it cannot be asserted with enough exactness whether poor households benefit from these transfers or they are poor also because they don’t benefit from these transfers. From the available data it can be concluded that poor categories receive insignificant sums from remittances. Taking into consideration the huge sum of transfers it is thought that their importance in diminishing the poverty rate is considerable. At the same time it can be affirmed that a certain number of persons do not have access to remittances. Respectively, even if the sum of transferred money continues to grow, it will not directly contribute to their saving from poverty. Schooling rates for poor families from the rural area are extremely low and continue to diminish year by year, with the exception of pre-school rate. An explication of this state of affaires can be found in the fact that in villages and small towns, individual households could not pay the expenses for clothes food, school supplies and textbooks. There are special motives for worrying, given the fact that an increasing number of school age children are left under the supervision of neighbours and relatives, because the parents have to work abroad. At the same time, children from villages enter the educational system a certain period later and leave it earlier. Already at the age of 13 the rates of schooling of these children begin to reduce in comparison with their fellows from the city area. This fact obviously influents the quality of knowledge and, as a consequence, the capacity of gaining incomes and building a career, based on the individual aspirations of each person. [Discriminated children and old people] In 2005, the average pension for age limit in agriculture was of 28% of the medium wage in the country and 56% from the existence minimum for pensioners, being smaller than pensions of other beneficiaries from the social insurance system. From the total of expenses for paying pensions in the system of insurances, 50% were expenses for paying pensions to farmers, while their contributions are of 5 %. While, social insurance transfers form an important source of income for individual households, especially for those with aged people, other money transfers had an insignificant effect for the reduction of the poverty. The majority of the allocations are made on the basis of category principles and just a few are directioned on the basis of testing income. The actual system of state social services continues to be poorly diversified. The institutionalization rate in 2005 represented a growth of 4% to the level of 2004, and of 12.9% to that of 2001. The necessity of the development of services with a communitarian emphasis alternative to the institutional ones is obvious. Population from villages pays less attention to the importance of income or alimentation, but puts an emphasis on the state of health. This situation is determined by the fact that the obtainment of income is directly related to the person’s capacity to physical work. As a rule, categorizing persons as poor is not made on the basis of expenses or income but mostly on that of the capacity to obtain income. This is the cause why poor people are appreciated as persons who either cannot or do not want to work, being followed by families in which the consumption is disproportionably greater comparatively to the incomes because of the family structure (families with many children for example). The lack of financial resources contributed to the reduction of the number of attending doctors especially I poor households from the rural area. On the other hand the number of appeals for urgency medical services is increasing. An alarming number of families are considered poor on motives of alcoholism or laziness. [New policies are requested] Experts [Business Consulting Institute] consider that the increase of the poverty rate in villages can be explained by a range of causes. Among the most important ones are the diminution of income from the farming activity, the insignificant impact of governmental policies for creating work places in rural area, the inequitable repartition of the national product, limited access of the population to goods and services as well as the lack of some effective mechanisms of supporting poor people. At the same, there exist methodological problems for the objective evaluation of the poverty in rural area, problems related to the evaluation of the natural consumption, difference between regional prices. It is also a problem to include in the category of poor, of those who realized consumption expenses under the threshold of absolute poverty, but who declared incomes which include these persons in the group of persons richer from their income.