Eritrea Poverty Assessment

Eritrea FY96 PA
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Eritrea is located in the northeastern part of Africa. The overall size of the country is 125,000 square kilometers and the population is estimated to be between 3 and 3.5 million, including about a half a million refugees in Sudan. Thirty years of war prior to liberation in 1991 and neglect and deprivation by the Derg regime devastated the country, and decades of lost opportunities for growth have made Eritrea one of the poorest countries in the world, with a per capita income of about $160-$190.

Poverty Profile There has not been a full-fledged consumer expenditure survey in Eritrea yet. The income poverty measures presented here are based on a Rapid Appraisal Survey conducted in 1993–94. Because the survey was conducted so soon after the war, when conditions were still unsettled, the results must be considered preliminary. About 50 percent of households in Eritrea were estimated to be poor in 1993–94, i.e., to not have sufficient income or endowments to consume a minimum requirement of 2000 calories per capita per day, plus a few other essential nonfood commodities such as clothing and housing. In that year because of drought, 70-80 percent of the households recieved food aid; without it, 69 percent of the population would have been unable to consume the minimum basket of food and other essential commodities. More than half of the poor live in the rural areas of the highlands, the rest in the rural low lands (about 30 percent) and in the urban areas. Crop cultivation and animal husbandry account for 60 percent of rural incomes although, in the lowlands, livestock income is more important. The rest is obtained from wage, self-employment, and trade.
The nonpoor have 3-4 times higher income from crops and livestock: the difference is partly explained by the availability of water and partly by the ownership of cattle, which provide both animal traction on the farms and income from livestock products. On average, the nonpoor rural household owns seven livestock units compared with two units by poor households. The really significant difference between the poor and nonpoor, however, is in income from trade and self-employment. On average, the nonpoor rural household gets eight times as much income from these activities as the poor household does. Therefore, in this predominantly rural country, opportunities for and the ability to participate in trading and service activities appear to make a critical difference. In urban areas, the poor are likely to be concentrated in low-skill occupations that require little capital, mainly in the nonformal sector.

Eritrean communities have a higher than usual share of households headed by women — about 45 percent — as a result of many long years of war that killed able-bodied men. The proportion of female-headed households that is poor is not different from that of male-headed households, partly because women have had more secure access to land and other productive assets than is common elsewhere in developing countries. Communities and extended families have also provided support. The war of liberation involved many women actively, increasing their independence and participation in public and community affairs.

Income poverty as described above is only one aspect of poverty. Social indicators tell the other part of the story. Eritrea's social indicators are low: life expectancy is about 46 years (compared with the average of 52 years for Sub-Saharan Africa), and infant mortality of 135 per one thousand live births (the average for Sub-Saharan Africa is 93). Furthermore, there are significant regional variations in all social indicators. There is a clear urban bias. In Asmara and Hamasien, the net primary school enrollment rate is over 40 percent, but is between 15 percent and 25 percent in most rural areas. In some parts of the lowlands, it is less than 10 percent. Child mortality is about 100 per thousand births in Asmara but about 300 in Sahil and Denalia. Distance to and lack of facilities are the major determinants of these regional differences.

Even in the few years since independence, access to facilities has improved after years of neglect. (Not a single school or health clinic was built during 1976–91.) Gross primary school enrollment increased from 36 percent in 1991 to nearly 50 percent in 1995. The share of children being covered by growth monitoring and nutrition programs increased from 7 percent in 1993 to 24 percent in 1994, and the child immunization rate has increased from from practically zero at independence to 25 percent of children under one year of age. It will take a few years of sustained effort for commonly monitored indicators such as infant and child mortality and life expectancy to reflect improved health status. But a begining has been made.

Discrimination in schooling on the basis of gender is generally absent in the cities and in the highlands; overall, the share of girls in primary school in the total is 44 percent. In most parts of the lowlands, overall enrollment rates are too low to indicate whether there is a gender bias or not. However, the rate of repetition is much higher for girls, and the rate of continuation is lower. Because of this, it takes two years longer for girls to graduate from primary school. Girls also do not perform as well on achievement tests: while 80 percent of the boys who appeared for the Grade 7 national examination in 1995 passed, only 56 percent of the girls did.

The unsettled conditions created a large number of refugees who lived mainly in refugee camps in Sudan. It is estimated that, even after spontaneous return and the formal repatriation and rehabilitation of 25,000 people, there are still about 400,000 refugees left in Sudan. As much as 25-40 percent of refugee households are female headed and all are quite poor.

Development Strategy and Poverty Reduction
With the return of peace in 1991, following three decades of war to gain independence, Eritrea has embarked upon the road to development and poverty reduction. In a short period of time, it has made significant progress in restructuring institutions, establishing key elements of a functioning government, eliminating a number of restrictive policies from the colonial period, and expanding investment in human capital. As a result, economic growth averaged eight percent in the last two years after contracting by over one percent per annum during 1985–93. Although, in some ways, Eritrea is still operating in a post-conflict reconstruction phase, it is eager to move ahead to the next phase of development. The goal of poverty reduction is implicit in its development policies and programs that emphasize economic growth and the development of human capital.

Because of the small size of the Eritrean economy, significant economic growth and transformation can only take place if Eritrea exploits all opportunities for export of goods and services, both traditional and new, and is open to foreign investment. In this effort, Eritrea can take advantage of its strategic location in the northeastern part of Africa, a long history of sea-trade through the two ports of Masswa and Assab, a past industrial tradition, and the skill, knowledge and wealth of its expatriate community. It should continue to implement and deepen its policies towards a liberal trade regime, the promotion of foreign and domestic investment, and the maintainence of a pragmatic exchange rate policy. It should also rehabilitate critical port and road infrastructure.

Many of Eritrea's new exports (fruits and livestock products) could derive from agriculture. Moreover, the fact that 80 percent of the poor in Eritrea live in rural areas and depend on agriculture suggests that increasing agricultural production and productivity will have a widespread impact on poverty. A chronic dependence on food aid is risky. Even in a good agricultural year, about half of Eritrea's food consumption is from food aid. While food self-sufficiency at any cost is not the right objective for Eritrea, to the extent that agricultural production can be efficiently increased, it will make an important contribution to the income and food security of the poor.

The data base of Eritrean agriculture is, at this time, limited. However, it is estimated that there are significantly large tracts of sparsely populated land available for rainfed development in the southwest lowlands. Private development of these lands through granting of leases is probably the best option for increasing agricultural production in the short to medium term. However, it will be neccessary to plan this expansion carefully since these lands are grazing grounds for animals owned by pastoralists and agro-pastoralists and the rivers provide water for their animals as well. A comprehensive land capability and land use plan is neccessary. Water is not plentiful in Eritrea although a full assessment can only be made after the Water Resources Study currently ongoing is completed. The expansion of small irrigation microdams and wells, the testing of improved crop varieties, and the selective introduction of fertilizer where rainfall patterns justify its application, are the other elements of an agricultural strategy. Since livestock generate considerable income and serve to cushion the impact of a drought, the foremost objective of a livestock policy should be to protect the national herd from major epidemics. Beyond this, developmental strategy has to be differentiated according to agroecological zones: provision of water points and market information, introduction of forage in farming systems and development of dairying around market towns are options that deserve careful study and experimentation.

Social Sector Strategies
The average attendance at health facilities — less than one visit per person per year — is low, even compared with the average of 1.5-2 visits per person per year for Sub-Saharan Africa. Public spending on health is less than two dollars per person, compared with nearly five dollars on average in Sub-Saharan Africa. The main health problems faced by Eritreans are amenable to primary health care interventions — the top five diseases in terms of life-years lost being perinatal and maternal diseases, diarrhea, respiratory infections, tuberculosis, and malaria. In addition, the prevalence of HIV infection is higher than thought earlier, presently occurring mainly in the urban centers.

The strategy for improving the health status of Eritreans must, therefore, concentrate heavily on improving access, particularly in the rural areas and the lowlands, and on increasing public spending to provide quality care that people will demand. The government has rightly adopted primary health care as the main objective, and the number of facilities and coverage of programs have increased rapidly. It has also instituted a schedule of user charges (with exemptions for those in need of them), collections from which should complement the health ministry's resources. But analysis indicates that many important primary health programs, such as malaria and HIV prevention, are inadequately funded. At the same time, public spending on hospitals is higher than justified by the rate of utilization of these facilities for in-patient care. Adequate funding of primary health programs should be assured, and any expansion of hospitals should be minimal, based on cost-benefit analysis and designed to sustain basic health services.

As in the case of basic health, the problem facing basic education is primarily a lack of access, particularly in the rural and lowland areas. The rehabilitation and building of new schools (which the government has already begun), flexibility regarding the size, location, and capacity of schools, and the provision of adequate recurrent expenditures for teachers, books, and teaching materials are all important for ensuring a good-quality basic education for all children. A second priority is the provision of secondary and technical education. Because of fewer social benefits, there is more scope for cost recovery at these higher levels of education, a principle that the government has accepted. The shortage of technical skills is evident in both the public and private sectors. The experience worldwide is that vocational training institutions in the public sector are generally ineffective in gauging labor market needs and responding to changes quickly. But Eritrea's special conditions after three decades of war, during which little skill could be accumulated and where the private sector is in a nascent stage, may require some innovative approaches. Therefore, in the first instance, it may be necessary for the government to invest in a few new vocational centers and, at the same time, test other approaches that involve the private sector so that a more appropriate strategy can be developed in the medium term.

Special Issues
The government's strategy for the distribution of food aid has recently undergone a change in the right direction. Recognizing the disincentive effects that free food aid was having on incentives to produce and to work, it has decided to monetize food aid and use the proceeds to provide cash assistance to those who are truly in need and cannot work. Many implementational details of the monetization program are still evolving, but it is important to focus attention on a few critical parameters. First, the price at which the food is monetized and sold to consumers should cover the (notional) cost of imports, as well as the costs of transportation and handling, i.e., on average, it should be close to the import parity price. Otherwise, monetized food will have a similar disincentive effect as free food aid. Second, large-scale trading activities by a parastatal should be avoided; it has been the experience of other countries in the region that such activities are financially costly and that costs are rarely fully recovered, resulting in large subsidies from the budget.

The reintegration of nearly half a million refugees will be a challenging task. Many have returned spontaneously but, for the most part, are waiting to be repatriated. In a pilot phase, the government has rehabilitated 25,000 refugees on nine sites in the southwest lowlands. Based on the lessons learned and the experience gained, the government expects to repatriate the rest of the refugees in the near future.

A Land Reform Act was enacted with the purpose of ensuring all Eritreans equal access to land. The new law makes the state the owner of all land and provides lifetime (and inheritable) usufruct rights to all Eritreans over the age of 18. It replaces a variety of complex local systems of land tenure, some of which may have reduced incentives for improvements to increase productivity. The implementation of the new law on a nationwide basis has yet to begin and, at present, the allocation of land for housing in peri-urban areas is the main concern. Because traditional land holding and tenure systems in Eritrea have been relatively equitable, the preoccupation with urban issues may not adversely affect poverty. However, uncertainty regarding the pace of reform may continue to discourage on-farm investment, and the government needs to be aware of this possiblility.

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Monday, 2 December 2013

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