Poverty 10X Higher World Bank Says

Associated Press, 19 September 2000, 3:17 p.m. ET

PRAGUE, Czech Republic (AP)—Poverty in countries of the former Soviet Union has increased tenfold since the collapse of communism, the World Bank reported Tuesday.

In its first study of poverty and inequality in Eastern Europe and Central Asia, the international lending institution said it was disappointed its $35 billion in loans to the region have not paved a smoother transition to a free market economy.

“It's clear that in a system where the government is weak, the overall effectiveness of our loans is not, and can't be, as effective as in areas with stronger, efficient governments,” World Bank Vice President Johannes Linn said in releasing the 500-page study at a press conference.

“It's disappointing, and with the benefit of hindsight, we would have done some things differently,” Linn added.

Meeting for the first time in the capital of a former communist country, the World Bank, along with its sister lending organization the International Monetary Fund, hope to showcase the Czech Republic as a former Iron Curtain success story.

But while the Czech Republic is a front runner to join its rich Western neighbors in the European Union, its eastern neighbors are still reeling from the collapse of the Soviet Union.

In the former Soviet states alone, cumulative economic output plunged nearly 50 percent over the last 10 years, while output in other Eastern Europe countries shriveled by 15 percent, according to the World Bank.

All that contributes to a population stuck in unprecedented poverty, with roughly 21 percent living on less than $2 a day level in 1998, compared to only 2 percent in 1988.

Tajikistan topped the list, with just under 70 percent of its people living in poverty. At the other end were the Czech Republic and Slovenia, where less than 5 percent of the populations are poor.

Russia was in the middle of the pack, with roughly 20 percent living in poverty.

“Many in the region weren’t poor 10 years ago,” said World Bank economist Ana Revenga, who co-authored the report. “They had jobs, livelihoods, expectations for pensions, and then had the rug literally pulled out from under them overnight.”

While maintaining the World Bank's loans to the region were still worthwhile, Linn said they would have been more effective had the Bank required more local political participation in the reform efforts and focused more on fostering social safety nets for the poor.

That would have entailed closer work with other non-governmental organizations, Linn added.

In the meantime, the World Bank has fine tuned its lending criteria to refuse loans to countries with high levels of corruption.

“In the end, the government needs to want to make changes, and when that is not the case, then we stop lending,” Linn said. “It's a learning process.”