Following considerable progress in reducing poverty in recent years, controlling inequality is starting to become a major challenge for Sri Lanka, Hayashi said. “Inequality is becoming a larger issue for Sri Lanka because in general, upper middle income countries have the highest inequalities. Gini coefficient is the indicator for inequality and a score of .4 is already quite high for Sir Lanka. There is pressure for inequality to increase in the future, so controlling this is another challenge for Sri Lanka,” he said. Hayashi said that the ADB is not yet using alternative methods such as the Palma Ratio to measure inequality.
The method used to measure the Gini coefficient is overly sensitive to wealth movements in the middle income range, and less sensitive to wealth movements in the more crucial ranges at the extreme bottom and top of income earners, which alternatives such as the Palma Ratio addresses. Therefore inequality in Sri Lanka could be worse than the Gini Index portrays. When questioned on this, Hayashi said that further studies will have to be undertaken.
He noted that regional inequality between the Western Province and other provinces was the major concern.