# **I. Introduction**

Since 2000/01, the NISR (National Institute of Statistics of Rwanda) has conducted five rounds of the Integrated Household Living Conditions Surveys (EICV surveys), with which the poverty trend has been monitored officially. The poverty estimation methodology used in the first three rounds of EICV (EICV1, EICV2, and EICV3) was modified when estimating poverty rates for the fourth round of the survey, EICV4 (see NISR 2015 for details). Due to the methodological change, there has been a debate around the poverty trend between EICV3 and EICV4.

According to the NISR statistics published in 2015, the incidence of poverty declined between EICV3 (2010/11) and EICV4 (2013/14). That said, some researchers, like Reyntjens (2015), argue against it, claiming that poverty had been stagnant or even increased during this period. NISR reviewed these claims and published a detailed report in the following year, NISR (2016), whereby the declining poverty trend was corroborated using global best practices. Nevertheless, the debate continued, and unfounded claims about stagnation in poverty were published in online blogposts and media websites, creating confusion and muddying the primary purpose of welfare estimation and poverty monitoring, limiting timely and relevant policy making. This paper is an attempt to provide theoretical and empirical evidence to help take the next steps in resolving this ongoing debate.

To do this, we first describe the official poverty estimation methodology used in EICV3 and EICV4 in section II. Section III examines the comparability of these estimates using a detailed theoretical framework, which provides the ‘necessary’ conditions for making robust poverty comparisons over time. Applying the framework to EICV data shows a decline in poverty based on the international poverty line. Section IV discusses the poverty trend based on the international poverty line of $1.90 per day per capita. Section V discusses the importance of the various price indices used to arrive at comparable poverty estimates, and section VI revisits the debate on the poverty trend. Section VII concludes.

# **II. Official poverty estimation methodology in Rwanda**

Poverty measurement essentially hinges on two main decisions; (i) choosing a _welfare indicator_ , and (ii) setting a _poverty line_ , which is the minimum value of the welfare indicator that households (or individuals) must have to fulfill their basic food and non-food needs. In most developing countries monetary poverty is measured using absolute poverty lines, which are based on a fixed welfare standard. To make welfare comparisons over time, these poverty lines are updated using price data such that they represent the _same_ purchasing power year after year (Ravallion 1998).

<mark>II.1. The Welfare Indicator</mark> <mark>Welfare indicators are either based on income or consumption.</mark><sup>2</sup> <mark>In Rwanda, as in most developing countries, the welfare indicator is based on aggregate consumption expenditure obtained from EICV surveys. The</mark>

> 2 In most developing countries, consumption expenditure is used as a proxy for income, since income is difficult to measure due to the size of the informal economy, large agricultural sectors and seasonality in the measurement of income (see http://siteresources.worldbank.org/INTPRS1/Resources/383606-1205334112622/5467_chap1.pdf).

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