International poverty lines were recently revised using the new data
on PPPs compiled in the 2005 round of the International Comparison
Program, along with data from an expanded set of household income
and expenditure surveys. The new extreme poverty line is set at
$1.25 a day in 2005 PPP terms, which represents the mean of the
poverty lines found in the poorest 15 countries ranked by per capita
consumption. The new poverty line maintains the same standard for
extreme poverty—the poverty line typical of the poorest countries
in the world—but updates it using the latest information on the cost
of living in developing countries. PPP exchange rates are used to
estimate global poverty because they take into account the local
prices of goods and services not traded internationally. But PPP rates
were designed for comparing aggregates from national accounts, not
for making international poverty comparisons. As a result, there is
no certainty that an international poverty line measures the same
degree of need or deprivation across countries. So-called poverty
PPPs, designed to compare the consumption of the poorest people
in the world, might provide a better basis for comparison of poverty
across countries. Work on these measures is ongoing.