Although the pace of economic growth in most nations that are World Bank's borrowers has been robust during the last five years, the multilateral financial body's programmes aimed at reducing poverty and lifting people's income levels have hardly borne any fruit, a World Bank watchdog panel said on Thursday.
Impressive advances in the world's most populous countries, India and China, have been at the forefront of the reduction in global poverty, the panel said. This progress notwithstanding, poverty reduction remains a formidable challenge for many bank borrowers, it rued.
The bank's Independent Evaluation Group said that of the 25 poor countries surveyed, only 11 nations showed some signs of reduction in poverty from the mid-1990s to the early 2000s, and the rest of the 14 registered the same levels of poverty -- in some cases even worse than before.
Countries that have posted strong growth have exhibited better policies and institutions than slow growers. The strongest growers have better economic management, as well as better policies for social inclusion than do moderate or slow growers. This indicates that high growth can be achieved alongside policies for social inclusion, the IEG report said.
In a statement, however, the World Bank management rejected the group's assessment calling it 'overly bleak,' arguing that the overall trend is improving in every region except Africa. Bank administrators noted that reducing poverty requires economic growth, something they said the world has been enjoying:
Over the past two years, developing countries collectively grew by about 5 to 6 per cent a year, excluding swiftly developing India and China. Even sub-Saharan Africa has grown by more than 4 per cent annually over the past five years.
The Independent Evaluation Group's Annual Review of Development Effectiveness 2006: Getting Results said: growth is essential for poverty reduction, yet not all growth results equally in improved welfare of the poor.
The report examines how well countries assisted by the World Bank's programmes have fared with achieving growth that led to poverty reduction, and the factors contributing to this result. The following is what the IEG found:
- The growth performance of World Bank borrowers has strengthened over the past five years, but achieving sustained per capita income growth, essential to poverty reduction, still remains a challenge for a considerable number of countries. Only two in five borrowing countries have recorded continuous per capita income growth over the 5 years ending in 2005, and just one in five did so for a full 10 years.
Growth performance has improved, but achieving sustained income growth remains a challenge for many bank borrowers
Source: World Bank 2006
- Countries that have posted strong growth have exhibited better policies and institutions than slow growers. The strongest growers have better economic management, as well as better policies for social inclusion than do moderate or slow growers. This demonstrates that high growth can be achieved alongside policies for social inclusion.
- Economic growth over the past decade has led to substantial poverty reduction in many East and South Asian countries, and more recently in the transition economies of Eastern Europe and Central Asia. This progress notwithstanding, poverty reduction remains a challenge for many Bank borrowers, because growth has remained sporadic and translated into poverty reduction with varying efficiency. High and sometimes worsening inequality has dampened the poverty-reducing effect of growth in a number of countries.
- Strategies aimed only at boosting overall growth may miss opportunities to reduce poverty more effectively. In the countries IEG reviewed where growth did not result in poverty reduction, growth resulted in little job creation and was concentrated in areas where few of the poor could earn their incomes. The bank's assistance in these countries effectively contributed to bringing the countries back on a growth path through improved economic management, but it was less successful in bringing about job-creating growth.
- Strengthening urban-rural linkages and strategies to improve rural productivity require more attention. About half of the bank's Country Assistance Strategies reviewed by IEG over the past four fiscal years concluded that the bank's assistance in rural areas had either not led to satisfactory outcomes or that rural poverty reduction required increased attention.
- To support growth strategies that more consistently translate into poverty reduction, the bank and its partners will need to further strengthen their understanding of what keeps the poor from participating in growth in each country, what prevents growth from reaching particular regions and sectors where the poor are concentrated and how inter-sectoral mobility can be enhanced.
- The bank's assistance has been effective when it has taken a realistic view of borrowers' political and institutional capacity and has focused on well-specified objectives. Almost half of all Bank Country Assistance Strategies reviewed by IEG in the past four fiscal years were found to be overly ambitious in two distinct ways. They either lacked selectivity or they were founded on unrealistic expectations for a reform programme that was not commensurate with the country's institutional capacity and political situation.
- Assistance strategies built on analytical work done in collaboration with local specialists have tended to be more realistic and resulted in better outcomes. Collaborative work also helps enhance local capacity and build ownership of bank-supported programmes.