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Inclusive and equitable growth for poverty reduction in Africa

By Babatunde Omilola - posted Wednesday, 20 July 2011

Globally, we have had unprecedented economic and financial crises in the recent past adding greatly to the vulnerabilities already caused by the previous protracted and especially difficult food and fuel crises. These back-to-back crises have left poor people, particularly in low-income countries at the mercy of increased price volatility and have given them less access to resources, credit, and social protection. Due to these crises, millions of people around the world have been pushed back into extreme poverty and hunger, making progress towards achieving the MDGs ever more urgent and difficult. The recent crises have demonstrated that it is the world's poorest who often suffer the most from problems not of their making.

The global economy of today is one of stark contrasts: the fragility of the current economic recovery and the complexity of the relationship between economic growth and poverty reduction. In many African countries, simply achieving economic growth is not sufficient to reduce poverty or meet the principal Millennium Development Goal of eradicating extreme poverty and hunger (MDG1). In practice, higher overall economic growth has not always translated into poverty and hunger reduction. Further rigorous analysis is needed to better assess these relationships. For example, a country beginning with high poverty, high inequality, and low investment will have to use more resources to make progress toward MDG1 targets than another country beginning with lower poverty levels and lower inequality. A country can make significant progress toward MDG1 targets without crossing the "halving" threshold. Further, the linkages among expenditures, growth, and poverty and hunger reduction are not direct. Achievement of the MDG1 targets will be more or less effective for each country depending on the quality of its investment and the extent to which growth is pro-poor. In addition, even pro-poor policies might fail to address childhood malnutrition, which would cause the hunger indicator to lag behind the poverty indicator, as is the case of many African countries.

For countries where poverty is wide spread, it will take unacceptably long time for poverty to be reduced through the trickling down of the benefits of growth to the poor. To achieve inclusive growth and poverty reduction, growth must be broad -based and the available resources of a country must be effectively utilised. Therefore, it is important to look at the structure and quality of growth so as to make growth inclusive in terms of broadening both the sources of growth and the benefits of growth. Some of the interesting questions that many African countries need to answer include the following: What does it take to achieve inclusive growth? How inclusive has the remarkable growth that many African countries have been experiencing over the last decade or so been so far? What remains to be done and how could it be achieved?


In terms of policy recommendations and policy measures to ensure inclusive and equitable growth for poverty reduction, a few suggestions are provided below:

Focus on long-term "resilience" measures to prevent vulnerability to future crises

In the past few years, global responses to the challenges facing the developing world have focused on short-term coping strategies. Still, more action needs to focus on long-term "resilience" measures to prevent vulnerability to future crises. Such long-term interventions must be sustained for years to come. Although there are clear positive signs of economic recovery, we still have increasing concerns and serious challenges of monitoring targets for development performance, a key component of managing for results. It is important to focus strongly on providing tools, information and in-depth analysis that are required to successfully undertake serious monitoring and evaluation of the progress and impact of global development challenges on poor countries.

A call for quality of financial flows and investments

Governments and development partners will not only need to increase their financial commitments to development in general terms, but will also need to carefully select policy, growth, and investment options that will reduce poverty and catalyze broad-based inclusive economic growth. In addition, there must be strategic focus on the efficiency and quality of investments in order to ensure that allocated funds are being used effectively and are targeted to groups that are not benefiting from growth (such as youths and women) and areas with the highest returns to economic growth (such as agriculture, basic health and education). Crucially, many countries need to avoid inefficient budget execution, which may negatively impact policy planning, design and implementation and make it difficult to attain the goals and expected outcomes enshrined in the MDGs. If investments are maintained during the economic recovery period, many countries can avoid many of the negative effects of slower growth. More importantly, sufficient attention must be paid to the investment needed in the productive sectors, which in the long term (after 2015 deadline of achieving the MDGs) should increasingly enable people and countries to pay for their own development needs. It is also crucial to urgently expand investments for social protection measures, sustainable livelihoods for families and, more importantly, broad-based policies, strategies, and resources. To improve the efficiency of investments, implementation issues must also be addressed to reform the institutions and processes of development. The good news is that at high-level summits, leaders from countries and development institutions have raised the level of dialogue and public advocacy on the importance of well-defined implementation plans. If these commitments are followed through on, with policy shifts, a new phase of global development through partnerships may be under way.

Pay attention to differences in demographic and socioeconomic groupings when designing policy interventions to achieve inclusive growth


As we move towards 2015, the disparities in the current economic recovery underscore the need to pay attention to differences in demographic and socioeconomic groupings when designing policy interventions to achieve inclusive growth and poverty reduction. Policies should also be conscious of equitable distribution of basic social services (for example, water, sanitation, nutrition, adequate health, education, food security). Political economy issues of the role of power and social groupings (for example, men and women; and rural versus urban groups) in the provision and financing of these services are important. The political processes of resource allocation and of policy implementation need to be understood and applied appropriately. The changing patterns of regional and global integration -- whether through trade, remittances, investments, commodities, financial flows -- or other factors offer a healthy and dynamic innovation for promoting regional and interregional cooperation, including South-South cooperation. Drawing on best practices and maximizing mutual comparative advantages is crucial. This will require tailor-made strategies for each country and the identification of key success stories.

The importance of good governance

The important role of good governance and the creation of an enabling environment are vital and crucial to achieve inclusive growth in most African countries and in creating the capacity to reduce poverty and hunger sustainably. More specifically, a favourable environment that benefits the poor and the vulnerable would include: a supportive macroeconomic framework; a streamlined and transparent legal and regulatory system; adequate physical and social infrastructure, human capital; and the rule of law.

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About the Author

Dr. Babatunde Omilola is the Regional Practice Leader for Poverty Reduction and the achievement of the Millennium Development Goals (MDGs) with the United Nations Development Programme (UNDP) Regional Service Centre for Eastern and Southern Africa.

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