July 2000

Poverty goes beyond lack of income. It encompasses economic, social, and governance dimensions. Economically, the poor are not only deprived of income and resources, but of opportunities. Markets and jobs are often difficult to access, because of low capabilities and geographical and social exclusion. Limited access to education affects the ability of the poor to get jobs and to obtain information that could improve the quality of their lives. Poor health due to inadequate nutrition, hygiene and health services further limits their prospects for work and from realizing their mental and physical potential. This fragile position is exacerbated by insecurity. Living in marginal conditions with no resources to fall back on, shocks become hard or impossible to offset. The situation is made worse by the structure of societies and institutions that tends to exclude the poor from participating in decision-making over the direction of social and economic development.

Progress and prospects

The last century witnessed major improvements in the health and education status of many, reflected in declining infant mortality rates, increasing life expectancy, and higher literacy rates. However, 1.2 billion people are estimated to still live on less than $1 per day, and almost 3 billion on less than $2 per day. 110 million primary school age children are out of school, 60 percent of them girls. 31 million people are infected with HIV/AIDS. And many more live without adequate food, shelter, safe water, and sanitation.

Poverty in the midst of plenty is one of the central challenges in today's global economy and society. Fighting poverty is both a moral imperative and a necessity for a stable world. In recognition of this, the international community adopted International Development Goals during the 1990s. However progress in meeting these goals has been slow and uneven across regions, while some parts of the world have retrogressed, with poverty increasing in countries of the former Soviet Union, and mortality rates deteriorating in Africa due to the HIV/AIDS epidemic. If trends of the past decade continue or worsen, the International Development Goals are not likely to be achieved. The global community needs to make a concerted effort to accelerate progress and more effectively address the causes of poverty at country and global levels.

Actions at the country level

The lives of poor people are most affected by actions at the country level. Countries need to get on a path of sustainable, pro-poor growth that provides opportunities for all, a voice in decision-making and protection from shocks.

Achieving sustainable, inclusive and broad-based growth and opportunities requires a sound macroeconomic framework. Policies that promote low inflation, realistic and stable exchange rates, reasonable fiscal deficits, effective integration into the global economy, and private sector activity, are all needed. Investments in the physical and financial assets of poor people are also necessary -- adequate schooling and skill development, secured nutrition, preventive health care, infrastructure and credit.

Providing a voice in decision-making means pursuing the involvement of poor people and society at large in policy/program design and implementation. Transparency and accountability contribute to a well-informed public debate and result in better policies with wider support. Broad participation can help improve the management of public expenditures by pushing shifts in resources toward priority areas and avoiding unproductive spending, such as generalized subsidies and excessive military spending. Broad participation may also lead societies to confront issues of social and economic inequality that are obstacles to poverty reduction.

Providing social protection to the poor requires mechanisms to mitigate the impact of local and national crises and to reduce vulnerability. These include subsidies targeted to the poor, public works and "food for work" programs, sustainable, well-designed pension, unemployment and social assistance programs, and severance payments to those laid off during civil service retrenchment or public enterprise reform.

Actions at the global level

At the international level, factors such as globalization, the volatility of commodity prices, the availability of knowledge, and flows of private and official capital have a powerful impact on poor countries and their ability to reduce poverty. Advanced countries have an important role to play in contributing directly to the fight against poverty, as well as through the role they play in international organizations.

Actions are needed to ensure that opportunities for poor countries are expanded. Industrialized countries should strive to sustain steady global economic expansion to provide the demand conditions for developing countries and to open their markets more completely to imports from developing countries (especially in agriculture, labor-intensive manufacturing and services), within a rules-based trading system. Donor countries should strive to increase aid flows to the poorest countries and to complete financing for the enhanced HIPC initiative -- with aid increasingly targeted at country-driven, poverty-oriented programs. The international community should provide increased support for international public goods, notably for research and dissemination of vaccines for communicable diseases such as HIV/AIDS, TB, and malaria. It should also assist with agricultural advances for tropical and semi-arid conditions. The private sector and research institutions also have a crucial role to play in devoting talent and resources to solving the problems facing poor countries.

Actions are needed to promote global financial and economic stability and help poor countries deal with shocks. Working jointly with governments and the private sector, the International Financial Institutions (IFIs) play a key role in strengthening the international financial architecture to reduce volatility, and to provide mechanisms for managing financial crises when they occur. The international community should also continue to search for ways to prevent armed conflict, and support countries emerging from strife. This calls for substantial technical and financial assistance for demilitarization, demobilization, and rehabilitation, and the restoration of domestic institutional capacity. The industrial countries further need to ensure greater coherence and transparency in their own policies on arms sales.

Actions are also needed to empower poor countries. Development assistance and debt relief must be provided in ways that strengthen ownership and effectively help poor countries help themselves. Donor countries are progressively linking all their assistance to country-driven strategies to reduce poverty, developed with the engagement of civil society, private sector agents, NGOs, donors, and the international community. Poor countries should be given more of a voice in international forums to ensure that international priorities, agreements and standards reflect their needs. IFIs, and other international organizations such as the WTO, should continue to make their strategies and actions fully transparent, and to hold regular dialogue with representatives of civil society, in particular organizations representing the poor.

Role of the MDBs and the IMF

IFIs, including the Multilateral Development Banks and the International Monetary Fund, have a central role to play at the country level, where they provide policy advice, and financial and technical support for long-term country-driven programs, as well as support to deal with shocks. The institutions also provide advice that helps governments create a sound environment for private sector development. They have a key role to play at the global level where they can help shape international rules and ensure the provision of global public goods. These are complex tasks that will require even greater collaboration and stronger partnership than in the past. Poverty reduction strategies now being prepared by countries are providing a framework for enhanced collaboration between governments, IFIs and other external agencies, and civil society.

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