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WASHINGTON, February 2, 1998 Reaffirming the central importance of poverty reduction and the urgent need to narrow the wide disparities between rich and poor, the World Bank today released a report outlining its strategy for better monitoring, assessment and inclusion of the low-income people who benefit from Bank-assisted projects and programs.
The Poverty Reduction and Economic Management (PREM) Network was recently formed to ensure that the Bank makes the greatest contribution that it can to poverty reduction.
The report, Poverty Reduction and the World Bank: Progress in Fiscal 1996 and 1997, reviews progress in implementation and lays out future directions for the World Bank's poverty reduction strategy.
Despite huge strides in reducing poverty over the past 40 years, 1.3 billion people live on less than $1 a day and almost 3 billion live on less than $2 a day. Moreover, despite overall improvements in such indicators as life expectancy, new sources of concern have arisen. In many countries, certain groups are socially excluded and benefit little from the overall growth process. Bringing these people into the socioeconomic mainstream is the key to achieving sustainable growth in developing countries.
"This challenge of inclusionpromoting equitable access to economic and social benefits of development regardless of nationality, race or gender is the key development challenge today," says James D. Wolfensohn, President of the World Bank.
According to the report, overall developing-country trends show significant progress in reducing poverty, but by region the results are mixed. In East Asia, for example, progress has been enormous in the past with the absolute number of the poor falling from 719 million in 1975 to 346 million in 1995. However, this is likely to stall in the wake of the East Asia financial crisis. The incidence of poverty has also been on a downward trend in the Middle East and North Africa and in parts of South Asia. In India the incidence of poverty fell from 55 percent in the 1950s and 1960s to 35 percent in 1993-94. Yet, while the incidence of poverty in India has fallen, the absolute numbers of the poor continue to rise. In Eastern Europe and Central Asia both the incidence and the absolute numbers of the poor have increased. In Sub-Saharan Africa the incidence of poverty remains stubbornly high, with the people there remaining among the poorest in the world.
The Bank's efforts to help governments reduce poverty include analytical work, policy dialogue, advice, and lending. The report assesses progress in the preparation and quality of poverty assessments and country assistance strategies (known as CASs, these are the overall development programs that the Bank negotiates with client countries). In addition, it reviews the Bank's poverty-targeted lending and analyzes the Bank's work on participation, gender, and poverty monitoring.
From the inception of poverty assessments in fiscal 1989 through the end of fiscal 1997, 94 assessments were completed. These were done in phases and, for 11 countries, "updates" were completed. With the first round nearing completion, these poverty assessments cover approximately 90 percent of the worlds poor. In fiscal 1998, 20 poverty assessments are scheduled (15 countries and 5 updates). The Bank plans to complete the remaining 22 first-round assessments (mostly in transition economies of Europe and Central Asia) and 9 updates by fiscal 2000. An annex in the report reviews all fiscal 1996 and 1997 poverty assessments and presents their summaries.
Poverty-Focused Lending in FY96 and 97
In recent years the Bank successfully stepped up its poverty reduction analysis and lending through a series of early 1990s poverty assessments and the Program of Targeted Interventions, or PTI (a pool of projects that specifically targets the poor that the Bank began tracking in fiscal 1992). According to the report, during fiscal 1997, PTI lending accounted for approximately $4.1 billion, or about 29 percent, of World Bank investment lending, compared with $5.4 billion, or 32 percent, in fiscal 1995 and 1996. For those poorest countries eligible for concessional International Development Association (IDA), lending to PTI projects was 53 percent of investment lending in fiscal 1997, down from 63 percent in fiscal 1996, but about the same as in fiscal 1995. The fall in fiscal 1997 reflects the unusually high level and share in fiscal 1996 which were due to the greater number of large PTI loans (amounts over $350 million) approved that year, and to the decline in aggregate lending in fiscal 1997.
In adjustment operations, both the share of poverty-focused operations and the amount of Bank lending for those operations increased steadily between fiscal 1995 and 1997. Poverty-focused operations as a share of all adjustment operations increased from 52 percent of adjustment operations in fiscal 1995 to 59 percent in fiscal 1996 and 62 percent in fiscal 1997. The amount of lending for such operations in fiscal year 1997 (including structural adjustment loans, sector adjustment loans, and rehabilitation import loans) totaled $2.65 billion. This compares with $2.23 billion in Fiscal 1996.
Country Assistance Strategies
According to the report, to better reach the poor, CASs are now increasingly being designed in ways that are firmly grounded in analyses that take into account how growth-oriented policies and sectoral reforms and investments will affect the poor. Malawi's CAS is a case in point it relied heavily on recommendations from a Bank-funded poverty assessment. Moreover, 120 stakeholder groups contributed to the design of the CAS and helped set priorities for reducing poverty in the country.
Poverty Monitoring and Partnerships
Counting the poor and gathering accurate information on their households and how they live is vital to the Bank's fight against poverty. Such information helps determine how government policies affect people's welfare. To complement quantitative data, participatory techniques, such as those used in beneficiary or social assessments, can yield useful information based on the poor's perceptions, the report states. For example, it was possible to introduce corrective measures during the implementation of the IDA-funded Social Recovery Project in Zambia because participatory mechanisms (beneficiary assessments, focus group discussions and rural appraisals) helped identify several issues that were hindering project effectiveness.
According to the report, major continuing efforts are needed to strengthen governments' commitments to maintaining statistical systems, to providing adequate funding for such systems and to bolstering the local capacity to collect, process, analyze, store and disseminate statistical data. Through two broad efforts the Living Standards Measurement Study and the Social Dimensions of Adjustment Project in Africa the Bank has been supporting programs to improve data quality and increase country coverage in some 70 member countries.
Regional plans for poverty monitoring vary according to countries' abilities' to establish sound statistical systems and adequate data collection methods such systems are strong in East Asia, for example, but uneven in Africa and highly unreliable or non-existent in many countries in Europe and Central Asia. For its part, the Bank in fiscal 1996 and 1997 supported monitoring efforts in many of the key countries eligible for lending from the International Development Association (IDA), the Bank's concessional lending arm that extends credit to the poorest countries.
Stronger partnerships are a central facet of the Bank's current poverty reduction strategy. The recently formed Poverty Reduction Board is the Bank's formal point of contact on poverty issues with all external partners, including UN agencies, regional banks, nongovernmental organizations, bilateral donors, foundations, and other research institutions in all member countries. Activities include analytical work with the United Nations Development Programme and UNICEFs participation in the 20-20 initiative (a multi-donor agreement that aims to ensure that all people have access to basic social services). In addition, the World Bank, the Inter-American Development Bank, and the United Nations Economic Commission for Latin America and the Caribbean are co-sponsoring financial and technical assistance for the Program for Improving the Measurement and Surveys of Living Conditions in Latin America and the Caribbean. The Bank is also involved in the Development Assistance Committee of the Organization for Economic Cooperation and Development, as part of the 21st Century Initiative. This seeks to establish a consensus among the donor community and client countries about the major development goals to be achieved by the year 2015. Among the objectives is cutting the incidence of extreme poverty by half.
Social Safety Nets
The report devotes a chapter to safety net programs, which are meant to complement the World Bank's main poverty reduction strategy of broad-based growth and investment in human capital. Safety net programs are designed to protect people suffering either from a chronic incapacity to work or earn enough income to survive, or from a temporary decline in earnings capacity because of cyclical declines in the economy or other temporary situations. Safety nets include publicly funded health programs, transfer programs targeted to the poor, as well as privately supported coping mechanisms and informal arrangements.
The Bank's portfolio of activities with safety net features cuts across all regions and sectors and falls into two broad categories: projects mainly concerned with safety net components, and adjustment operations with safety net components. Much of the Bank work on safety net programs in economies in transition, where the real value of pensions and other social benefits has declined sharply, has focused on analytical work bearing on restructuring and assessment of options for reform. For example, in Latvia, the Welfare Reform Program (FY1997) seeks to improve the capacity of the government to help localities to target and provide services to the poor and vulnerable in response to their needs during the transition to a market economy.
The Bank's New Approach
Key to the Bank's new approach is the recently formed Poverty Reduction and Economic Management Network. The network has a Poverty Reduction Board that has identified two shifts in implementation strategy:
- A shift from describing poverty to formulating strategies for reducing poverty (with work to be linked primarily to operational strategies in individual countries).
- A shift from counting poverty-focused projects to assessing their impact on the poor (as part of a move toward better evaluation of the impact of lending and projects on household welfare.)
"The World Development Report 2000, the institution's annual flagship research study, will focus on poverty. The WDR 2000 will be highly collaborative and will be a major organizing force for new work in the study of poverty and the goals of social inclusion and more equitable economic growth," says Michael Walton, Director of the Bank's Poverty Reduction Board.