Items filtered by date: Thursday, 28 February 2019

The world is making remarkable progress in combating poverty. From 2000 to 2013, the portion of the world’s population living on less than the international poverty line of US$1.90 a day fell from 28.5 % to 10.7 %. That’s about one billion people lifted out of poverty.

In 2000 the United Nations launched the Millennium Development Goals, a coordinated international effort to eradicate poverty and raise living standards worldwide by 2030.

An even more ambitious global effort to eradicate poverty, called the Sustainable Development Goals was adopted in September 2015. This also seems to be producing significant results. An estimated 83 million people have escaped extreme poverty in the first three years after the goals were adopted – between January 2016 and July 2018.

At the same time, there’s been a dramatic shift in the geography of poverty around the world.

Today, extreme poverty is mostly around Africa, where 23 of the world’s 28 poorest countries are found. These countries have poverty rates above 30%.

Poverty projections up to the year 2030 (the end of the Sustainable Development Goals) suggest that even under the most optimistic scenario, over 300 million people in sub-Saharan Africa will still be in extreme poverty. Thus success in poverty eradication under these goals will depend crucially on what happens in Africa.

According to our research, the adoption of the goals in 2000 played a significant part in accelerating the process of poverty reduction in the world. The implementation of antipoverty programmes and poverty reduction strategies in individual countries became a routine part of national development plans. But, there was considerable disparity in how different countries responded to the development goals as well as in their capacity to implement these plans.

In the early 1990s, African countries such as Nigeria, Lesotho, Madagascar, and Zambia had similar poverty levels to those of China, Vietnam and Indonesia. Yet, this group has been successful in reducing poverty, while the African countries haven’t.

So, why this disparity and how can poverty reduction in Africa be accelerated?

Poverty trends

We looked at poverty trends in the developing world between 1990 and 2013. Using standard income poverty measures expressing the part of the population living on less than $1.25 and $1.90 a day, we found that poverty tended to fall faster in more poverty-ridden countries.

Good news? Yes, but such progress, although significant, doesn’t imply that the end of poverty is in sight everywhere. For example, if trends continue in a poverty-ridden country such as Mali, where 86.08% of people were living below $1.25 a day in 1990, it would take about 31 more years to eradicate extreme poverty altogether.

And, even a much less poor economy like Ecuador (where 6.79% people lived on less than $1.25 a day in 1990) is predicted to take about 10 more years to eradicate extreme poverty altogether.

State capacity

Our research identifies a crucial role for state capacity in differing levels of poverty reduction. Sub-Saharan African states often suffer from limited institutional capability to carry out policies that deliver benefits and services to citizens. In other words, they have limited state capacity.

Building state capacity depends on many variables. It is greater when ruling elites are subject to effective limits on the exercise of their power through institutionalised checks and balances. It’s also greater in countries with a longer history of statehood. For example, China, an experienced state which is centuries old, may have developed a greater ability to administer its territory - through learning by doing. It has thus become more effective at delivering on policies compared to less experienced African states.

And our own research suggests that countries with the most effective governments reduced income poverty at up to twice the speed than countries with the weakest states.

Fighting poverty in Africa

The weaknesses of a state affects the fight against poverty in a number of ways.

Firstly, fighting poverty requires direct policy interventions. Yet poorer African countries are less effective in reaching their poor. For example, governments in sub-Saharan Africa don’t have the data and administrative know-how necessary for reliably identifying their poor. This means they can’t target resources to them. Anti-poverty programmes in countries such as Malawi, Mali, Niger and Nigeria miss many of their poorest households.

The growing evidence on the gaps in state capacity and the importance of effective states for poverty reduction implies that, without significant improvement in governance, Africa may fall further behind in meeting the first sustainable development goal target of ending poverty.

To accelerate the end of poverty, African states should focus on developing enough capability for designing and delivering poverty reduction strategies. Implementing these reforms is vital. After all, improving the quality of government is not only important to accelerating poverty reduction. It’s also a development goal in itself.The Conversation

 

M Niaz Asadullah, Professor of Development Economics, University of Malaya and Antonio Savoia, Senior Lecturer in Development Economics, University of Manchester

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Published in Opinion & Analysis
At least two Kenyan cabinet secretaries are facing arrest for their alleged role in two dam projects through which public funds were misappropriated, the Star reported, citing people it didn’t identify.
 
The cabinet secretaries in the East African nation could face charges of negligence or conspiracy to steal public funds meant for construction of the dams in the Rift Valley, the Nairobi-based newspaper said Thursday.
 
The two dam projects by the state-owned Kerio Valley Development Authority will cost about $502 million, the agency said Thursday in a newspaper statement. It is partly financed through a loan from the Italian government, it said. A 15 percent advance payment was made to the contractor and both projects are on schedule for completion within the agreed period, according to the statement.
 
Kenyan authorities may arrest three county-governors for alleged involvement in graft and the Ethics and Anti-Corruption Commission is investigating another 12 of the East African nation’s 47 county-governors, the Star reported Feb. 21. Kenya has intensified efforts to cut corruption related losses in order to avail more funds to finance ambitious infrastructure projects.
Published in Bank & Finance
Asian stocks extended declines along with U.S. futures after the U.S.-North Korea summit, where leaders had previously been expected to sign a joint statement, ended abruptly without any ceremony. Korean assets dropped and the yen advanced.
 
Equities were already on the back foot from Japan to China earlier in Thursday’s session, when disappointing Chinese economic data underscored concerns about the global economic slowdown. South Korean shares underperformed after the news that President Donald Trump and Kim Jong Un departed the summit venue early in Hanoi. European futures were lower, as was West Texas Intermediate oil.
 
Japanese investors have sold global stocks for seven straight weeks despite rally
After a stellar two-month rally for global shares, the bar for further gains may be high. U.S. Trade Representative Robert Lighthizer gave investors no incentive to bid up prices further on Wednesday, when he dialed back expectations for a sweeping trade deal with China. Nor did the latest monthly China manufacturing PMI, which indicated another contraction.
 
“We still need more expansionary credit and fiscal policy to be implemented to stabilize growth” in China, Betty Wang, senior China economist at ANZ, told news men “The economy is still not in a good shape.”
 
The dollar was little changed after Federal Reserve Chair Jerome Powell told lawmakers Wednesday that he’ll soon announce a plan to stop shrinking the central bank’s balance sheet, now around $4 trillion balance.
 
The recent escalation in tensions between India and Pakistan adds to a list of concerns from trade talks to global growth. Pakistan Prime Minister Imran Khan sounded ready to back away from the brink, using a televised address to call for talks with India so that “better sense should prevail.”
 
Published in Business
Almost two decades of profligate monetary policy has destroyed Zimbabwe’s economy and fueled rampant inflation, decimating the savings of its people twice.
 
Hyperinflation of as much as 500 billion percent in 2008 made savings worthless and led to the abolition of the local currency in favor of the dollar the following year. In 2016, former President Robert Mugabe’s cash-strapped government introduced securities known as bond notes that it insisted traded at par with the dollar. In 2018, it separated cash from electronic deposits in banks without reserves to back them, causing the black-market rate to plunge.
 
Last week, it threw in the towel and allowed bond notes to trade at a market-determined level, once again slashing the value of savings. The decision came after the southern African nation faced shortages of bread and fuel, was hit by strikes and protests, and President Emmerson Mnangagwa’s drive to attract new investment floundered.
 
“At the root of this is the currency crisis,” said Derek Matyszak, a Zimbabwe-based research consultant for South Africa’s Institute for Security Studies. “This is analogous to them creating a giant Ponzi scheme that originated under Mugabe. What we are seeing now is that Ponzi scheme collapsing.”
 
‘1-to-1 Fiction’
The latest step, while welcomed by what’s left of the country’s business sector, is unlikely to solve Zimbabwe’s problems because all it does is reflect exchange rates on the black market, according to Steve H. Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.
 
“The 1-to-1 is a fiction,” Hanke said. “They are saying officially we are going to condone what has been happening anyway. It officially says, ‘we robbed you.’”
 
The gap between Zimbabwe's formal and parallel FX rates is still wide
The interbank rate for the new currency is about 2.5 to the dollar, data published on the central bank’s website shows. That figure is meaningless because the authorities are failing to divulge the volume of trade, according to marketwatch.co.zw, a website run by financial analysts. It estimates the black-market rate for the bond notes is 3.36 per dollar.
 
We see this interbank rate as completely meaningless until the Government allows for transparency on volumes etc.. As for the general public the Parallel market is still flourishing.
 
The origins of Zimbabwe’s currency crisis stretch back to a violent land-reform program initiated by Mugabe in 2000, which slashed export income and devastated government finances.
 
In response, then-Reserve Bank of Zimbabwe Governor Gideon Gono, known as ‘God’s banker’ because of his close ties to Mugabe, increased printing of Zimbabwe dollars exponentially to pay government workers, stoking inflation and eventually making the currency valueless.
 
Printing Money:
“It was a Ponzi scheme in the past,” said Ashok Chakravarti, an economist and lecturer at the University of Zimbabwe. “Especially in the Gono era, where that chap just kept printing money.” Gono didn’t answer a call to a mobile phone number he has used in the past.
 
The currency’s collapse led to the predicament Zimbabwe now finds itself in -- chronic cash shortages and rampant inflation.
 
By late 2008, some Zimbabweans had reverted to barter trade as illicit dealings in foreign currencies flourished. In February 2009, the answer the government came up with was to switch to the use of foreign currencies, mainly the U.S. dollar.
 
“Dollarization puts a hard budget constraint on the system,” said Hanke. “You can’t go to the central bank or any other government institution to get credit for the government.”
 
Repaying Debt:
The pressure on government finances led to history repeating itself, with a loophole being found: the introduction of bond notes and locally denominated electronic money. That contributed to money in circulation growing to more than $10 billion, according to George Guvamatanga, the permanent secretary in the Finance Ministry. The figure was $6.2 billion in 2013, said Tendai Biti, a senior opposition leader and former finance minister.
 
“If you continue to print money you are destroying what you are creating,” Guvamatanga said. Under a stabilization program introduced by Finance Minister Mthuli Ncube in October, the government is now repaying domestic debt, has stopped issuing Treasury bills and has no overdraft with the central bank.
 
That’s helped the economy move toward “walking on two legs, there is an effort to go in a different direction. It’s an inevitable adjustment.”” Chakravarti said. “It’s very unfortunate that this is the second time in 10 years people have lost the value of their savings. In 2009 we all went down to zero including me.”
 
For some observers the latest development isn’t a sudden discovery of fiscal discipline. It’s another admission of failure and the victims are Zimbabwe’s people.
 
Zero Savings:
To Biti, who says the new currency will fail because it isn’t backed by reserves, it shows the country has come full circle.
 
“It’s theft because people had regrouped and rebuilt their lives from zero based on the U.S. dollar,” he said.
 
The country’s best hope is to join southern Africa’s Common Monetary Area, which is dominated by South Africa and its rand, Biti said. That would give certainty to business and impose fiscal discipline on the government, as opposed to the current arrangements that are unsustainable, he said.
 
“It’s a Ponzi economy,” he said.
Published in Bank & Finance
  1. Opinions and Analysis

Calender

« February 2019 »
Mon Tue Wed Thu Fri Sat Sun
        1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28