04 March 2009
DFID supports economic growth and poverty reduction by assisting countries in developing growth strategies, by providing finance and through collaborative work with other donors, international development partners and through partnerships with the private sector and civil society.
It is not possible to measure accurately the impact of DFID’s work on growth and poverty reduction. DFID leads on the so-called Public Service Agreement 29, which aims to reduce poverty in poorer countries through quicker progress towards the Millennium Development Goals. DFID has chosen to focus on 22 PSA countries that have the greatest chance to meet this goal.
Of DFID’s fourteen PSA countries in Sub-Saharan Africa, thirteen experienced growth rates of 5% or more in 2007. The only country not to achieve similar rates was Zimbabwe. Twelve of these countries will maintain growth rates of 5% in 2008 and 2009 in spite of the global financial crisis. Of DFID’s eight Asian PSA countries, six grew at 5% or higher in 2007 and five countries will maintain growth rates of 5% or higher in 2008 and 2009.
While this success cannot be directly attributed to DFID, its efforts have played a crucial role in supporting these countries.
Poverty Reduction in China
China has experienced the most dramatic reduction in poverty since 1990. The number of people living in poverty in China has fallen by more than 450 million to 208 million in 2005. This is can be largely explained by the dramatic growth rates that China experienced in this period averaging almost 10% growth per annum.
Uganda
DFID is supporting the government’s implementation of the Poverty Eradicaton Action Plan (PEAP). This sets out a clear strategy to eradicate poverty and for Uganda to become a middle income country in twenty years. Over the past three years, DFID has provided £105 million of budget support. A recent evaluation of budget support in Uganda concluded it has: increased government’s spending on reducing poverty and provided improvements in health and education; improved the efficiency of public expenditure and improved public financial management systems.
Inequality and Poverty Reduction
The impact that growth has on poverty reduction will depend on the level of inequality in a country. For example, India, which has consistently experienced high growth rates, only experienced a reduction in poverty from 51% to 42% between 1990 and 2005 (and an increase in the absolute number living in poverty). The fact remains that growth is essential for poverty reduction but its impact will be diluted if inequality remains high.
DFID has allocated over £625 million in Poverty Reduction Budget Support to its bilateral partners in 2007/2008. This type of support has been shown to help partner countries develop ownership over policies and enable them to fund public service improvements and achieve better outcomes for the poor.
