New international aid negotiations reach final phase

This post is crossposted from the BRAC blog.

Far from the limelight, global leaders are on the cusp of striking a historic and unprecedented financing deal for spurring pandemic recovery through the World Bank’s International Development Association (IDA), a mechanism overseen by 173 governments that aims to reduce poverty by providing low-interest loans and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions. A whopping $90-100 billion is on the IDA negotiating table in 2021 to help the world’s poorest countries rebuild from the pandemic over the next three years.

Current negotiations around how this money is spent have critical implications for our global landscape – determining not only which strategies will be pursued to support our recovery, but also whether global problems like extreme poverty will inadvertently be allowed to grow dramatically and become further entrenched for decades to come. It should be of great concern to all of us that government funding for IDA is spent as effectively as possible on the key pressing problems that threaten global progress and growth far beyond the COVID-19 crisis. We need urgent and strategic action as the World Bank estimates that nearly 100 million more people are falling into the deepest states of poverty following pandemic-induced economic shocks.

The expansion of economic inclusion programs can make a tremendous impact on extreme poverty worldwide. To date they have enabled millions of people around the world to escape cycles of extreme poverty long term. These interventions focus on empowering people who have been socially and economically excluded to build sustainable livelihoods and often involve providing support for their basic needs alongside asset transfers, skills training, and ongoing coaching.

The evidence base for these programs is broad and growing; research from the London School of Economics found 93% of participants in BRAC’s Ultra-Poor Graduation program in Bangladesh have seen a continued increase in income, savings, consumption, and self-esteem for years after program interventions ended. According to the World Bank, these interventions have been a tool of choice for governments in the pandemic, with 219 programs now reaching nearly 92 million people across 75 countries.

Civil society members with deep experience working with people in the most severe states of poverty are calling for additions to current funding proposals to ensure they aren’t left behind. In a letter to officials from the +50 donor governments to IDA this September, and in subsequent engagement activities, 35 organizations and allies affiliated with the World Bank’s Leadership Collaborative on Ending Ultra-Poverty, a group of Northern and Southern NGOs, researchers, and practitioners dedicated to reaching Sustainable Development Goal 1, or ending all forms of poverty, through economic inclusion programs, outlined concrete proposals to ensure commitments address the most severe forms of poverty.

The proposals hinge on our experience and rigorous research that without specifically-dedicated efforts, funds will fail to reach those below the World Bank’s extreme poverty line of $1.90/day who experience multidimensional, structural vulnerabilities. Already, the World Bank has accepted that IDA programs supporting expansion of adaptive social protection and building resilience to shocks must intentionally prioritize and include targeting mechanisms to reach those deeper in poverty to more fully accelerate upward social and economic mobility. However, the latest draft of the IDA package lacks concrete targets and indicators for reaching this critical population.

There is an opportunity to directly include a focus on people living in extreme poverty in the system used to measure the impacts of IDA funding, fostering greater accountability for the goals of reaching those living in extreme poverty. Current systems for distributing support to the world’s poorest, through which IDA funds would flow, have considerable leakage that weakens their impact. The World Bank Aspire database indicates that between 25% to 60% of cash transfer and social assistance payments went to people in the upper three poverty quintiles in 2018 in Africa, largely missing the people who were poorest. To avoid repeating history, when reporting on safety net coverage, IDA needs to both measure and report on the flow of funding to the lowest poverty quintile.

Finally, the proposed target numbers of people in poverty reached by the plan can be more ambitious and specific to reaching people experiencing extreme poverty. Given the projected growth of the numbers of people living in poverty due to the combined factors of COVID-19, climate change and demographic growth, we recommend a substantial increase in IDA targets. The previous 2019 IDA funding package set a target for 30-40 million people reached by safety nets in all quintiles of poverty. We believe that the IDA 20 package should go beyond this, aiming to reach at least 44-54 million people (accounting for demographic growth and excluding COVID-19 temporary coverage), for all quintiles, with the majority of these being people in extreme poverty. The newly released IDA draft is encouraging in that it sets a minimum level of 75 million people reached, but unfortunately this number includes the numerous recipients of temporary pandemic benefits and lacks a focus on people in the lowest quintiles.

If accepted, these changes could go a long way to facilitating the inclusion of more people who struggle daily to make ends meet. Given the staggering numbers of people who have fallen into extreme poverty as a result of the COVID-19 pandemic, the intentional inclusion of people living in extreme poverty in programs is critical to ensuring a resilient and equitable economic recovery.

IDA financing will be an unprecedented moment of collective action from donor governments at a time of high deficits and strong competition for scarce resources. To build support and fully meet this moment of crisis, a “business as usual” approach will not work. We must be able to demonstrate clear efforts to effectively reach those who are most marginalized.