Blog
How to get back on track to ending poverty – the imperative for a livable planet

We are off track to end poverty. Despite remarkable progress over the past few decades, the goal of eradicating poverty remains elusive, and SDG1: End poverty in all its forms everywhere is out of reach. While more than a billion people have been lifted out of poverty, the pace has significantly slowed. If we persist with business-as-usual, by 2030 around 7% of the world’s population will still live in extreme poverty—more than double our target of 3%.

Unsurprisingly, this challenge is particularly acute in Fragile and Conflict-Affected Settings (FCS) where global extreme poverty is concentrated. Today. FCS countries are home to 44% of the global extreme poor. By 2030, this share is expected to rise to 60%. As is evident from this data, eradicating extreme poverty and addressing conflict and fragility cannot be treated as separate issues.

The World Bank Group recently adopted a new mission and vision statement—ending poverty on a livable planet. This underscores the need to address poverty reduction within the broader context of global challenges such as fragility, climate change, and pandemics. To achieve this mission, we must depart from business-as-usual approaches, broaden our perspectives, and rethink policies to unleash the productive capacity of the poor, catalyzing inclusive and sustainable growth.

New challenges in a complex aid architecture

Countries worldwide are facing a very challenging situation—navigating the complex interplay of multiple crises amid increasingly constrained fiscal space. In this setting, the role of international actors is crucial in supporting domestic poverty reduction and broader development efforts. While there are various roles that international actors can play, their role in providing financial resources to meet these growing challenges is particularly critical.

Over the past two decades, development finance has increased steadily, but so has the complexity of the aid architecture. This trend is marked by a proliferation of donor agencies, greater aid fragmentation, limited fund leveraging, and increased circumvention of government budgets. For instance, the number of entities providing official finance has more than doubled. This has led to a situation where some governments, even those with limited implementation capacity, need to manage interactions with hundreds of donor agencies. 

Mozambique, for example, needed to engage with 179 different donor agencies between 2017 and 2021. In Ethiopia, the average number of donor agencies increased by 24% in the same period, leaving the country to manage more than 200 relationships. Countries such as Tajikistan, Rwanda, Malawi, and Mali, interacted with 130, 171, 140, and 191 agencies, respectively. Moreover, less than half of official financial flows are now channeled through country budgets, with three out of four projects implemented by non-government agencies. These trends reduce aid effectiveness, increase transaction costs for providers and beneficiary countries, and result in missed opportunities for leveraging scarce concessional resources.

The IDA can help get back on track

In this context, platforms like the World Bank’s International Development Association (IDA) offer a unique opportunity to overcome many of the current aid architecture’s difficulties, due to its global presence, convening power, and unrivaled analytical capacity. As the largest single provider of Official Development Assistance grants, IDA can convene a diverse range of stakeholders, including governments and civil society organizations, to enhance coordination and alignment of efforts. Its horizontal nature allows for an integrated and intersectoral approach at the country level, with more than 90% of IDA’s financing and 99% of its transactions going through beneficiary governments. This helps to reduce aid circumvention, build capacity, and strengthen country systems. Furthermore, IDA’s unique hybrid financial model enables it to leverage additional resources by a multiple of 3.5 for lower-income countries.

Getting back on track to end poverty on a livable planet demands a renewed commitment and integrated, innovative approaches. Global platforms like IDA are key instruments for coordinating development efforts and enhancing the impact of financing. As the World Bank embarks on IDA21, it is crucial to recognize that an ambitious replenishment could be a lifeline for a world in crisis. 

Luis Felipe López-Calva is the Global Director for Poverty and Equity at the World Bank. He has over 25 years of experience working with international institutions and advising national governments, including in leadership roles at the World Bank and the United Nations Development Programme and academic roles at Harvard, Stanford, UC-San Diego and UNU-WIDER. His research interests focus on labor markets, poverty and inequality, institutions, and the microeconomics of development.

The views expressed in this piece are those of the authors, and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.