Jim Yong Kim and the World Bank's Goal to End Poverty
Since 2012 (and now in his second term), physician and anthropologist Jim Yong Kim has served as the president of the World Bank Group. After assuming leadership of the World Bank, he took up two goals: “to end extreme poverty by 2030; and to boost shared prosperity, focusing on the bottom 40 percent of the population in developing countries.” 
His career has revolved around health, education and improving the lives of the poor.

Milken Institute and Global Poverty

On May 19, Jim Yong Kim spoke at the Milken Institute Global Conference which focuses on “advancing collaborative solutions that widen access to capital, create jobs and improve health.” 

The Milken Institute hosts its Global Conference from April 29 to May 2 in Los Angeles, California, and possesses various centers focused on topics such as the Center for Financial Markets, Center for the Future of Aging, and Center for Jobs and Human Capital. One of the organization’s foci is children — 150 million children around the world are affected by poor nutrition, undersized growth, and cognitive impairment, and live primarily in South Asia and African countries.

According to VOA, if leaders don’t focus on investing in their people, then “many, many, many people will find themselves undereducated and without the skills to be able to compete in the economy of the future and so many countries are going to go down the path of fragility, conflict, violence, and then of course, extremism and migration.”

Business, Health and Development

In the talk, Jim Yong Kim stated there should be a business-like mindset when talking about health and development of individual; in fact, Kim has made it his mission to make this world a better place by working towards a common goal of reducing poverty.

According to Forbes, Kim wants to “reduce extreme poverty levels to below 3 percent of global people, and grow the incomes of the bottom 40 percent of each country.” His organization also lends out cash — almost $59 billion a year.

Before Kim assumed his position as president of the World Bank, he was president at Dartmouth College and “from 2003 to 2005, as director of the World Health Organization’s HIV/AIDS department, he led the “3 by 5” initiative, the first-ever global goal for AIDS treatment, which greatly to expand access to antiretroviral medication in developing countries.” 

From A Ted Talk to Today

In a Ted Talk in April of 2017, Kim spoke about going to Haiti when everyone told him that the best thing to do was to focus on vaccination and possibly a feeding program. Since Kim’s parents had emigrated from Korea to flee the Korean war, though, Kim had a different perspective — what he saw in Haiti was what he saw in parents: to give their children the opportunity that they didn’t have.

In the Ted Talk, he goes on to say, “the Haitians wanted a hospital. They wanted schools. They wanted to provide their children with the opportunities that they’d been hearing about from others, relatives, for example, who had gone to the United States. They wanted the same kinds of opportunities as my parents did.”

In conclusion, Jim Yong Kim is a accredited president of the World Bank Group, and a charitable person who traveled to Haiti to help build hospitals and schools, and give children increased opportunities. All in all, if more people follow Kim’s example, the world will be a stronger and more sustainable place. 

– Valeria Flores
Photo: Flickr

US Backs World Bank Capital Increase
The World Bank has secured a $13 billion paid-in capital increase by committing to reforms in its lending programs. The increase, opposed until recently by the Trump administration, will help the bank continue its mission of alleviating poverty and supporting international economic development.

The World Bank

The World Bank is a multilateral institution that supports developing countries through loans and grants for investment in education, healthcare, infrastructure and a variety of other initiatives that accelerate and sustain economic growth. Given its status as a nonprofit organization, the bank is willing to fund projects in poorer and riskier countries that privately funded and profit-focused organizations may not be willing to.

The World Bank must have a secure capital base in order to lend this money. This funding is supplied by its 189 member countries, with the United States (17.25 percent of total subscribed capital), Japan (7.42 percent), and China (4.78 percent) providing the most capital and thus being among its largest shareholders.

In 2015, The World Bank set a goal for a capital increase for the International Bank for Reconstruction and Development (IBRD) and International Finance Corporation (IFC), two of its lending arms, by the end of 2017.

International Economic Development and the U.S.

Initially, this goal faced a major obstacle: the United States government. A contributor of approximately 16 percent of the bank’s capital, the United States is The World Bank’s largest shareholder and the only member to have veto power over changes in the bank’s structure, giving it the capability to block the increase.

In 2017, the Trump administration expressed skepticism over the capital increase, with Treasury Secretary Steven Mnuchin expressing concerns that too much lending is being directed to upper middle-income countries that have plentiful sources of credit. Mnuchin contended that the bank should target lower income countries, supporting international economic development in locations more in need of a source of loans and grants.

In April, following a World Bank agreement to commit to certain reforms, the United States pivoted from its previous objection and supported the increase, resulting in an injection of $13 billion of paid-in capital from the bank’s shareholders and channeling more resources to developing countries.

Global Financing

Lending is now expected to average around $100 billion annually until 2030, compared to $59 billion last year — a stark increase that will ensure funding for the bank’s ongoing initiatives. To cite a recent example of the bank’s capital being put to work, The World Bank approved an $180 million guarantee to Kenya in April to encourage private sector financing in the country’s largest electricity company and increase energy security.

The aforementioned reforms accompanying the capital increase will result in a greater share of initiatives directed to lower-income markets. Countries classified in the lower- to mid-range of the IBRD income classifications currently receive approximately 60 percent of IBRD commitments, and the reform package will seek to elevate that to 70 percent.

Hurdles and Hope

These reforms mean that the bank’s increased capital will be in service of supporting international economic development for countries on the lower end of the income spectrum.

The ultimate success of the capital injection and its associated reforms will be determined in the years to come, but by overcoming the Trump administration’s initial reservations and obtaining funding, the World Bank, backed by the U.S. and other shareholders, has secured its role as a leading institution for economic development for the foreseeable future.

– Mark Fitzpatrick
Photo: Google

history of the World BankThe history of the World Bank is one of change. As the world’s leading development finance institution, the World Bank has established a unique global role over its 75-year existence leading to its modern goal of poverty alleviation. Its longevity and evolution have fostered a bevy of admirers and critics, and its efficacy in achieving its goals has been a cause célèbre for members of the international development community.

How the History of the World Bank Began

The World Bank was formed in 1944 during and because of the ruin caused by World War II. Its original purpose was as a source of financing for the reconstruction of Western Europe, as countries such as France, the beneficiary of the bank’s first loan in 1947, were so devastated that no commercial lender would risk their own capital. As Europe gained its footing and could once again access capital markets, the bank shifted to a global focus including Latin America, Asia and Africa.

However, the history of the World Bank is one of not just an expanding geographical focus but of expanding policy focus. The bank’s initial projects in the 1950s-60s focused on infrastructure and reconstruction, but over the decades this mission has evolved.

The World Bank’s Growing Purpose

The creation of the bank’s International Development Association (IDA) in 1960, with a mission to provide concessional loans and grants to the world’s poorest countries, presaged a shift toward supporting the world’s least developed economies. Bank president Robert McNamara’s pivotal 1973 speech in Nairobi was considered a turning point toward what is thought to be the most important of its many modern mandates: poverty eradication. In 2013, current President Jim Yong Kim described the institution’s twin goals as eliminating extreme poverty by 2030 and promoting income growth among the poorest 40 percent of the world’s population.

To this end, the World Bank has continued to represent a formidable source of financing. Its 2017 annual report totaled commitments of $61.8 billion in loans, grants, equity investments and guarantees to partner countries. For perspective, this is 57 percent greater than the 2019 President Budget for the State Department and USAID of $39.3 billion. The annual report also highlights the diversity of its initiatives, with projects ranging from support of Syrian refugees to cash transfers and nutrition services in

.

Pushback Against the World Bank

However, for an institution committed to a goal as noble as poverty eradication, the World Bank has attracted its fair share of critics. This stems from both the consequences of the Bank’s projects and questions surrounding the relevance of its strategy.

High profile projects have come under fire for decades for their unintended environmental consequences, such as the displacement of more than 60,000 Brazilians after the construction of the Bank-financed Sobradinho Dam in the late 1970s. Bank defenders would acknowledge these failures, but also cite the many safeguards implemented over the years to manage such unintended risks.

Other critics question the Bank’s relevance: in a world where private investors willingly commit over $1 trillion a year to emerging markets, is the multilateral really needed as a backstop? In stark contrast to the 1940s, financing is abundant and capital moves freely in many parts of the world. However, defenders might argue that the World Bank continues to fill financing gaps, as certain arms of the institution, such as the IDA, offer grants and concessional loans to low-income areas that cannot attract private investors seeking a profit.

Criticisms are likely to continue, but among multilateral institutions the size and clout of the World Bank in financing poverty alleviation projects are unmatched. Given its shareholders’ recent approval of a capital increase, the Bank’s financial footprint looks set to continue growing in the near future. The history of the World Bank is one of evolution, and supporters of international development hope its positive influence will continue to shape the poverty eradication landscape.

– Mark Fitzpatrick
Photo: Google

Development Assistance CommitteeThe Development Assistance Committee is an arm of the Organization for Economic Co-operation and Development (OECD). Founded in 1961 by the OECD to better organize and execute its agenda, the Development Assistance Committee also has the duty of innovating and monitoring future and ongoing development projects.

These projects target sustainable economic growth in countries who seek the committee’s aid. It also monitors how members of the committee and the OECD use development aid. The Development Assistance Committee is made up of 30 member nations, as opposed to the OECD’s 35 members.

The World Bank, the International Monetary Fund and the UNDP are all observing members of the committee. The members, along with the observing members of the Development Assistance Committee form the world’s leading forum for bilateral economic development and cooperation. It is known for its neutrality.

Official Development Assistance is the or ODA is the term used by the Development Assistance Committee (DAC) to define all assistance rendered by member nations that target sustainable economic development. Due to the fact that the Committee is dedicated to furthering bilateral relations between member nations and nations it deems in need of assistance, ODA is not the only form of aid.

Member nations foster development in areas that are important to their national agendas. For example, Canada, which is a member of the DAC, will focus its foreign aid towards girls’ and women’s rights over the next five years. Denmark, another member nation, will be spending much of its aid in combating the refugee crisis.

This is not the only difference between member nations. Because there is no legally binding agreement holding a nation to the amount of money it must spend each year, there is a wide range in the percentage of assistance money spent. The DAC uses a percentage of a nation’s gross national income.

In 2014, Sweden, Luxembourg, Norway and Denmark all donated more than 0.07 percent of their GNI, a target set in 1974 by the DAC. Germany spent 0.04 percent of its GNI on foreign aid and South Korea spent just 0.01 percent.

The OECD agenda is mostly economic. They focus on economic stability within nations. Currently, it is focusing on re-establishing confidence in markets, promoting public financing as a strong driver of economic growth, developing green strategies for economic growth and ensuring job growth and security for people of all ages.

In 2016, saw the appointment of a new chair of the DAC, Petri Gornitzka, who was the former head of the Swedish Foreign Aid Agency. Gornitzka is pushing for reform within the DAC and she hopes to bring smaller member nations into the fold when making decisions about future projects and funding. She also plans to make the private sector a more viable partner.

In the 2016 DAC Global Plan, the DAC also states that it wants to survey nations who receive aid linked to the DAC on what can be improved. The DAC also plans to bring the smaller donors into the fold by helping them improve the effectiveness of their aid. This is also one of the incentives that the DAC boast to countries who wish to become members.

The last members who joined the committee were Iceland, the Czech Republic, the Slovak Republic, Poland and Slovenia in 2013 and Hungary in 2016. The European Union has made it a goal of all member nations to work towards joining the DAC.

Although the DAC does not do much direct work, its work behind the scenes promoting cooperation greatly benefits the world. The continued growth of the organization will also benefit the world. 

– Nick DeMarco
Photo: Flickr

 

The Merits of a Focus on Children in Extreme PovertyChildren are the world’s future. This phrase is often uttered, yet across the globe it is rarely enforced. Children in extreme poverty are affected differently than adults. Between inadequate nutrition, exposure to stress and a lack of early stimulation and learning, the disadvantages of growing up in poverty last a lifetime.

Consequences such as stunted development, low levels of skills needed for life and work, limited future productivity as adults and the generational cycle of poverty inhibit change in children living in poverty. These consequences are especially heinous because they debilitate the global human capital needed to grow and sustain economic prosperity.

Report Details Extent of Children in Extreme Poverty

Based on data from 89 countries representing 84 percent of the developing world’s population, UNICEF and The World Bank Group estimated that 385 million children were living in extremely poor households in 2013. Children are more than twice as likely to be living in households in extreme poverty. Roughly 19 percent of children in extreme poverty are estimated to be living on less than $1.90 a day, compared to an estimated 9 percent of adults.

The World Bank Group and UNICEF researchers conducted a comprehensive range of tests to check if changing these assumptions would affect their results. They tested their findings against realistic large and small economies of scale, as well as a range of realistic ratios comparing children’s consumption to adults’. In all cases, children still emerged with higher poverty rates across developing countries.

The World Bank Group is a vital source of financial and technical assistance to developing countries around the world as the world’s largest funder of education, the largest external financier of the fight against HIV/AIDS and the largest international financier of biodiversity projects, water supply and sanitation projects.

UNICEF promotes the rights and well-being of every child. With work in 190 countries and territories, UNICEF translates that commitment into practical action, focusing special effort on reaching the most vulnerable and excluded children to the benefit of all children in extreme poverty.

Recommendations for Governments to Help Children in Extreme Poverty

Together, UNICEF and The World Bank Group have established partnerships with governments across the globe to address child poverty and to promote a range of cross-sector investments in the early years of life. Their goal is to end extreme poverty by 2030. This vision is central to the work of the World Bank Group and UNICEF. The two organizations are calling on governments to focus on four main areas to combat extreme poverty:

  • Ensure that the number of children in extreme poverty is routinely measured and addressed at the national level as countries work towards both ending extreme poverty by 2030 and improving the well-being of their poorest citizens.
  • Make deliberate policy decisions that ensure a country’s economic growth benefits all of its citizens, including making sure children are fully considered in poverty reduction plans.
  • Strengthen child-sensitive social protection systems, including cash transfer programs that give direct payments to families to help lift children out of poverty and protect them from its impacts.
  • Prioritize investments in education, health, nutrition, clean water, sanitation and infrastructure that benefit the poorest children and prevent people from falling back into poverty after setbacks like droughts, disease or economic instability.

Addressing these multidimensional aspects of children in extreme poverty is crucial. In the face of a global economic slowdown, ending extreme child poverty by 2030 will not be easy. However, change is possible.

– Richard Zarrilli

Photo: Flickr

Investments in Infrastructure by the World BankAiming to alleviate global poverty, the World Bank has provided the financial backing for the construction and reconstruction of vital infrastructures, such as roads, dams and electrical grids, to war-torn and developing countries since 1944. In the fiscal year 2017, the World Bank granted $59 billion for projects in developing countries.

There are currently over 2,600 active projects worldwide ranging from financial risk management to roads and railways. Investments in infrastructure by the World Bank toward developing countries start in the billions of U.S. dollars. Here are the top five most expensive pledges for active projects in developing countries.

Eastern Dedicated Freight Corridor—II (India)

Active investments in infrastructure by the World Bank in India include the Eastern Dedicated Freight Corridor. It is an expansion effort that increases the reach and efficiency of freight cargo transportation in India’s northern and eastern regions, from Ludhiana to Dankuni.

The Eastern Freight Corridor, a project originally approved in October 2011, is a series of three projects that aim to double Indian Railways’ carrying capacity. In April 2014, the World Bank approved a $1.1 billion pledge, with a total cost of $1.65 billion, for the second tier of the project. This phase is set to build a 393-km, double-track, electrified, freight-only railway with a 25-ton axle-load at 100km/h. This sector will span between Kanpur and Mughal Sarai.

Uttar Pradesh, the most populous Indian state, stands to benefit from increased access to employment, health and education for its citizens by the de-cluttering of roadways. Once completed in December 2019, the full stretch of railway will be 1,839 km and is expected to reduce greenhouse gas emissions by up to 55 percent.

IN Swachh Bharat Mission Support Operation (India)

In 2015, the World Bank agreed to fund $1.5 billion of a $2.2 billion sanitation project, the Swachh Bharat Mission (SBM) Support Operation. The project focuses on the construction and promotion of using toilets in rural areas in India, in which 67 percent of Indians live.

The project is a part of a universal sanitation initiative that seeks to end the practice of open defecation by 2019. Ten percent of deaths in India are associated with poor sanitation. India also misses out on six percent of possible GDP due to insufficient sanitation. Further investments in infrastructure by the World Bank will provide $25 million to aid state training programs to encourage usage of toilets in rural areas.

PMGSY Rural Roads Project (India)

The Pradhan Mantri Gram Sadak Yojana (PMGSY) Rural Roads Project was established in 2010 when India’s National Rural Roads Development Agency and the World Bank agreed to a $1.5 billion deal. The project provides all-weather roads, servicing the states Jharkhand, Himachal Pradesh, Rajasthan, Meghalaya, Uttarakhand, Uttar Pradesh and Punjab.

The World Bank’s investment fully funds the PMGSY program for five years and covers civil works expenditures and furnishes a technical assistance program to assist agencies running it. PMGSY Rural completed work in April 2018 on a 7,000 km rural road, which is the longest road assembly in a year since PMGSY began in 2000.

This is the second of multiple investments in infrastructure by the World Bank as a part of the PMGSY project, the first being a $400 million loan in 2004. It connected 9,900 km of rural roads in Himachal Pradesh, Jharkhand, Rajasthan and Uttar Pradesh. The greater PMGSY project aims for 375,000 km of roads, linking 178,000 habitations and refurbishing 372,000 km of existing rural roads.

South-West Roads: Western Europe-Western China International Transit Corridor (Carec 1b & 6b) (Kazakhstan)

Investments in infrastructure by the World Bank in Kazakhstan look to improve road management and traffic safety. The South-West Roads Project was approved in 2009 when the World Bank agreed to fund $2.125 billion of the $2.50 billion total cost. The project includes constructing a 1,500-km road connecting China and Western Europe from the Aktobe and Kyzylorda district border to South Kazakhstan.

Road construction provides a local economic boost. The World Bank’s end of the deal employs 30,000 to 35,000 people. The cost of workers, subcontractors and materials boasts $1.6 million in spending power. Four thousand South Kazakhstan workers receive $600 a month, compared to the latest estimates that show the average Kazakhstan citizen earns $525 a month.

Eskom Investment Support Project (South Africa)

The largest, active investment in infrastructure by the World Bank is $3.75 billion, funding the Eskom Investment Support Project. Approved in April 2010, the total $10.75 billion project provides support for Eskom to enhance its energy supply and security.

Much of the funding was allocated for completion of the Medupi Power Station, the fourth-largest coal-fueled power plant. Stirring controversy, the plant is expected to add an annual 25 million metric tons of carbon emissions. Eskom is already reported to contribute to a 40 percent share of South Africa’s greenhouse gas emissions.

Eskom is South Africa’s state-owned primary electricity producer and Africa’s largest facility in electricity production. There is concern about Eskom as a monopoly producer of electricity and, accordingly, a call for more contributors in South Africa’s energy market. The National Union of Metalworkers of South Africa is currently pursuing a legal interdict from the Gauteng High Court in Pretoria in an effort to prevent Eskom from signing 27 renewable energy contracts.

As the World Bank continues to strive for its main objectives–decreasing the percentage of people living on less than $1.90 a day and spurring income growth for the bottom 40 percent–these projects, with such immense lending, are promising for the future of some of the world’s most economically vulnerable populations.

– Thomas Benjamin

Photo: Flickr

BUILD Act Introduced to House Committee on Foreign AffairsOn February 27, Congressman Ted Yoho (R-FL) led a bipartisan effort that brought H.R. 5105, otherwise known as the Better Utilization of Investments Leading to Development (BUILD) Act, to the House Committee on Foreign Affairs.

Modernizing U.S. Foreign Aid

The goal of this bill is to make foreign aid programs more efficient through consolidation. The BUILD Act specifically targets development finance programs, or foreign aid programs that assist other countries financially. The bill will consolidate all these foreign aid programs into one corporation that will be called the U.S. International Development Finance Corporation (IDFC).

“By streamlining our current system, we will not only spark economic growth in developing countries; we will improve America’s global competitiveness,” Rep. Yoho said in a press release.

Economic Assistance

These development finance programs are a vital part of foreign aid, because they help to make a country economically stronger. Once a country’s economy is healthy, the country will no longer depend upon the U.S. for foreign aid.

The text of the BUILD Act states that the goal of the IDFC will be to primarily assist countries with low and lower-middle income level economies, as outlined by the World Bank, as opposed to providing assistance to upper-middle income economy countries.

Furthermore, the bill states that the IDFC will work primarily with the private sector in order to boost the economy of the country in need. The private sector is the part of the economy that is not controlled directly by the government, or in other words, the part of the economy that is managed by the citizens.

The IDFC will work to encourage the use of a country’s private capital to facilitate sustainable economic growth and promote poverty reduction. To achieve this goal, assistance will be provided to individuals and collectives that are part of the private sector, so that they can avoid market gaps and inefficiencies.

In addition, the IDFC will not just provide financial assistance to developing countries; it will also ensure that the civic institutions in these countries are fortified and that there is a healthy level of competition in the economy. The IDFC will also foster public transparency.

Long-Term Goals of the BUILD Act

The consolidation of the various development finance programs into one corporation will help the U.S. to more efficiently achieve its foreign aid goals.

The ultimate goal of the BUILD Act is for developing countries to eventually graduate from their need for assistance. The act will help to achieve this by making it easier for U.S. foreign aid to bolster the economies of developing countries so that over time they will depend less on traditional forms of foreign assistance.

“Taking countries from aid to trade is the end goal. We want to help countries become robust trading partners with the United States,” Congressman Yoho said in the press release.

The BUILD Act will benefit not only developing countries in need of assistance, but will also have positive effects for the U.S. in terms of business and national security.

– Jennifer Jones

Photo: Flickr

history of the world bank

The history of the World Bank begins in 1944. Founded as an international financial institution, the World Bank’s official goal is poverty reduction. The World Bank was established to finance projects that strengthen economic sectors for developing countries.

The function of the World Bank is providing low-interest loans, interest-free credit and grants pave the way for improved education, healthcare and infrastructure for countries emerging from poverty and conflict.

The Changing History of the World Bank

The World Bank officially began in 1946 when the first loan was given to France under strict limitations. One such requirement had France remove government members associated with Communism. With $250 million loaned to France, the World Bank began its credibility as a lender.

Initially, the World Bank aimed to assist European countries devastated by World War II. However, concerned voices of leaders from around the world helped shift the World Banks’s role as a support system for the world.

The history of the World Bank shows that the focus soon shifted to major infrastructure projects. Loans provided to developing countries went towards resources, training and developmental necessities to ensure financial sustainability.

In the 1970s the World Bank’s priorities shifted once again to focus on the elimination poverty. The World Bank focused on people driven projects regarding agricultural development, education of health and sanitation as well as rural and urban development.

As of December 2017, the World Bank is shifting once again. Jim Yong Kim, President of World Bank, announced that the World Bank will no longer invest in oil and gas projects. Instead, it will focus on the One Planet climate summit in Paris. Kim believes environmental policies and energy access will improve countries in terms of sustainability.

The history of the World Bank continues to shift as the needs of the world changes in order to meet the needs of communities.

– Jennifer Serrato

Photo: Flickr

Jim Yong KimWorld Bank President Jim Yong Kim said at the start of his term in July 2012 that he wants to eradicate poverty by the year 2030. Jim Yong Kim is the 12th president of the World Bank Group, nominated by Barack Obama in 2012, and unanimously reappointed in September 2016 to an additional five-year term to head the global financial and technical assistance program. Kim established these twin goals to inspire the work he accomplished throughout his term: alleviating poverty by 2030 and increasing shared prosperity.

In a speech delivered at Stanford Graduate School of Business in 2015, Kim proposed that efforts be refocused on improving health in developing nations. If we want to end poverty and stimulate the global economy, redirecting efforts to improve healthcare systems is the best way to accomplish these goals. Kim wants to capitalize on the World Health Organization’s goal of reducing the number of stunted children in the world by 40 percent by 2025. Kim proposes to completely rid the world of cognitive impairments brought on by malnourishment and understimulation by 2030 as well.

The secretary is well on his way to achieving the goals he put in place at the start of his term. In a press conference held in October 2017, Kim revealed that over 800 million people have escaped the grip of poverty as a result of China’s poverty reduction efforts. The World Bank’s involvement with China will continue in the form of improving its healthcare system, promoting access to social services in rural regions and supporting China’s focus on increasing domestic consumption. Similarly, multicomponent efforts have reduced the world’s population who live on less than $1.90 a day from 1.86 billion to 767 million people. This means that nearly 1.1 billion people have been lifted out of extreme poverty since 1990.

In addition to these accomplishments, the World Bank also reached its target goal of disbursing $518 million to support countries affected by the Ebola outbreak in 2016. World Bank President Jim Yong Kim’s career has been dedicated to global health, education and ameliorating the conditions of the world’s poor. With these goals in motion, the year 2030 should be a beautiful one.

Sloan Bousselaire

Photo: Flickr

Georgia's Poverty Rate

Georgia is located between Europe and Asia and has become a crucial junction for trade flows across the two regions. Since the country’s political independence from the Soviet Union, the government has made a considerable effort to increase funding to social sectors and improve the transparency of public expenditure. While the country has made significant strides in recent years regarding human development, Georgia’s poverty rate continues to impede further development.

In 2015, about 20.1 percent of the population of Georgia was recorded as living below the poverty line by the Asian Development Bank. While the country has also experienced significant economic growth over the beginning of the 21st century, it has failed to translate it into equal wealth. Income disparities exist in pockets across the nation. As the country continues to urbanize, large differences between rural and urban areas continue to exist.

Those living in rural Georgia earn much of their income through the agriculture sector. Only 27 percent of rural dwellers earn their income through salaried work and 28 percent of rural incomes come from social payments. As the country’s agriculture production has become stagnant in recent years, much of the poverty today can be attributed to the agricultural sector which tends to account for around 45 percent of rural household income.

Georgia’s poverty rate also tends to be impacted by household sizes. Households with children have higher chances of falling into poverty than those without children. In rural areas of Georgia, around half of the children live in poverty, which is significantly greater than in urban areas.

In Georgia, one in every five children lives in poverty and one out of six live at the minimum subsistence level, according to UNICEF. These children that live in poverty also experience less educational opportunities than their peers living in wealthier families. The UNICEF representative of Georgia, Laila Omar Gad, professes that “We need to invest more in reaching the most vulnerable children, or pay the price in slower growth, greater inequality, and less stability”.

While large pockets of poverty remain, Georgia’s poverty rate has decreased by 14.4 percent in only four years, between 2010 and 2014. This result is partially due to the increase in the employment rate of those living in poverty from 50.7 percent to 56.6 percent over the same period.

Improving living conditions through economic activity has proven to reduce poverty in the country and should continue to be a tool to improve the living conditions for the people of Georgia. The World Bank Group has noted that the fiscal policies, inclusive economic opportunity creation and the deeper analysis of the rural economy all have driven the poverty reduction in Georgia.

To continue on the path toward development, Georgia must continue to engage in poverty alleviating policies while also working to ensure equal opportunities for all.

Tess Hinteregger

Photo: Flickr