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Why Middle-Income Countries Lag Behind

Middle-Income Countries
In 2019, the United States donated $8.1 billion in official development assistance (ODA) to the global health sector, according to the Organization of Economic Co-operation and Development (OECD). This kind of government aid, alongside other contributions, explicitly aims to promote economic development and welfare in developing nations as the OECD has defined. The Development Assistance Committee (DAC) of the OECD, an international forum of some of the largest providers of aid, including the United States, adopted ODA as the “gold standard” of foreign aid in 1969 and continued to be the primary source of financial assistance for development in other nations. Foreign support for health often prioritizes low-income countries over middle-income countries (MICs). According to a policy report, the national average income level for nations fails to reveal poverty and inequality. Millions of people living in poverty in MICs end up behind as donors focus on the poorest countries.

Who are the Middle-Income Countries

According to the World Bank, MICs are home to around 75% of the global population and 62% of the world’s poor. Middle-income countries also have two categories: lower-middle-income and upper-middle-income economies. Finally, the gross national income (GNI) per capita for MICs ranges between $4,046 and $12,535. Middle-income countries are diverse in terms of region, size, population and income level. Countries considered MICs could be nations with small populations such as Belize to larger countries such as China and India. Since the category of MIC expands to a multitude of different nations, there are a variety of other challenges. For those in the lower-middle-income category, one of the most significant issues may be providing citizens with essentials, such as water and electricity. The most critical challenges could potentially be corruption and governance for upper-middle-income nations.

How Health Donors Target Poverty

Duke University’s Center for Policy Impact in Global Health “analyzed donors’ allocation policies to determine if they reflect subnational poverty trends.” In addition, researchers aimed to identify ways funders can adapt their policies to ensure that no one ends up behind.

The researchers found four key features of the allocation policies including an overreliance on national poverty indicators, focus on critical and vulnerable populations, future subnational targeting and health system strengthening.

Health aid funders relied on national-level economic indicators for a country’s aid eligibility. There was also a high correlation to most health donors prioritizing epidemic control over poverty elimination, especially for organizations that target specific diseases. Through targeting diseases, health aid funders define populations by their epidemiological risk profile rather than making an explicit link to subnational poverty that may be causing a higher exposure to the diseases. Many donors also direct their funds to two different pathways of either “a ‘health systems strengthening (HSS) window or a cross-cutting HSS approach.” Organizations including the Global Fund to Fight AIDS, the World Bank’s International Development Association (IDA) and the United States Agency for International Development (USAID) use HSS to reach people considered the poorest. Unfortunately, the organizations do not often track poverty-specific metrics linked to their HSS portfolios even while trying to reduce poverty.

Due to a focus on elements that poverty or national-level economic indicators cause, donors often overlook the poor in middle-income countries.

The Importance of Donors

To ensure impoverished people can benefit from health aid, eliminating poverty should be a central goal for donors. They should use geospatial data sources and methods, consult the citizens living in poverty and use other indicators and factors to assess poverty. This would ensure that donors deliver the best aid to the community. However, donors should also acknowledge that poverty is a “complex, multidimensional and context-dependent social phenomenon that cannot be captured by monetary indicators alone.” Donors have to realize that the value for money approach may not align with the idea of ensuring that no one ends up behind.

Donors should also work alongside domestic policymakers to achieve long-term sustainability for a clear action plan for vulnerable groups. The donors have to define who will receive the program, how these people will access the program and what benchmarks will determine progress. The donors should also ensure that the community involves itself in a meaningful way to create change. In addition, medical interventions including vaccines should have mechanisms in place to set reasonable prices.

The United Nations Conference on Trade and Development (UNCTAD)

Middle-income countries have garnered the attention of the United Nations Conference on Trade and Development (UNCTAD). As U.N. General Assembly President Volkan Bozkir said that “The international community must urgently address the structural obstacles holding back progress…” Specifically, when middle-income countries experience exclusion from relief initiatives, they cannot respond effectively to the COVID-19 pandemic and the other social and economic effects. UNCTAD Acting Secretary-General Isabelle Durant said, “If the international community fails to support middle-income countries, the debt crisis will threaten global efforts to tackle poverty, inequality and climate change for years to come.” To help, UNCTAD developed the Productive Capacities Index (PCI) that would measure “how far productive capacities and benchmark their achievements.” This will help nations to formulate and implement better policies and benchmarks in terms of development and country-specific conditions.

Hope exists that the correct aid will uplift the community and implement sustainable solutions to today’s health issues ranging from parasites to chronic and infectious diseases. Middle-income countries will continue to grow their health infrastructure to give their citizens the best future possible.

– Gaby Mendoza
Photo: Flickr

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Number of Low-Income Countries Has Been Halved Since 1994

low-income_countries

The World Bank evaluates a country’s gross national income per capita to assess their economic performance. The GNI per capita is calculated by dividing a country’s gross national income by its mid-year population. Low-income countries are defined by a GNI per capita under $1,045 per year, while this number falls between $1,045 and $12,746 for middle-income countries. High-income countries have a GNI per capita of $12,746 or higher. These group thresholds, defined in 1989, are adjusted for inflation each year, but they do not necessarily mean that all economies in a given group are developing in the same fashion.

Recent data from The World Bank shows that the number of low-income countries has decreased by about 50% since 1994, from 64 countries to 31. In 1994, 3.1 billion people lived in low-income countries, but that number has since fallen by 80% to 613 million.

These countries have “graduated” from low-income to middle-income through different processes. Countries such as Indonesia and Mongolia have increased growth by discovering or exploiting energy and metal resources, and investing in other natural energy resources. Several European and Central Asian countries, including Armenia and Azerbaijan, experienced recessions in the 1990s, but recent rebounds in growth have brought them over the middle-income threshold. Countries like India and Vietnam have experienced structural, political and economic reforms, while nations such as Pakistan are slowly becoming more peaceful. Other countries have benefitted from debt relief. Overall, these “graduated” countries are now experiencing faster and more stable economic growth.

Currently, all low-income countries except for Afghanistan, Cambodia, Haiti and Nepal are located in Africa. Most have agricultural economies, with agriculture accounting for about 25% of their GDPs, and may struggle with changing climate conditions. Many rely on remittances for promoting consumption and investment. Some lack the necessary healthcare services, which lowers the quality of life and impedes economic growth.

Growth in low-income countries will depend on improvements in public financial management and increased investments in infrastructure. Another important area is education, which opens up opportunities for advancement and is the key to upward mobility for many.

For countries to move up to the middle-income threshold, they will need to improve security and political conditions. Countries currently struggling with conflicts will need to focus on peace-building initiatives. Others will need to invest in fighting disease and improving public healthcare. Currently, the outlook for low-income countries is rather positive, with an expected increase in economic growth after 2015, and in coming years, more and more countries will graduate to middle-income status.

– Jane Harkness

Sources: Global Economic Perspectives, The Guardian, The World Bank 1, The World Bank 2, The World Bank 3
Photo: The Guardian

New Study Finds 1.6 Billion in Multidimensional Poverty

multidimensional_povertyA new study from the Oxford Poverty & Human Development Initiative (OPHI) has found 1.6 billion people living in multidimensional poverty. That’s hundreds of millions more than reported by the World Bank, which uses income-based methods.

The Global Multidimensional Poverty Index released by Oxford examined 101 countries and 5.2 billion people. It went beyond the typical measures of poverty to get the more complete picture.

Traditionally, many organizations use income-based measures to determine the extent of global poverty. The World Bank, for instance, uses a threshold of $1.25 per day.

The researchers at OPHI use a more comprehensive metric that looks at health, education and living standards to determine not only the extent of global poverty but also where the poor tend to live.

That has produced a few interesting results. The World Bank estimates just over one billion people live on less than $1.25 a day, placing them under the threshold of global poverty. However, using the multidimensional poverty measure, over 1.6 billion would be considered poor.

Another interesting result is that most of the world’s poor live in so-called “middle-income countries” and many live in countries considered to have high or medium development. Most of the world’s poor do not live in failed states, either.

In several countries, including Egypt, Sudan, Niger and Pakistan, there are more than twice as many poor people as would be reported using the $1.25-a-day threshold.

Most of the world’s poor live in South Asia (54 percent) and sub-Saharan Africa (31 percent), according to the report.

The Global Multidimensional Poverty Index looks at a wide variety of development issues, including nutrition, child mortality, years spent in school, sanitation and water. It is a sobering view of global poverty that shows that life can still be difficult for those earning more than $1.25 a day.

In a press release, OPHI director Sabina Alkire said, “This analysis highlights how MPI and monetary poverty measures can complement each other to ensure no one is overlooked.”

The report should provide better insight into the extent of global poverty to allow development agencies to more specifically target those in need.

– Kevin McLaughlin

Sources: Humanosphere, Oxford Poverty & Human Development Initiative, World Bank
Photo: The Telegraph