Briefing Note of the Overseas Development Institute (ODI)
Marcus Manuel, Liam Carson, Emma Samman and Martin Evan: Financing the reduction of extreme poverty post-Covid-19, November 2020.
The Covid-19 pandemic has wiped out years of progress in ending extreme poverty: we forecast an additional 250 million people in extreme poverty by 2030 and expect that it will take 10 years of economic growth just to bring extreme poverty numbers back to where they were before the crisis.
- To reduce extreme poverty, many countries urgently need to step up public investments in education, health and nutrition, social protection, water, sanitation and hygiene – sectors that are also critical in developing resilience to future pandemics.
- Middle-income countries (MICs) have 100 times more tax than low-income countries (LICs) and could raise a further $1,960 billion, which would cover most of the costs of ending poverty; LICs could only raise another $11 billion and still could not afford even half the costs.If donors better prioritised their aid and met the 0.7% aid target, all LICs could afford at least half the costs. Donors should:
– include meeting the 0.7% target in their long-term fiscal plans for Covid-19 response to increase access to national health and social protection systems for those living in extreme poverty;
– better align their aid with countries’ abilities to pay, increasing the share of financial support to LICs and focusing technical assistance on helping MICs to increase their taxation and to spend more efficiently. By reallocating aid to LICs, which have lower unit costs, development assistance may benefit more people;
– commission structured research programmes to assess relative aid effectiveness in LICs and MICs, and to identify robust policies and instruments to effectively deploy aid in fragile contexts, where 85% of those in extreme poverty are projected to reside.