At least 400 million people will still be living on less than $1.90 a day by 2030, despite governments pledging to eliminate all extreme poverty, new research from the Overseas Development Institute has found.
A new report, ‘Financing the end of extreme poverty’, reveals that while economic growth will continue to reduce the number of people living in extreme poverty, more aid needs to be focussed on the poorest countries if the global goal to end extreme poverty by 2030 is to be achieved.
Researchers have calculated that among the poorest countries there is a funding gap of $125 billion each year for health, education and social protection, which are crucial for reducing poverty.
Although increased taxation could close this gap in most middle-income countries, low-income countries will need aid to fund these social sectors and eliminate extreme poverty.
ODI report author Marcus Manuel said: ‘Extreme poverty could be eliminated in the next 12 years if all donors reallocated aid to those who need it most and committed to reaching the UN target of providing 0.7% of GNI in aid.
‘Economic growth will continue to lift millions out of poverty, but health, education and particularly social protection are severely under-funded.
Researchers also found that if all countries maximised their income from tax then low- and middle-income countries could increase revenues by $2 trillion to $9.4 trillion a year.
However, 99% of this increase would be generated by middle-income countries, leaving 48 of the poorest countries unable to fully fund their education, health and social protection. Of these, 29 severely financially challenged countries would not be able to afford even half the costs.
‘Donors must reverse the trend of increasingly giving more aid to middle-income countries, who currently receive ten times more aid than low-income countries per person living in extreme poverty. Instead, this aid should be focused on the poorest countries that need aid the most’, said Manuel.
The report makes a series of recommendations for donors to end of extreme poverty by 2030, the first Sustainable Development Goal, including:
- Focus aid on those countries that are least able to finance their own public spending to end extreme poverty, even after maximising their tax revenues
- Increase the share of aid provided to least developed countries from 29% to 50%
- Increase funding in the poorest countries for the core social sectors of health, education and particularly social protection, and
- Increase global aid from all OECD DAC donors to 0.7% of GNI
Notes to editors
- The report, ‘Financing the end of extreme poverty’ is due to be published on Friday 14 September
- Drawing on World’s Bank latest baseline figures for 2013 (with additional estimates for 35 countries where data is either missing or deemed unreliable) the ODI baseline estimate is that 800 million people were living in extreme poverty in 2013. ODI projections indicate that 610 million are living in extreme poverty in 2018 and that 400 million will be living in extreme poverty in 2030. The World Bank is due to announce new baseline figures for 2015 shortly
- Economic growth rate has been calculated using past trends drawing on World Bank (2014) A measured approach to ending poverty and boosting shared prosperity: concepts, data and the twin goals Policy Research Report Washington DC: World Bank
- Maximum tax figures calculated using IMF and World Bank research that takes into account the economic and structural characteristics that limit a country’s tax potential
- Share of OECD DAC donor aid to least developed countries has fallen from 34% in 2010 to 27% in 2016, and an average of 29% for 2014-2016.
For more information or to arrange an interview with the report author please contact James Rush on [email protected] or +44 (0)7808 791265