Making a Breakthrough

• Author: Pedro Conceição and Selim Jahan
• Position: Chief Economist and Head of the Strategic Advisory Unit, Regional Bureau for Africa, and is Director of Poverty Practice, both at the United Nations Development Programme.

THE decade leading up to the 2009 global recession saw fast economic growth in most developing countries. Since the late 1990s, growth in the developing world has been consistently higher than in advanced economies. In sub-Saharan Africa this represented a break from a long period of economic stagnation, roughly lasting from the mid-1970s through the mid-1990s.

This growth was accompanied by improvements in human development outcomes and progress toward the Millennium Development Goals (MDGs; see Box 1 in “Regaining Momentum,” in this issue of F&D). In sub-Saharan Africa, extreme poverty rates started to drop rapidly in the late 1990s. The population living in extreme poverty (less than $1.25 a day at purchasing power parity and 2005 prices) in sub-Saharan Africa in 1990 (the baseline year for the MDGs) was 57 percent (United Nations, 2010a). By 1999 the poverty rate actually increased by 1 percentage point, to 58 percent. But by 2005, the poverty rate had dropped to 51 percent. More recent data are not yet available, but some projections suggest that the extreme poverty rate in sub-Saharan Africa continued to drop to about 46 percent in 2008 (World Bank and IMF, 2009). If these projections hold, between 1999 and 2008 the extreme poverty rate in sub-Saharan Africa dropped by 12 percentage points.

Still, this average performance in growth and poverty reduction masks great diversity across countries. Take Ghana. The extreme poverty headcount ratio fell from 51 percent in 1992 to 39 percent in 1998 and to 30 percent in 2006 (United Nations, 2010b). Ghana is well on its way to meeting the extreme poverty target under MDG 1. Economic growth certainly played an important role in this progress but cannot alone account for it.

By contrast, many sub-Saharan African countries, some growing much more rapidly than Ghana, have been much less successful in reducing poverty. Many of those that grew as rapidly as, or even faster than, Ghana have barely reduced poverty. In fact, on average, growth has been historically much less effective in reducing poverty in sub-Saharan Africa than elsewhere. According to some estimates, the poverty elasticity of income—the extent to which increases in income translate into reductions in poverty—is almost one-third lower in sub-Saharan Africa than in other developing countries (Fosu, 2009).

Working toward inclusive growth

Thus growth, while necessary for reducing poverty and making progress toward the MDGs, will not, on...