Liberia's Poverty Reduction On Course: World Bank’s Latest Report

The good news from the World Bank is that Liberia’s Poverty Reduction Strategy programs, and that of several of Africa's poorest nations, are showing signs of improvement and providing the environment for economic growth and poverty reduction.

It is certain that when the FY National Budget 2012/13, which is currently before the National Legislature that puts premium on education, job creation, road construction, agriculture, the rehabilitation of the Mount Coffee hydro plant, the provision of clean and safe water in the energy sector and other people-centered components is enacted and passed into law and subsequently implemented; the prospects of Liberia’s economic recovery and growth would be even much brighter.

According to the  World Bank's latest review of policies and institutions in Sub-Saharan Africa (SSA), there is an improved policy environment for growth and poverty reduction in 13 of the continent's poorest countries including Liberia, Comoros, Congo Republic, Cote d'Ivoire, Ethiopia, the Gambia, Guinea, Guinea Bissau, Sao Tome and Principe, Senegal, Togo, Zambia and Zimbabwe.

More broadly, most African countries show a stable and improved environment for development, a positive trend that is especially important given the more severe economic climate being weathered by other countries, most notably in the developed world.

This review is part of the annual World Bank Country Policy and Institutional Assessment (CPIA) that rates the performance of poor countries that have been used since 1980 to determine their allocation of zero-interest financing under the International Development Association (IDA), which is the World Bank Group’s fund for the world’s poorest countries.

The CPIA examines 16 key development indicators covering four areas: (i) economic management, (ii) structural reforms; (iii) policies for social inclusion and equity; and (iv) public sector management and institutions. Countries are rated on a scale of 1 (low) to 6 (high) for each indicator. The overall CPIA score reflects the average of the 16 indicators.

"There was a concern that global economic turmoil would slow reforms across the continent," said Shanta Devarajan, World Bank Chief Economist for the Africa region. "But African policymakers generally continued their commitment to reform programs during the global crisis, and some even accelerated them with the ultimate mission of improving the development prospects and economic well-being of their people."

CPIA scores show a wide variation across countries, from as high as 4.0 for Cape Verde (despite a decline in its score in 2010 and 2011), to as low as 2.2 for Eritrea and Zimbabwe.

‘Fragile’ and conflict-affected countries in the region show much lower scores than non-fragile states, reflecting the challenges they face, especially in the area of public sector capacity. Nevertheless, some of them are making fast progress. Three of the countries that improved the most are ‘fragile’ states―Comoros, Cote d’Ivoire, and Zimbabwe.

Performance is strongest in economic management, and the pace of reform varies across the four areas covered by the CPIA. For example, where reforms are deeply political or by nature incremental, they tend to improve slowly and lag behind other areas.

In Africa, performance in economic management leads all other areas. In fact, several years of prudent macroeconomic policies meant that African countries entered the 2008-09 global economic crises with policy space to counter external shocks.

Performance in the area of structural policies is a close second, followed by social inclusion. Governance lags behind other areas. Despite these differences, the countries that top the CPIA scores tend to do well in all of them, suggesting a broad-based approach to reforms. On the other hand, ‘fragile’ countries tend to show uneven reform efforts, as they typically address macroeconomic management issues ahead of difficult and complex structural and governance reforms.

This is the first year that the CPIA indicators for Sub-Saharan Africa are published in a single document accompanied by an interactive website.

“The CPIA is a valuable tool for governments, the private sector, civil society, researchers, and the media to monitor their country’s progress and benchmark it against progress in other countries,” said Punam Chuhan Pole, World Bank Lead Economist. “We hope that by making the CPIA more accessible, it can spark a broad evidence-based debate in countries that in turn can stimulate support for more reforms to create jobs, improve the quality of health, education, and other key services, and ultimately improve the quality of life for all Africans across the continent.”

The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing zero-interest credits, and grants, for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 81 poorest countries, 39 of which are in Africa.

Since 1960, IDA has supported development work in 108 countries. Annual commitments have increased steadily and averaged about $15 billion over the last three years, with about 50 percent of commitments going to Africa.

This means that following the World Bank and the International Monetary Fund (IMF)'s unprecedented debt cancellation scheme that benefited several of Africa's most indebted and poorest countries such as Liberia few years ago, the bank's indicators are now showing a steady or improved economic environment for a majority of countries.