Making up for Lost Time: Getting Back on Track to the Millennium Development Goals

IMF Blog, September 20, 2010

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The global financial crisis, following the food and fuel shocks of 2007-8, delivered a severe blow to poor countries and has set back the poverty reduction agenda with only five years to go until the Millennium Development Goals (MDGs) deadline.
Historical achievement: "the number of people living in extreme poverty fell by a staggering 400 million from 1990 to 2005."
The piece frames the problem as global and interconnected: the fate of poor countries is increasingly tied to that of advanced economies.

"Everything hinges on restoring balanced, sustainable, global growth."
Priority: advanced economies and leading emerging markets should focus "first and foremost on getting the growth engine up and running again to secure a sustainable global recovery."
Warning: without a durable recovery in these economies, "all other efforts on the MDGs will come to naught."

Aid commitments:
- Richer countries "must keep their Gleneagles promises on aid."
- They "have delivered only about 60 percent of the scaled-up aid they committed five years ago, and less than half of what was promised to Africa."
Trade and market access:
- Poorest countries account for "1 percent of global GDP, but only ½ percent of global trade," and that share "hasn’t changed in the past 15 years."
- Proposed interim trade package:
- Grant "full duty-free and quota-free market access to the poorest countries."
- Streamline "the complex rules surrounding trade preference schemes so that poor countries can actually take advantage of them."
- Tackle "the distortions in rich countries’ agricultural markets which depress prices for farmers in poor countries and inhibit trade."
- Completing the Doha Round is noted as important, but actionable interim reforms are emphasized.

Infrastructure shortfalls:
- Especially in Africa, countries "are badly lacking in infrastructure—notably power, but also roads and ports."
- Existing infrastructure "is dilapidated due to years of neglect."
- World Bank estimate: Africa will need to spend "$93 billion a year to close the 'infrastructure gap'—twice what those countries are currently spending."
- Even if aid commitments are met, "this will not be enough to fund the needed improvements."
Financing and investment options:
- Mobilize other sources: "domestic tax revenues, where collections currently fall well short of potential."
- Tap private investment, both local and foreign, which requires "a better regulatory environment, stronger property rights, and less corruption."
- Consider more borrowing from the markets, but "this is expensive and needs to be done carefully to ensure that debt problems do not recur."
Policy and social resilience:
- Rebuild "policy buffers" such as "low debt, low inflation, and high reserves" that "protected countries from the worst of the crisis."
- Strengthen social safety nets "to protect the most vulnerable."
- IMF will publish a paper on rebuilding policy buffers "next month."

The IMF offers assistance through "policy advice, financial support, and technical assistance."
Specific IMF support priorities highlighted:
- Help with "strategies to scale up investment and to 'borrow safely.'"
- Promote "economic stability, an essential ingredient for strong, sustained growth."
Institutional engagement: IMF Managing Director participating in the United Nations MDG summit; IMF staff prepared "a background paper on the macroeconomic foundations needed to attain the MDGs."

Source: Making up for Lost Time: Getting Back on Track to the Millennium Development Goals (IMF blog, September 20, 2010).