World Bank will support govt to reduce poverty levels further

26Sep 2016
The Guardian Reporter
Columnist
The Guardian
Commentary
World Bank will support govt to reduce poverty levels further

UGANDA’S progress in reducing poverty is an African success story. In the last decade, the country recorded one of the fastest rates of extreme poverty reduction in sub-Saharan Africa (SSA) and the developing world.

As the backbone of Uganda’s economy, agriculture has the potential to create lucrative livelihoods and lift thousands of Ugandans out of poverty, especially with the adoption of modern techniques and better quality inputs.

The percentage of the population living with less than $1.90 (2011 PPP) a day declined from 53.2 per cent in 2006 to 34.6 per cent in 2013.

Similarly, the proportion of the Ugandan population living beneath the national poverty line almost halved from 38.8 per cent in 2003 to 19.7 per cent in 2013. Despite this remarkable progress, the task is far from finished.

Indeed, Uganda still faces major challenges, especially in several non-monetary dimensions of poverty. This is particularly true in the case of improved sanitation, access to electricity, and education (completion and progression).

In Uganda, only 14 per cent of households have adequate sanitation (half of the SSA average rate) and only one in seven use electricity for lighting (compared to one in three on average for SSA). In addition, the primary completion rate is 20 percentage points lower than the average for SSA of 70 per cent.

In addition, high fertility rates have held back poverty reduction in the country, by increasing the dependency ratio and slowing consumption growth among poor households by 15 to 20 per cent, and have limited the participation of women in the economic development of the country.

It must be noted that in the last decade, Uganda has made significant progress in other human development outcomes such as child and infant mortality.

Nonetheless, these numbers illustrate the need for the government to redouble the effort to improve the quality of public service delivery and ensuring that key services are accessible to all.

The progress against poverty has been uneven across regions the northern and the eastern regions lag behind the more developed and wealthy western and central regions.

As of 2013, close to 43.7 per cent of the population in the northern region and 24.5 per cent in the eastern region were living in poverty (compared to 8.7 per cent and 4.7 per cent in the western and central regions respectively).

More worryingly, poverty is currently more concentrated in the northern and the eastern parts of Uganda than it was before: while 68 per cent of the poor lived there in 2006, that share had increased to 84 per cent by 2013.

Also, households in Uganda's northern, eastern, and western regions have much lower levels of human capital, fewer assets, and more limited access to services and infrastructure than households in the central region.

It might be time for Uganda to evaluate regional development policy options that could lead to regional convergence - not divergence - in economic and development outcomes.

What drove Uganda's poverty reduction? Agriculture. Households in agriculture account for 79 per cent of the decline from 2006 to 2013.

While diversifying income with activities not related to agriculture was increasingly important for Ugandan households, poverty reduction was just as fast for those households solely in agriculture as for those with diversified non-agricultural income sources.

Agricultural incomes grew because the government got some key fundamentals right such as the pacification of the north, enhancements in infrastructure, liberal export markets and better market information for farmers and traders (thanks to an improved ICT sector).

Luck was also on Uganda's side: good weather benefited many households and positive price trends in international and regional markets aided real crop income increases.

Our estimates show that 2/3 of the growth in agricultural income between 2006 and 2012 can be explained by good weather and favourable prices.

The less positive news is that agricultural growth was not driven by technology adoption or changes in the nature of production.

As is well known, the usage of inputs remains low, and is curbing the country's agricultural potential. In 2011/12 only one in four farmers used fertilisers for their crops, and only one in 10 used pesticides.

This happened despite the high returns of using inputs (of around 36 per cent in terms of crop income) among farmers in the bottom 40 per cent of the distribution.

Similarly, less than 12 per cent of farmers received extension or advisory services and the low quality of inputs is prevalent (on average, 30 per cent of nutrients are missing in fertilisers, according to a recent study).

The critical role that the agricultural sector has played, and most likely will continue to play, in poverty reduction demands a re-examination of agricultural policies, with a focus on extension services, input availability and quality, and access to credit.

The World Bank remains committed to supporting the government of Uganda in its efforts to further reducing poverty and ensuing that everyone benefits from economic growth.

The Bank's engagement focuses on both strengthening social service delivery and raising incomes in rural areas, with special emphasis in the northern and eastern regions. Uganda deserves recognition for its important development achievements over the last decade.

But much work remains ahead in order to improve the living standards of all Ugandans and continue to create success stories in the next decade. Malmberg Calvo is the World Bank Country Manager.