Week 8: Part 1

Before Jeffrey D. Sachs lists off within his book, “The End of Poverty,” which countries have a poverty reduction plan established (PRS), he explains which kind of countries should receive help. His solution is:

“Perhaps the most important action that rich countries can take in those circumstances is to help the well-governed neighbors of such countries to prove that there is help available for those that are organized politically to help themselves” (269).

He backs his statement and says, “well-governed countries get far too little [help]” (269). Sachs says he thinksreaches his raising the taxes of the more rich people would supply countries in need to establish a PRS.

“To organize country-level work, each low-income country should adopt a poverty reduction strategy (PRS) specifically designed to meet the Millennium Development Goals” (270).

Source: ebooks-strategy.com

Sachs explains that the existing poverty reduction strategies will not meet the criteria to achieve the MDG’s. However, Sachs does list 5 countries that have reached a status of “notable quality in Africa.” These countries are:

  • Ghana’s Poverty Reduction Strategy (GPRS)
  • Ethiopia’s Sustainable Development and Poverty Reduction Program (SDPRP)
  • Kenya’s Economic Recovery Strategy for Wealth and Employment Creation (ERS)
  • Senegal’s Poverty Reduction Strategy Paper (PRSP) **(my assigned country)
  • Uganda’s Poverty Eradication Action Plan (PEAP)”

UGANDA

According to The World Bank, President of the Republic of Uganda Yoweri Kaguta Museveni wrote that PEAP has been successful, but there needs to be more improvement:

A list of some of the challenges:

(a) to consolidate a national security, deal with the consequences of con oct, and improve regional equity

(b) to restore sustainable growth in the incomes of the poor

(c) to build strong social and economic infrastructure

(d) to enhance human development

(e) to use public resources more efficiently.”

According to Museveni, the challenges listed above is what Uganda would like to focus on. What suprised me was that during the 1990’s poverty fell dramatically within Uganda, and it was not until the 2000’s that income poverty rose, and continued to rise from that point on– this information can’t be found in MDG outlines, but only within the PEAP.

GHANA

According to The World Bank, Ghana’s GPRS, in 2003, “reflected a policy framework that was directed primarily towards the attainment of the anti-poverty objectives of the UN’s Millennium Development Goals (MDGs).” However, presently, the updated version of GPRS from 2005 plans to shift the strategic focus.

“The central goal of the new policy is to accelerate the growth of the economy so that Ghana can achieve middle-income status within a measurable planning period.”

Source: Telegraph.co.uk

Ghana’s and Uganda’s GPRS and PEAP match with what Dambisa Moyo has written within her book, “Dead Aid.” Unlike Sachs, Moyo, thinks that more aid should not be given and that the economy has to be strong in order for the country to be successfull.

Moyo discusses possible capital solutions within her book, such as bonds. Moyo wrote, “Monies raised by bonds could, however, also be used to fund governments’ day-to-day (current) expenditures such as on the military, civil service and trade imbalances” (77).

On the other hand,  Moyo also wrote that once countries mature, some “may choose to reduce the number of bonds they issue in the international market in favour of domestic bond issues or relying on domestic savings and tax” (82).

This means that sometimes countries leave willingly, and sometimes they are forced out. Moyo provides two examples; South Africa and Argentina. South Africa declined its issuance of international bonds and thus its position in the “J.P. Morgan EMBI league table fell and eventually it was dropped” (82).

Moyo also wrote that analyzing the financial strategy of Sub-Saharan Africa can be done by looking at credit ratings. Moyo wrote, “their credit rating determines which investors a borrower gets to see and the cost of borrowing” (83).

Ultimately, “assessing a potential borrower’s ability (mainly the country’s likely future income path based on economic and social factors) and willingness (essentially a political assessment) to repay any debt.”

Moyo also suggested securitizing a bond issue to mitigate risk and reduce the cost of borrowing (96). Moyo explains that this process is “The process of ringfencing, or setting aside, specific cashflows to pay off a debt obligation.”

Source: un.org

The MDG’s are overall goals, for example, for countries like Sub-Saharan African countries. Moyo explains in the conclusion of her chapter that when Sachs estimated the money needed to meet the MDG’s, he required a doubling of aid for each country. Moyo said Ghana was seen as the country that did not wish to maintain the status quo by beginning to not rely heavily on aid.

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