SDG+1: Turning Myth into Reality for the Poverty Agenda

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  • 2016•09•24

    Turning Myth into Reality for the Poverty Agenda

    Photo: UN Photo/Kibae Park

    As we reach the first anniversary of the adoption of the Sustainable Development Goals (SDGs) — “a plan of action for people, planet and prosperity” — this series from the UNU Maastricht Economic and Social Research Institute on Innovation and Technology focuses on various aspects of a new monitoring tool designed to measure SDG impact and hold governments to account.

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    Eradicating poverty has been a global priority since the founding of the United Nations. Thanks to international efforts, the number of people living in extreme poverty around the world has fallen by more than half over the last three decades — from 1.9 billion in 1990 to 836 million in 2015, according to the Millenium Development Goals Report of 2015. Yet despite impressive progress, more remains to be done in terms of poverty reduction and levelling the playing field — both between and within countries.

    China, for example, has been very successful in reducing extreme deprivation, with a 94% decrease between 1990 and 2015; yet many countries in Sub-Saharan Africa have failed to achieve the goal of halving the proportion of people living in extreme poverty. Millions of the poorest and disadvantaged are still being left with insufficient income, poor nutrition, and a low standard of living.

    The new Sustainable Development Goals (SDGs) on poverty provide a new challenge to national and global development. In order to achieve targets 1.1 and 1.2 of SDG #1, extreme poverty (i.e., living on less than US$1.90 per day) must end by 2030; meanwhile, the number of people living in poverty, according to national definitions, must respectively be cut in half. A crucial step in achieving the goals will be to ensure effective allocation of resources.

    How to hit the targets?

    Shedding light on the 2030 Agenda is a core mission of the UNU Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT). In an effort to contribute to this objective, I and four other PhD fellows co-authored a working paper, The Affordability of the Sustainable Development Goals: A Myth or Reality?. We developed a methodology to estimate the resource requirements to fulfil the poverty target of the SDGs.

    Poverty Incidence in 2010 Resource Requirement (Percentage of GDP)
    Country Poverty Headcount at US$1.90 Line Poverty Gap at US$1.90 Line Poverty Headcount at National Line Target 1.1 Target 1.2 Total
    Ethiopia 33.54 9.04 29.6 5.829 0.341 6.170
    Senegal 37.98 12.79 46.7 4.108 1.624 5.732
    Cambodia 9.97 1.82 22.1 0.241 0.381 0.622
    El Salvador 7.24 2.33 36.5 0.065 0.195 0.260
    Indonesia 15.9 2.89 13.3 0.237 0.000 0.237

    Source: World Development Indicators, World Bank and authors’ calculation
    Note: Poverty Headcount Ratio at US$1.90 line and Poverty Gap at US$1.9 line of Senegal is in 2011 due to the data availability. For the same reason, the national poverty gap ratio is not available for El Salvador so the purchasing power parity (PPP) US$3.10 a day is used instead.

    Within our framework, we identified three main steps. First, we estimated the annual investment required to end extreme poverty for all people and thus achieve target 1.1. Second, we calculated the resource gap to achieve target 1.2, reducing at least by half the number of people living in poverty, according to national definitions. Finally, we calculated the total resource allocation required to achieve the SDG poverty targets: we added the resource requirement to achieve target 1.1 and 1.2 and then converted this into percentage of gross domestic product (GDP).

    Applying these steps to the selected five countries, two from the low-income group (Ethiopia and Senegal) and the other three from the lower-middle-income category (Cambodia, El Salvador, and Indonesia), we found that the resources required to close the poverty gap vary across countries.

    Within the low-income category, around 5% to 6% of additional investment is necessary to close the poverty gap. Although poverty incidence in Ethiopia is lower than in Senegal, the resource requirement is the highest among the five countries due to its low GDP level. An additional 6.2% of GDP must be allocated in order for Ethiopia to achieve the above-mentioned SDGs.

    Senegal also needs to contribute a lot to achieve the targets. An extra 4.2% of GDP is required to eradicate extreme poverty and a further 1.6% of GDP is a must to bring half its people above the national poverty line. Overall, Senegal needs to spend 5.7% of GDP to achieve the new poverty goals.

    The lower-middle-income countries — Cambodia, El Salvador, and Indonesia — require less than 1% of GDP. Although the poverty incidence of Indonesia looks worse than that of El Salvador or Cambodia (especially when using the US$1.90 per day line) the resource requirement to halve the number of people living in poverty, by the national definition, is the smallest. This is because Indonesia’s additional resource requirement is not that high compared to the size of its economy.

    To successfully achieve the SDG poverty targets by 2030, countries needs to show strong commitments by making policy changes that are both tangible and result-oriented. This shift is likely to require additional budget allocation — although of course higher budgets do not always mean better outcomes. The way forward therefore is to provide the most transparent, comparable, and quantifiable estimates of how much countries need to invest, based on effective planning and monitoring systems and more effective use of data.

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    This article originally appeared on the UNU-MERIT website on 9 September 2016.