In Ethiopia, poverty high despite growth

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By ANDUALEM S. GESSESSE

Posted  Saturday, January 24  2015 at  15:52

IN SUMMARY

  • In order to boost poverty reduction, the report recommends that the government introduce policies that encourage further agglomeration through urbanisation.
The rapid economic growth Ethiopia has witnessed in the past decade has failed to bring about the kind of structural changes that would help reduce poverty in a meaningful way, a new assessment report by the World Bank says.

The Ethiopia Poverty Assessment Report released recently in Addis Ababa notes that the manufacturing and service sectors have failed to reduce poverty the way agriculture has.

“Although there is evidence of manufacturing growth starting to reduce poverty in urban centres at the end of the decade, structural changes have been remarkably absent from Ethiopia’s story of progress,” the report says.

“The majority of Ethiopian households still engage in agriculture and live in rural areas. Additional drivers of poverty reduction will be needed to end poverty in Ethiopia, particularly those that encourage the structural transformation of the country’ economy.”

In order to boost poverty reduction, the report recommends that the government introduce policies that encourage further agglomeration through urbanisation.

“This in turn requires policies that favour the entry and growth of firms, in addition to support to self-employment in non-agricultural activities. Programmes targeted at improving the wellbeing of the urban poor will also become increasingly important,” the report notes, indicating the need for a replication of the rural-focused productive safety net programme (PSNP) in urban areas where unemployment is rising.

Since 2005, when the PSNP was introduced in the country, around one-and-a-half million Ethiopians in rural areas are believed to have moved out of absolute poverty (those earning less than $1.25 per day), according to Ruth Hill, a senior World Bank researcher who presented the report.

Even though poverty fell from 44 per cent in 2000 to 30 per cent in 2011, it remains widespread in Ethiopia, and the poorest households have become poorer than they were in 2005, according to the report, which some have criticised for failing to include the economic performance of the country after 2011.

“High food prices that improve incomes for many poor farmers make buying more challenging for the poorest. Despite improvements, Ethiopia still has relatively low rates of education enrolment, access to sanitation and attended births, and challenges remain around investment in the health, safety and education of women and girls,” says the report.

It, however, notes that average household health, education and living standards today have improved since 2000, and that the number of people living below the poverty line has fallen.

“Reductions in poverty were driven mainly by agricultural growth, underpinned by high and consistent economic growth,” notes the report.