Growth alone will not reduce poverty
-says IDB, pushes strengthening social programmes

Stabroek News
June 29, 2003

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Economic growth will not be enough to reduce poverty in Guyana and the Inter-American Development Bank (IDB) recommends emphasis on social programmes to tackle the problem.

It also says governance, security and justice issues need to be addressed along with public sector reforms.

The Bank is targeting programmes with the aim of having poverty in Guyana reduced from its current 35% to 31.4% by 2004, a goal of Guyana’s Poverty Reduction Strategy Paper.

The bank notes that economic growth is not sufficient to reduce poverty given that while absolute poverty declined from 43% in 1993 to 35% in 1999, the benefits of high growth were uneven as poverty increased in the rural interior.

Guyana also suffered from high rates of emigration and the bank says it is necessary for special attention to be placed on strengthening broad-based social programmes and poverty targeting.

In its country strategy for 2002, the bank sees three major development challenges facing Guyana: accelerating and sustaining economic growth; undertaking comprehensive public sector modernisation; and further strengthening social programmes given the low economic growth rates and weak institutional capacity.

While the bank notes that the government has pursued sound macroeconomic policies, deepened structural reform and sought debt sustainability for a decade, it says that the private sector continues to face a weak enabling environment for trade, investment and business expansion.

“The specific challenges would require the government to deepen reforms to improve the trade and investment regime, tax policy and administration, the commercial legal environment and access to land, financial intermediation, business and sector regulations, promotion strategies and other governance systems.”

The IDB would be supporting policy and institutional reforms to improve trade investment and the business environment for the private sector development as well as an integrated approach to agricultural and rural development. Policy reforms would be accompanied by investments in productive infrastructure.

The IDB says accelerating and sustaining economic growth to allow for durable poverty reduction is the foremost challenge facing Guyana but it is not sufficient because of other development challenges.

It cites the need for comprehensive public sector modernisation as a second serious challenge.

“The difficulty of obtaining broad stakeholder participation and consensus on major policy issues and the recent increase of criminal activity, represent major obstacles to national development and the increase of consumer and investor confidence.” It notes that the public sector is also constrained by a human resource problem which affects the delivery of quality service, the efficient use of public current and capital expenditure, public financial administration systems and capacity to undertake reforms.

“The public sector also continues to `crowd-out’ the private sector in the markets for capital and land,” the bank said. These are all factors, which also affect economic performance.

The bank is pursuing policies to improve governance, security and justice as well as the public sector systems. The aim is to redefine the role of government, help remove institutional constraints to stakeholder dialogue and participation, improve the public sector capacity and service delivery, increase the efficiency and accountability of public financial and investment systems and contribute to other public sector objectives.

The third challenge, the IDB says, is for the government to further strengthen social programmes. Social programmes, it notes, are filled with uncertain outcomes and require sustainability of both human and financial resources.

. Guyana’s overall social sector expenditure has increased in periods of economic duress and the IDB expects Guyana to achieve four of the seven goals in common with the millennium objectives on poverty.

The bank is supporting strengthening of targeted social programmes which will include sweeping educational reforms and investment to combat the “deleterious effects of decades of emigration,” and to allow for improvement of health and nutrition as well as the monitoring of social indicators to increase accountability. To meet these three challenges, the bank has an indicative programme of US$244.3M for Guyana, which consists of 14 loans over the 2002-5 periods.

Under growth oriented programmes, the information and communications technology project, a trade and investment facility, an agriculture sector loan, a deep water harbour and port facility, two road projects, rural roads and an environmental loan are covered, accounting for 60.9% of the resources. The social programmes account for 23.2% of the resources.

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