The Effectiveness of Government Policies to Reduce Poverty in Ethiopia - Research Paper Example

The Effectiveness of Government Policies to Reduce Poverty in Ethiopia Introduction Ethiopia has long been considered one of the poorest countries in the world. However, according to the World Bank, in the year 2000, some improvements in the life and poverty levels of Ethiopians were seen. Still, poverty rates were remained one of the highest in the world as majority of their population were living at less than $1.25 a day (World Bank, 2014). Since then, some improvements in their poverty levels were seen and in 2011, “less than 30% of the population lived below the national poverty line and 31% lives on less than US$1.25 PPP a day” (World Bank, 2014, p. xv). This means that from 2000 to 2011, major improvements were made in the country’s program to address the issue on poverty. This paper shall now seek to establish the effectiveness of government policies to decrease poverty in Ethiopia. Body According to the World Bank (2002), the Ethiopian government has prioritized poverty reduction in its programs, with economic growth being made as one of their primary objectives in ensuring poverty reduction. The Federal Democratic Republic of Ethiopia (FDRE) has acknowledged that without strong development programs, it would be difficult to establish an environment which would speed up development and secure improvements in the people’s lives (World Bank, 2002). The Sustainable Development and Poverty Reduction Program (SDPRP) has been the primary program adopted by Ethiopia in order to address its poverty issue. The objectives of the program has been to ensure rapid economic development, the extrication of the country “from its dependence on food aid” (World Bank, 2002, p. i). Another objective of the program has also been on ensuring that the poor would be the primary beneficiaries of economic growth and development (World Bank, 2002). The program also set out to strengthen the private sector, improve export, increase investments on education, decentralize services to the grassroots population, improve governance, empower the poor, expand agricultural research, and ensuring water resource utilization to promote food security (World Bank, 2002). The Millennium Development Goals (MDGs) as set forth by the United Nations were established in order to secure improvements in the quality of life of the global community (United Nations Development Programme, 2012). These goals include gender parity in basic education, decreased child mortality, decreased rates of HIV/AIDS and malaria, decreased infant deaths and maternal deaths, among others (UNDP, 2012). Ethiopia has committed itself to implement improvements in their basic services based on these MDGs. As a result, the “average household in Ethiopia has better health, education, and living standards today than in 2000” (World Bank, 2002, p. ii). Through these improvements, their life expectancy increased and gender parity in basic education was also improved. Child and infant mortality also decreased and the prevalence and incidence of HIV/AIDs and malaria also decreased (World Bank, 2002). Fewer births were also seen for women, thereby helping decrease their population. Literacy was also improved and more households have been able to gain access to piped water and electricity (World Bank, 2002). The government therefore has been able to effectively address the major issues and problems being experienced by their country. As a result, they have also been able to decrease the pace of poverty in their country, from 55% of the population living below US$1.25 in 2000 down to 31% is a very steep decline in in their poverty level (World Bank, 2002). This meant that Ethiopia was able to increase its GDP per capita. This also means that from 2000 to 2011, the country has been “robust to a number of sensitivity analyses that can be conducted on the 2011 poverty estimates” (World Bank, 2014, p. xv). Ethiopia’s success in addressing poverty has also been associated with reforms it has set forth into its legal system, including the protection and enforcement of contracts, the protection of property rights, ensuring peace and stability, and promoting better delivery of public services (World Bank, 2002; United Nations Conference on Trade and Development, 2011). The government has set forth major improvements across various fronts including: “capacity building, devolution, empowerment, justice system and civil service reform, anti-corruption, etc.” (International Monetary Fund, 2004, p. 2). These strategies have allowed for stronger revenues from taxes, thereby allowing for improvements in the financial sector (UNCTAD, 2011; IMF, 2004). Ethiopia has also focused on promoting improvements in its poverty levels by decreasing their deficits to more sustainable levels and also redirecting investments and allocations towards agriculture, education, health, road improvements, and natural resources (World Bank, 2002; IMF, 2004). Since its poverty alleviation program was implemented, the government has been able to increase its revenue from taxes and its monetary policies have been directed towards the management and prevention of inflation, as well as gaining more international reserves (World Bank, 2002). The government did not neglect the rural areas where it was able to reduce inequality and as such, the economic gap between the urban and rural areas was also addressed by the government, especially with income also rising in the rural areas through the increased agricultural yield (IMF, 2011). Despite these developments however, it is important to acknowledge that poverty is still widespread in the region and those who are poorest have not experienced any improvements (World Bank, 2014). Consumption among the poorest citizens in Ethiopia has not increased to any significant extent. “Prior to 2005, the growth in consumption of the bottom 40% was higher than the growth consumption of the top 60% in Ethiopia, but this trend was reversed in 2005 to 2011 with lower growth rates observed among the bottom 40 percent” (World Bank, 2014, p. xvi). The improvements in consumption has therefore been experienced by those below the poverty line, but has not been experienced by the poorest population. Ethiopia has nevertheless been able to address other related goals for its citizens, especially on matters relating to health, education, as well as quality of living, especially for those in the rural regions (World Bank, 2014). In these cases, the government has been able to improve the delivery of water and electricity to the rural areas, especially the poor citizens in the region. Education services have also been improved, along with sanitation, for the majority poor in the country (World Bank, 2014). Still, the population deprived of these services is still considered a significant population. Ethiopia’s enrollment rate for instance has been considered low, with access to sanitation also poor, and some births being unattended (World Bank, 2014). There are many rural households experiencing deprivation in these services, even where the government has focused on the delivery of education, sanitation, as well as clean water. Based on the Multidimensional Poverty Index (MPI, 2011), Ethiopia is considered poor because of its failure to deliver at least a third of the different MPI measures. As a result, the country has been considered the second poorest country in the world (Oxford Poverty and Human Development Initiative, 2014). Although the MPI has been valuable in providing focus on the importance of expanded progress in accessing basic services for Ethiopia, it is not a sufficient measure in establishing deprivation in the country at present (World Bank, 2014). Increased levels of poverty based on the MPI are mostly based on the divergence of monetary poverty as well as the assessment of living standards considered under the MPI (World Bank, 2014). Such divergence is mostly due to the fact that the assets evaluated by the MPI do not cover the assets relevant to Ethiopia and the cutoff values in some variables are too high to indicate actual and current growth and development (IMF, 2011; World Bank, 2014). The government of Ethiopia also did well in securing a consistent economic growth by encouraging public investments as well as increased agricultural and service investments (World Bank, 2014). The developmental state model was applied by the government in order to decrease their poverty rate. Through this approach, they visualized a more assertive role for the government in their economy, including more public investments and more services provided to the people (World Bank, 2014). This model has been an effective model because it is agriculture-based. According to the Food and Agriculture Organization (FAO, 2011) of the United Nations, the country’s economy is heavily dependent on agriculture. Agriculture represents close to 43% of their GDP in the 2008 to 2009 period alone, and about “86% of foreign currency earnings” (FAO, 2011, p. 7). Eight out of ten people in the country owe their source of living to agriculture. Such numbers however has been affected by severe drought in the region (Rural Poverty Portal, n.d). Nevertheless, their agriculture has served the country well in terms of output, owing to small-scale farming and rain-fed farming (FAO, 2011). Close to 83% of Ethiopia’s rural population farm about two hectares per household and based on 2008 figures, their overall land area represents 110 million hectares with 14 million being used for farming (FAO, 2011). This represents only about 13% of their country’s land area (FAO, n.d). The country is abundant in natural resources with lands ranging from “125 meters below sea level to 620 meters above sea level” providing a significant agricultural potential for the country (FAO, 2011, p. 7). Their primary crops include “cattle meat, roots and tubers, maize, wheat, cereals, cow milk, dried chilies, and peppers” (FAO, 2011, p. 7). Their exports from their agricultural products are in the vicinity of US$352 million, which rose to US$821 million in 2005. Their exports also rose by 21.6% in 2008 with 84.4% attributed to agricultural products alone. Their primary agricultural goods exported include “coffee, sesame seeds, vegetables, beans, oilseeds, and dry salted sheep skins” (FAO, 2011, p. 7). The World Bank (2013) has repeatedly acknowledged that Ethiopia’s economic growth rates have mostly been due to its increase in agricultural investments and revenues. Their agricultural development has also been inclusive with more people in their rural areas engaging and benefiting from agricultural investments. The FAO (2011, p. 8) has also admitted that “poverty fell fastest when and where agricultural growth was strongest”. For every 1% of the government’s investment in agriculture, they were able to reduce their poverty levels by 0.9% (FAO, 201). This means that their agricultural growth has allowed for drops in poverty about 4% from 2005 when their poverty reduction efforts were at its peak of implementation (FAO, 2011). These figures imply that the government of Ethiopia has been able to gain effective rates in poverty reduction, sufficient to promote sustained growth and development for the country. Conclusion Based on the above details and analysis, it can be concluded that the government of Ethiopia has effectively established programs to reduce their poverty levels. The government of Ethiopia effectively used the current resources and assets of the country – its strengths – poured its investments on these assets and resources and have since been enjoying profits and economic growth from these investments. The country is largely agricultural and with more investments in agriculture, their rural population has been able to increase their income. The government has also improved its delivery of services, especially in the rural areas. As a result, the quality of life for these people was also improved. The gap in the income and the quality of life between the urban and the rural dwellers has been effectively decreased by the government’s investments in services and agriculture. The country’s investments in its agricultural sector have also helped increase its GDP, thereby allowing for increased surplus and exports. With more exports, increased profits, as well as tax revenues have been made possible for Ethiopia. All these government investments have therefore contributed towards poverty alleviation in the country. In other words, their government has effectively been implementing an economic program which has helped reduce poverty among the people, and in turn, has also improved the overall poverty levels and conditions in the country. References Food and Agriculture Organization (n.d) AQUASTAT. Retrieved from http://www.fao.org/nr/water/aquastat/data/query/index.html;jsessionid=4394545F724D5D606CBBB2C1F2EBF21B Food and Agriculture Organization (2011). Foreign Agricultural Investment Country Profile: Ethiopia. Retrieved from http://www.fao.org/fileadmin/user_upload/tcsp/docs/ETHIOPIA_COUNTRY_PROFILE.pdf International Monetary Fund (2011). The Federal Democratic Republic of Ethiopia: Joint Staff Advisory Note on the Growth and Transformation Plan 2010/11–2014/15. Retrieved from https://www.imf.org/external/pubs/ft/scr/2011/cr11303.pdf International Monetary Fund (2004). The Federal Democratic Republic of Ethiopia: Poverty Reduction Strategy Paper: Annual Progress Report. Retrieved from http://www.imf.org/external/pubs/ft/scr/2004/cr0437.pdf Ministry of Finance and Economic Development (2010). Ethiopia growth and transformational plan 2010/11–2014/15, volume I. Addis Ababa: Ethiopia Oxford Poverty and Human Development Initiative (2014). Global Multidimensional Poverty Index Databank. University of Oxford: OPHI Rural Poverty Portal (n.d). Rural poverty in Ethiopia. Retrieved from http://www.ruralpovertyportal.org/web/guest/country/home/tags/ethiopia United Nations Conference on Trade and Development. (2011). Poverty reduction and progress towards MDGs in the LDCs: Encouraging signs but much remains to be done. Retrieved from http://unctad.org/en/Docs/presspb20118_en.pdf United Nations Development Programme (2012) Annual report UNDP in Ethiopia. Retrieved from http://www.et.undp.org/content/dam/ethiopia/docs/UNDP%20Ethiopia%20Annual%20Report_for%20Web%20FINAL.pdf World Bank (n.d) Ethiopia poverty reduction strategy papers. Retrieved from http://go.worldbank.org/WSVY4W85I0 World Bank (2014). Ethiopia: Poverty assessment. Retrieved from file:///C:/Users/Diane/Downloads/AUS67440REVISE019B00PUBLIC00PAfinal.pdf World Bank (2002). Ethiopia: Sustainable Development and Poverty Reduction Program. 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