Journal Article

MACROECONOMIC ADJUSTMENT AND POVERTY IN AFRICA: AN EMERGING PICTURE

Lionel Demery and Lyn Squire

in The World Bank Research Observer

Published on behalf of World Bank

Volume 11, issue 1, pages 39-59
Published in print February 1996 | ISSN: 0257-3032
e-ISSN: 1564-6971 | DOI: http://dx.doi.org/10.1093/wbro/11.1.39
MACROECONOMIC ADJUSTMENT AND POVERTY IN AFRICA: AN EMERGING PICTURE

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The view that macroeconomic adjustment disproportionately hurts the poor in Africa has become commonplace. The popular media and the nongovernmental aid community frequently express this view in critiques of Bankfunded economic reform programs. Yet the evidence on which the claim has been based is flimsy and anecdotal. The emergence of more convincing data, from detailed household surveys in Africa, provides an opportunity to set the record straight.

The evidence from six African countries reviewed in this article demonstrates that poverty was more likely to decline in those that improved their macroeconomic balances than in those that did not. The critical factor is economic growth: the economy grew more rapidly and poverty declined faster in countries that improved macroeconomic balances, depreciating the real effective exchange rate. Changes in the real exchange rate also immediately and favorably affected rural incomes, benefiting the poor both directly and indirectly. But the findings also highlighted three causes for policy concern. First, many African governments have yet to display a real commitment to macroeconomic reform; second, the poorest of the poor have not benefited from recent growth in some countries; and, third, the prospects for the poor are not rosy unless there is more investment in human capital and better targeting of social spending.

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Subjects: Development Planning and Policy

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