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November 9, 2020

Reversing Setbacks to Poverty Reduction Requires Nations to Work Together for a Resilient Recovery

Children playing on a blank area of a slum in front of their homes in Mumbai, India. © 

17-year-old M’Balu Tucker was poor even before the pandemic. She lives in Sierra Leone, a post-conflict country, in a village with only one primary school and a single water tap, not enough to serve all the residents. There is no electricity and the roads are unpaved.

She dreams of furthering her education, moving to the city, and someday working in a bank, so that she can help her family, her village, and her country. But her parents, who are farm workers, sometimes don’t have the money to pay her school fees without taking out a loan.

A project in response to the pandemic has changed her fortunes.

Tucker is one of a group of young women taking part in a project to learn how to make and sell soap, funded by the International Finance Corporation, a member of the World Bank Group, and implemented by the faith-based group World Hope. Soap-making not only helps protect communities from the coronavirus but also provides an income for those most at risk of economic hardships.

Every day, she and her co-workers meet and agree on plans to produce the soap and what they will do with the money they earn.

“Prior to this project, we were not able to make such money,” she said. But now she can pay her school fees and even buy books.

Tucker’s desire to create a better future for herself and her community is shared by millions of people around the world who live in poverty. But now they are facing an unprecedented collision of challenges. 

COVID-19, conflict, and climate impacts will change the profile of the global poor

For almost 25 years, extreme poverty was steadily declining. Now, for the first time in a generation, it is increasing. This setback is largely due to major challenges — COVID-19, conflict, and climate change — facing all countries, but in particular those with large poor populations. The increase in extreme poverty from 2019 to 2020 is projected to be larger than any time since the World Bank started tracking poverty globally in a consistent manner. While COVID-19 is a new obstacle, conflicts and climate change have been increasing extreme poverty for years.

A new World Bank report — Poverty and Shared Prosperity 2020: Reversals of Fortune — sheds light on the threats to poverty reduction and provides recommendations to navigate this tough terrain.

The number of extremely poor people has fallen dramatically from 1.9 billion in 1990 to 689 million in 2017. Global extreme poverty dropped by an average of 1 percentage point per year between 1990 and 2015, but it fell by less than half a percentage point per year between 2015 and 2017.

The main causes of this slowdown have been apparent for some time, but their effects have now been amplified by COVID-19.

More than 40 percent of the poor live in conflict-affected countries. The poorest people suffer the most from violent conflict. It destroys their livelihoods while discouraging further investment in their communities. For instance, the extreme poverty rates nearly doubled between 2015 and 2018 in Middle East and North Africa, spurred by the conflicts in Syria and Yemen.

 In its most extreme form, violence can lead to wars that destroy lives, households, assets, and natural resources, leaving a legacy from which it can take years to recover.

Climate change is also an ongoing threat to poverty reduction, and it will intensify in coming years. New analyses for this report estimate that climate change will drive 68 million to 135 million into poverty by 2030. Climate change is a particularly grave threat for countries of Sub-Saharan Africa and South Asia — the regions where most of the global poor are concentrated. The impacts of climate change can also include higher food prices, deteriorating health conditions, and exposure to disasters, such as floods, that affect both the poor and the general population.

The pandemic is set to increase poverty among groups that had been less affected

While violent conflicts and climate change have been threatening poverty reduction for years, COVID-19 is the newest, and the most immediate threat.  

The impact of COVID-19 on poverty reduction will be swift and substantial. In 2020 alone, this pandemic could drastically increase the number of people living in extreme poverty by 88 million to 115 million. The novel virus is disrupting everything from daily lives to international trade. The poorest are enduring the highest incidence of the disease and suffering the highest death rates worldwide.

“What this means is that kids will not go to school, mortality rates may be affected, as well as malnutrition rates, the quality of water, and many other indicators” said Axel van Trotsenburg, World Bank Managing Director of Operations, at the 2020 Annual Meetings last month. “We are already seeing this in health and education data. We are concerned and care about it, and we are willing to work harder than ever to address this challenge.”

COVID-driven poverty is making inroads in populations that had been relatively spared. The new poor are likely to be more urban and educated than the chronic poor, more engaged in informal services and manufacturing and less in agriculture. Middle-income countries such as India and Nigeria may be home to 75 percent of the new poor.


Swift, significant, and substantial policy action urgently needed

COVID-19, conflict, and climate change will exact enormous human and economic costs. The Poverty and Shared Prosperity 2020 report shows that the goal of bringing the global extreme poverty rate under 3 percent by 2030, already at risk before COVID-19 emerged, is now beyond reach without swift, significant, and substantial policy action.

The current moment of crisis is extraordinary. No prior disease has become a global threat so quickly as COVID-19. Never have the world’s poorest people resided so disproportionately in conflict-affected territories and countries. Changes in global weather patterns induced by human activity are unprecedented.

“We are crying and seeking for help,” says Tucker. How the world responds to these major challenges today will have a direct bearing on whether the current reversals in global poverty reduction can be turned around and whether millions like Tucker, her family and neighbors, have a fighting chance to achieve their potential and aspirations.

The immediate highest priorities everywhere must be saving lives and restoring livelihoods. Some of the policies needed to achieve this are already in place, such as social protection systems. For example, Brazil and Indonesia have expanded existing cash transfer programs.

The World Bank Group is supporting countries in their efforts to save lives and livelihoods in the short-term and ensure resilient recovery in the medium to long-term. The Bank Group has stepped up its support for regions in which extreme poverty is increasingly concentrated, armed conflict is disproportionately prevalent, and large populations face severe risks linked to climate change, from flooding to locust swarms.

“We are working on a multitude of urgent issues, including food support, digital connectivity, and equitable access to COVID-19 diagnostics, therapeutics, and vaccines,” said World Bank Group President David Malpass. “As we look beyond immediate responses to the pandemic, policymakers should remain attentive to broader development challenges.”

Emergency action and long-term development can share lessons

While addressing COVID-19 is crucial, countries should continue to enact solutions to the ongoing obstacles to poverty reduction.

The Poverty and Shared Prosperity 2020 report provides recommendations for a complementary two-track approach: responding effectively to the urgent crisis in the short run while continuing to focus on foundational development problems, including conflict and climate change.

1. Closing the gaps between policy aspiration and attainment

Too often there is a wide gap between policies as articulated and their attainment in practice, and thus between what citizens rightfully expect and what they experience daily.

Policy aspirations can be laudable, but there is likely to be considerable variation in the extent to which they can be realized, and which groups benefit from them. For example, at the local level, those who have the least influence in a community might not be able to access basic services.  At the global level, political economy concerns will be reflected in the extent to which rich and poor nations get access to finite global supplies of medical equipment. It is critical to forge implementation strategies that can rapidly and flexibly respond to close the gaps.

2. Enhancing learning, improving data

Much about the novel coronavirus remains unknown. The speed and scale with which it has affected the world has overwhelmed response systems in rich and poor countries alike. Innovative responses often come from communities and firms, which may have a better sense of the problems that should be prioritized and may enjoy greater local legitimacy to convey and enforce difficult decisions such as stay-at-home requirements. The faster everyone learns from each other, the more useful it will be.

The Republic of Korea’s widely applauded response to COVID-19, for example, has been attributed in part to intentional efforts to learn from its “painful experience” when responding to the Middle East Respiratory Syndrome coronavirus in 2015.

3. Investing in preparedness and prevention

“Pay now or pay later” may be a cliché, but in the current moment the world is surely learning this lesson again, the hard way. Prevention measures often have low political pay-off, with little credit given for disasters averted. Over time, populations with no lived experience of calamity can become complacent, presuming that such risks have been eliminated or can readily be addressed if they happen.

COVID-19, together with climate change and enduring conflicts, is reminding us of the importance of investing in preparedness and prevention measures comprehensively and proactively.

4. Expanding cooperation and coordination  

Contributing to and maintaining public goods requires extensive cooperation and coordination. This is crucial for promoting widespread learning and improving the data-driven foundations of policymaking, and for forming a sense of shared solidarity during crises and ensuring that the difficult policy choices by officials are both trusted and trustworthy.

Finally, effective responses must begin by recognizing what makes these challenges not just different and difficult, but so consequential for the poor. Failure to act comprehensively and urgently will create even bigger challenges in the future. As important as it is to address these shocks currently, there must be relentless focus on the ongoing development agenda of promoting inclusive growth, investing in human capital and productive assets, and protecting them if countries are to sustain poverty reduction.

But reversing even a massive reversal of fortune, such as we are seeing with COVID-19, is necessary and possible. It has been done in the past, in the face of what were regarded at the time as insurmountable challenges – eradicating smallpox, ending World War II, closing the ozone hole – and it will be done again in the future.

No country acting alone can adequately control, much less prevent, the type of emergency the world is now experiencing. Future preparedness, prevention, and crisis responses must be global and collaborative. Reversing even a massive reversal of fortune, such as we are seeing with COVID-19, is possible. It has been done many times in the past and it will be done again in the future. To address development challenges, whether large or small, the world must commit urgently to working together for resilient recovery and ensure no stone is left unturned to help millions like Tucker and those in her village.