Week Eight — Poverty Reduction

Part I

In his book, The End of Poverty, Jeffrey Sachs discusses poverty reduction strategy plans. These plans are specifically designed to meet the Millennium Development Goals. He states that most underdeveloped countries have poverty reduction strategy plans that they have developed with the help of the World Bank or the IMF. Sachs mentions that both Ghana and Ethiopia have “strategy plans of notable quality in Africa” (Sachs 270).

Ghana — The Country Strategy Partnership Strategy developed by the World Bank is based on three main goals: improving economic institutions, improving competitiveness and job creation, and protecting the poor and vulnerable. The report claims that it will take approximately $3 billion to complete the projects, and $2.1 billion of that comes from the support of the International Development Association. Three hundred and eighty-two million dollars will be reserved specifically for the development of six operations. “The six regional projects in West Africa, are in transport, energy, agriculture, higher education and trade. In transport, two regional corridors are being supported jointly with other donors, the Abidjan Lagos corridor along the coast, and the Bamako Ouagadougou Tema corridor.”

Ethiopia — This strategy plan seems less developed than the one for Ghana. The first pillar for this plan includes creating a macroeconomic stable environment for the country by increasing agricultural productivity, manufacturing competitiveness and improving access to financial services for small businesses. It also includes improvements for infrastructure. The second pillar talks about developing and improving upon social services for those in need. This includes food insecurity programs.

In Moyo’s book Dead Aid, the capital solution is moving over towards bonds markets for investing in foreign aid. Issuing bonds to international investors would “help their development programs, including infrastructure, education, and healthcare” (Moyo 77). In order for this to work, countries must acquire ratings. Moyo suggests that reputable international agencies be responsible for doing this. “The rating is a guide to the investors of the risk involved — the likelihood that a country will repay its loans — and therefore determines the cost of the country’s borrowing” (Moyo 78).

The Democratic Republic of Congo does not have a rating according to the World Nations Online, and neither does Malawi. The bordering countries Uganda and Rwanda both have ratings. Uganda has a B+ rating, and Rwanda has B rating.

Part II

In Dead Aid,  Moyo says it’s imperative that African countries improve its amount of Foreign Direct Investment (FDI) in order for its growth to improve. There’s an abundance of investment opportunities in African countries, but investors are often wary due to the lack of infrastructure in some areas. There’s also the bureaucratic regulations and restraints in African countries that make it difficult for investors to do business.

Foreign Direct Investment (FDI) flows in the Democratic Republic of Congo are very low due to conflicts such as “war, economic and political instability, corruption and anti-trade political decisions.”

Corruption also poses a large issue for investors. This includes the misappropriation of funds by political figures.

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