MACROECONOMIC ADJUSTMENT AND POVERTY IN AFRICA - AN EMERGING PICTURE

The view that macroeconomic adjustment disproportionately hurts the po or in Africa has become commonplace, The popular media and the nongove rnmental aid community frequently express this view in critiques of Ba nk-funded economic reform programs. Yet the evidence on which the clai m has been based is flimsy and anecdotal. The emergence of more convin cing data, from detailed household surveys in Africa, provides an oppo rtunity to set the record straight. The evidence from six African coun tries reviewed in this article demonstrates that poverty was more like ly to decline in those that improved their macroeconomic balances than in those that did not. The critical factor is economic growth: the ec onomy grew more rapidly and poverty declined faster in countries that improved macroeconomic balances, depreciating the real effective excha nge rate. Changes in the real exchange rate also immediately and favor ably affected rural incomes, benefiting the poor both directly and ind irectly. But the findings also highlighted three causes for policy con cern. First, many African governments have yet to display a real commi tment to macroeconomic reform; second, the poorest of the poor have no t benefited from recent growth in some countries; and, third, the pros pects for the poor are not rosy unless there is more investment in hum an capital and better targeting of social spending.