ABIDJAN/WASHINGTON, DC – Faced with a slowing global economy and rising debts, many developing-country governments may be tempted to scale back anti-poverty programs. That would be a grave mistake. Combating poverty is not just a moral imperative; it is also crucial for economic stability, conflict prevention, and long-term development.
Recent research supports the economic case for reducing poverty, showing that a ten-percentage-point decrease in poverty rates can raise per capita growth by up to 1.2% annually. For countries like the Democratic Republic of the Congo (DRC) and Paraguay, that would mean an increase of 25% or more in annual per capita growth.
Moreover, the experience of countries across Africa, Latin America, and the Caribbean demonstrates that meaningful poverty reduction can be achieved even under severe budget constraints. To this end, governments must focus on three key areas.
The first is energy. Expanding access to affordable electricity is essential for manufacturing and agriculture, and thus for the sustainable growth required to reduce poverty. A major step forward in this regard is Mission 300, a groundbreaking initiative led by the World Bank and the African Development Bank (AfDB) that aims to provide electricity to 300 million Africans by 2030.
The second priority is investing in human capital. Studies have consistently shown that investments in early childhood programs, quality education, and accessible health care generate high returns. In Jamaica, for example, early interventions increased mid-career incomes by 37%, according to a 2021 study. Similarly, a 2024 World Food Program study found that school nutrition programs can produce up to $9 in cross-sector benefits for every dollar of investment. Notably, Kenya’s Home-Grown School Feeding Program, which links education, nutrition, and local agriculture, has boosted school attendance, improved health outcomes, and enhanced students’ long-term earnings potential.
Lastly, investing in large-scale cross-border infrastructure can accelerate economic integration, create job opportunities, and sharply reduce poverty. The $15.6 billion Abidjan-Lagos Super-Corridor, which connects five West African countries with a combined population of 330 million, will cover 75% of the volume of West Africa by 2030. Similar projects include a proposed $531 million corridor linking the DRC, the Central African Republic, and Chad, and the $576 million AfDB-funded Nacala Road Corridor, which is already benefiting more than two million people in Zambia, Malawi, and Mozambique.
While these strategies are cost-effective, scaling them up requires increased financing at a time when public budgets around the world are under growing strain. A hybrid capital instrument based on the International Monetary Fund’s Special Drawing Rights (SDRs, the IMF’s reserve asset), developed by the AfDB and the Inter-American Development Bank (IDB), offers a promising solution.
In 2024, the IMF allowed countries to use this innovative financial tool to reallocate their existing SDRs voluntarily to developing countries through the AfDB and the IDB, whose triple-A credit ratings and proven track records uniquely enable them to maximize the impact of these additional resources. The impact can be transformative, because each dollar equivalent of SDRs the AfDB and the IDB receives counts as quasi-equity, enabling them to multiply its value by 3-8 times, according to our estimates. So, by leveraging SDRs, we could deploy low-interest loans, guarantees, and blended-finance instruments that attract private investment in infrastructure, greentech, and agriculture.
In Latin America, the IDB estimates that channeling $1 billion in SDRs could unlock $7-8 billion in development funds – enough to provide school meals to ten million children, health-care services to 1.3 million women and children, and direct cash transfers to four million households for a year – advancing efforts to eliminate extreme poverty by 2030.
In line with this approach, the IDB has already joined the Global Alliance Against Hunger and Poverty, committing up to $25 billion to support policies and government-led anti-poverty and food-security initiatives that leverage innovative tools such as reallocated SDRs.
Even modest SDR reallocations could deliver outsize returns, especially in Africa. Redirecting just $1.5 billion in SDRs to the AfDB could generate $10 billion in development financing. If invested in agriculture, these resources could double the productivity of 16 million farmers, increase food production by 40 million tons, and lift 80 million people out of poverty by 2030, according to AfDB estimates.
An additional $4.5 billion could be directed toward regional infrastructure, including the 1,300-kilometer (807-mile) Lobito Corridor. This EU-backed project to modernize the railway linking Angola to landlocked, mineral-rich regions in Zambia and the DRC will cut shipping times between the Atlantic and Asia by at least 10 days, unlocking billions of dollars in copper and cobalt exports and supporting infrastructure investment.
With sufficient political will and international cooperation, SDRs could become a powerful tool for multilateral development banks to expand development finance. By lending just a fraction of their SDRs through the innovative model pioneered by the AfDB and the IDB, countries can facilitate transformative investments while preserving the value of their international reserves and enabling participating central banks to deliver higher returns.
The fight against poverty must remain a high global priority. Through well-deigned investments and innovative financing, developing countries can weather economic slowdowns, raise living standards, and lay the foundation for a more stable and prosperous future for all.
