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 300mn Africans by 2030.
The second priority is investing in human capital. Studies have consistently shown that investments in early childhood programmes, 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 Programme study found that school nutrition programmes can produce up to $9 in cross-sector benefits for every dollar of investment. Notably, Kenya’s Home-Grown School Feeding Programme, 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 $15.6bn Abidjan-Lagos Super-Corridor, which connects five West African countries with a combined population of 330mn, will cover 75% of the volume of West Africa by 2030. Similar projects include a proposed $531mn corridor linking the DRC, the Central African Republic, and Chad, and the $576mn AfDB-funded Nacala Road Corridor, which is already benefiting more than 2mn 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 maximise 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 channelling $1bn in SDRs could unlock $7-8bn in development funds – enough to provide school meals to 10mn children, health-care services to 1.3mn women and children, and direct cash transfers to 4mn 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 $25bn 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 $1.5bn in SDRs to the AfDB could generate $10bn in development financing. If invested in agriculture, these resources could double the productivity of 16mn farmers, increase food production by 40mn tonnes, and lift 80mn people out of poverty by 2030, according to AfDB estimates.
An additional $4.5bn could be directed toward regional infrastructure, including the 1,300km (807-mile) Lobito Corridor. This EU-backed project to modernise 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. – Project Syndicate
- Akinwumi A Adesina is a former president of the African Development Bank Group (2015-25).
- Ilan Goldfajn is President of the Inter-American Development Bank Group.