Uganda Can Reduce Poverty by Building People’s Resilience to Shocks, says World Bank Report

There was little progress in poverty reduction in Uganda during much of the decade leading up to 2019/20. Numerous shocks not only reduced economic growth, they also hampered the ability of households to increase their income, says a new World Bank poverty assessment report, Strengthening Resilience to Accelerate Poverty Reduction in Uganda.

According to the report, launched yesterday in Kampala, about 30% of Ugandans were poor in 2019/20, a percentage only slightly lower than 31% in 2012/13. The poverty rate used in the World Bank study is based on revisions made to the poverty line by the Uganda Bureau of Statistics in 2021. Joseph Enyimu, Acting Commissioner in the Ministry of Finance, Planning and Economic Development, has described these revisions as expanding the scope of Uganda’s poverty measurements to cater for the cost-of-living in the country “within the context of modernizing societal aspirations and rising standards of living.”

Shocks have disproportionately affected Uganda’s poor and rural residents, according to the report, with 40% of rural and 30% of urban households experiencing at least one since 2013. About 90% of farmers report that climate conditions have grown worse for agriculture over the last decade.

Given the limited amount of social assistance available in Uganda and the low resilience of households, “the poor were more likely to use detrimental coping strategies, such as reducing food consumption, which could have negative consequences for their human capital in the long run,” said Mukami Kariuki, the World Bank’s Country Manager in Uganda. “As a result, at least 50% of Ugandans remain vulnerable to the risk of falling back into poverty in next two years.”

“Productive economic opportunities outside agriculture build resilience but these were not easily accessible to the poor,” said Nistha Sinha, a World Bank Senior Economist and one the report’s two lead authors. Strategies that are known to increase people’s incomes—such as the transition from subsistence agriculture to non-farm activities and migration from rural to urban areas—proceeded at a faster pace among the wealthier and more educated but were not readily accessible to the poor. COVID-19 slowed down this structural change and pushed many people back into subsistence agriculture.

“Education, health, and access to basic services are crucial for building resilience and for equipping a fast-growing population with the opportunities and skills needed to earn higher incomes,” said Aziz Atamanov, World Bank Senior Economist and the other lead author. “But access to these services remains very unequal.” The report demonstrates that access among children to such basics as electricity, education, sanitation, water, and health remains far from universal. The COVID-19 pandemic stalled the progress Uganda had been making in improving human capital growth, particularly in education.

The study also examined telecommunication services, an increasingly important factor in people’s lives and in income-earning prospects. Closing the digital infrastructure gap stimulates economic growth and is especially relevant given Uganda’s large population of youth. Yet the sector is held back by limited competition, which gets in the way of making digital services more affordable for existing users and discourages take-up by new users, who are typically less well-off.

The report calls for a two-pronged approach to poverty reduction. The first part of the approach is to raise productivity and income-earning opportunities by investing in the development of human capital. Targeting lagging regions and the country’s most vulnerable groups, reducing barriers and costs to non-farm opportunities, and increasing competition in the telecommunications sector are all seen as vital to this. The second part is to strengthen household resilience both by addressing deficiencies left in human capital and by expanding safety nets for both Ugandans and refugees to lessen their vulnerability at household level. Ideally, social protection programs should also be accompanied by policies to promote the sort of non-traditional insurance and savings schemes that could prove viable in the large informal sector in Uganda.