metadata: authors: 0: author: Devarajan, Shantayanan
1: author: Miller, Margaret J.
2: author: Swans
docna: 0: docna: Goals for development : history, prospects
            and costs
docty: Policy Research Working Paper
subtopic: Health Care Services Industry,Educational Sciences,HIV AIDS,Hydrology,Cholera,Communicable Diseases,Leprosy,Inequality
teratopic: Poverty Reduction
abstracts: cdata!: The Millennium Development Goals set
            quantitative targets for poverty reduction and improvements
            in health, education, gender equality, the environment, and
            other aspects of human welfare. At existing rates of
            progress many countries will fall short of these goals.
            However, if developing countries take steps to improve their
            policies and increased financial resources are made
            available, significant additional progress toward the goals
            is possible. The suthors provide a preliminary estimate of
            the additional financial resources which would be required
            if countries would work vigorously toward meeting the
            Millennium Development Goals. Two estimates of the resource
            gap are developed, one by estimating the additional
            resources necessary to increase economic growth so as to
            reduce income poverty, the other by estimating the cost of
            meeting specific goals in health, education, and the
            environment. Both estimates yield a figure in the range of
            $40-$70 billion in additional assistance per year, which is
            in line with estimates from other international development
            agencies and which would roughly represent a doubling of
            official aid flows over 2000 levels. While the authors
            believe this is a reasonable first approximation of the
            costs associated with achieving the Millennium Development
            Goals, it should be interpreted with caution for several
            reasons, including the lack of empirical data in many
            countries to estimate the relationship between expenditures
            on health or education and related outcomes, or the
            relationship between investment and growth, the sensitivity
            of the results to changes in the policy environment (both at
            the macroeconomic and sector level, and with respect to
            international trade), and opportunities for increased-and
            more efficient-domestic resource mobilization.
repnme: repnme: Goals for development : history, prospects
            and costs
display_title: Goals for development : history,
            prospects and costs
listing_relative_url: /research/2002/04/1758950/goals-development-history-prospects-costs
topicv3: Water m1326522 137,Poverty m1326687 695,Education m1327048 470,HIV/AIDS m1327522 1416,Health m1504661 3480
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Poverty Reduction
origu: Off. of VP & Head of Network (HDNVP)
no_of_pages: 44
model_extractions: | POLICY RESEARCH WORKING PAPER 2819

# Abstract

The Millennium Development Goals set quantitative targets for poverty reduction and improvements in health, education, gender equality, the environment, and other aspects of human welfare. At existing rates of progress many countries will fall short of these goals. However, if developing countries take steps to improve their policies and increased financial resources are made available, significant additional progress toward the goals is possible.

Devarajan, Miller, and Swanson provide a preliminary estimate of the additional financial resources which would be required if countries would work vigorously toward meeting the Millennium Development Goals. Two estimates of the resource gap are developed, one by estimating the additional resources necessary to increase economic growth so as to reduce income poverty, the other by estimating the cost of meeting specific goals in health, education, and the environment. Both estimates yield a figure in the range of $40-$70 billion in additional assistance per year, which is in line with estimates from other international development agencies and which would roughly represent a doubling of official aid flows over 2000 levels. While the authors believe this is a reasonable first approximation of the costs associated with achieving the Millennium Development Goals, it should be interpreted with caution for several reasons, including the lack of empirical data in many countries to estimate the relationship between expenditures on health or education and related outcomes, or the relationship between investment and growth, the sensitivity of the results to changes in the policy environment (both at the macroeconomic and sector level, and with respect to international trade), and opportunities for increasedand more efficient-domestic resource mobilization.

This paper-a product of the Office of the Vice President, Human Development Network, and the Development Data Group-is part of a larger effort in the Bank to accelerate progress toward the Millennium Development Goals. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Susan Brickland, room G8-015, telephone 202-473-0944, fax 202-522-3235, email address sbrickland@dworldbank.org. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at sdevarajan@>worldbank.org, mmiller5Caworldbank.org, or eswanson@worldbank.org. April 2002. (38 pages)

> _The Policy Research Working Paper Series dissetninates the findings of work in progress to encourage the exchange of ideas about development issuies. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclitsions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent._

Produced by the Research Advisory Staff
Goals for Development: History, Prospects and Costs' Shantayanan Devarajan, HDNVP Margaret J. Miller, HDNVP and SRM Eric V. Swanson, DECDG

> ' The authors would like to thank Deon Filmer, Alain Mingat, and William Shaw for their contributions to this paper. Comments and suggestions by William Easterly, Lant Pritchett, Martin Ravallion, and Jeffrey Hammer are also gratefully acknowledged.
# I. **Introduction**

The Millennium Development Goals (MDGs) have enjoyed unusually widespread support and acceptance, from both developing and developed countries and from international development agencies, since their introduction in September 2000 at the United Nations Millennium Summit. The appeal of the Goals is understandable, since they provide a view of a much improved world by 2015, where extreme poverty is cut in half, all children are in primary school and infant, child and maternal mortality are greatly reduced. (See Table 1) The Millennium Development Goals, however, have the opportunity to be **Table 1: Millennium Development Goals (1990-2015)** much more than an idealistic 1. Eradicate extreme poverty and hunger statement of what the world would . Halve the proportion of people with less than one dollar a like to achieve. There are, in fact, day several hard-nosed reasons for the * Halve the proportion of people who suffer from hunger 2. Achieve universal primary education importance attached to the Goals by . Ensure that boys and girls alike complete pimary development practitioners, including: schooling

|ever,have theopportunitytobe<br> <br> <br>|**Table1:MillenniumDevelopmentGoals(1990-2015)**|
|---|---|
|h<br>more<br>than<br>an<br>idealistic|1.Eradicateextremepovertyandhunger|
|ementofwhattheworldwould<br> to achieve.Thereare, infact,<br>ralhard-nosedreasonsforthe<br>|.<br>Halve the proportionofpeoplewith lessthanone dollara<br>day<br>*<br>Halve theproportionofpeoplewho sufferfrom hunger<br>2.Achieveuniversalprimaryeducation|
|ortanceattachedtotheGoalsby<br>elopment practitioners,including:<br> <br>|.<br>Ensurethat boysand girlsalikecompletepimary<br>schooling|
|*<br>theresultsorientationencour-<br>agedbytheMDGs, whichshifts|3.Promotegender equalityandempowerwomen<br>Eliminategenderdisparityatalllevelsofeducation<br>4.Reduce child mortality|
|thefocusfrominputsandsector-<br>specificworktocross-sectoral<br>approaches anddevelopmentout-|.<br>Reducebytwothirdsthe under-fivemortalityrate<br>5.Improvematemalhealth<br>*<br>Reducebythreequartersthematemalmortalityratio<br>6.CombatHIV/AIDS, malariaandotherdiseases|
|comes;|.<br>Halt andreversethe spreadofHIV/AIDS|
|*<br>theincreased<br>emphasis<br>on<br>quantitativanalyis,f<br>|.<br>Haltand reversethespreadofmalaria&tuberculosis<br>omg7.Ensureenvironmental sustainability|
|<br>quantitativeanalysis,fromgather-<br>|<br>.<br>Integratesustainabledevelopmentintocountry policies|
|ingofbasicstatisticaldatato<br>monitoring<br>and<br>evaluation<br>of<br>policyandprogrameffectiveness;<br>poli<br> <br>|andreverselossofenvironmentalresources<br>.<br>Halve theproportionofpeople withoutaccesstopotable<br>water<br>cy an rgamef*Significantly improvethelivesofatleast100million|
|<br>*<br>theconsensustheyrepresent|<br>slumdwellers|
|regarding<br>a<br>core<br>agenda<br>for<br>development;and<br> <br>|8.Developaglobalpartnershipfordevelopment<br>.<br>Increase officialdevelopmentassistance,especiallyfor<br>countries applyingtheirresourcestopovertyreduction|
|*<br>theirpotentialroleinstreng-|.<br>Expandmarketaccess|
|theningdonorcoordination.|.<br>Encouragedebtsustainability|

In many contexts, setting goals and monitoring performance against agreed targets has proved to be a successful strategy for mobilizing resources and improving results. But for goals to be useful, they must be well defined and measurable; they must be agreed by those who set the strategies and appropriate the resources to pursue them; and they must be attainable under some plausible scenario. Findings from research and experience in development suggest that the policy environment is at least as important a component of success as financial assistance for countries trying to accelerate progress toward the Goals. Empirical studies on the health sector, for example, show there is only a weak relationship between public expenditures on health and health outcomes (Filmer, Hammer and Pritchett 2000). Improvements in service delivery, which reduce waste and increase the effectiveness of interventions, can greatly impact the likelihood that the Goals are met. The overall policy and institutional framework in a country is also a key determinant of the impact that additional foreign aid may have. Thus, if additional financial assistance were to be made available, it should be allocated to 2
those countries that have, or are developing, policy and institutional environments in which foreign aid will be effective.

The research findings discussed above imply that we should be extremely careful in interpreting the resource estimates of the cost of attaining the MDGs. The estimates should not be taken as an amount of money which, if available, would guarantee that the MDGs will be reached. Money is not the only input, or even the most important input. If the aid goes to countries with poor policies and institutions, it is likely to be wasted. The question we are asking, therefore, is the following: If the necessary changes in policies and institutions are forthcoming, what additional financial resources will be needed to achieve the 2015 goals?

Two approaches are followed. In the first, the additional financing needed to raise growth rates by enough to meet the target for poverty reduction is estimated to be $54 to $62 billion each year. This estimate is based on the notion that the aid will be focused on those countries where it can make a difference, namely, countries with the appropriate policies and institutions for broadbased growth. In the second, we estimate the costs of improved schooling, health and environmental outcomes associated with reaching the goals in these aspects of development. These are estimated to be between $35 and $75 billion a year. To be sure, achieving improvements in schooling, health and the environment all depend on a host of factors, including most significantly, the demand for these services. Simply increasing the supply of education or health care through greater public spending may not improve outcomes. Rather than representing the additional aid "required" to reach the goals, these costs are best interpreted as the additional costs that are likely to be incurred when the education, health and environmental goals are being met.

More precise cost estimates are not possible without additional information on the circumstances in each country. Progress in achieving the development goals - and the cost of increasing the rate of progress -- will depend on the level of development, the absence of war or civil conflict, the quality of policies, the effectiveness of governments in providing public services, and the viability of adequate external financial and technical assistance. These must be assessed on a country-by-country basis, with particular attention given to the obstacles to and opportunities for progress toward each target identified by the development goals.

The rest of the paper is organized as follows. Section II presents a brief history of the Millennium Development Goals. Section III reviews progress to date on the most prominent MDG targets for which well established outcome indicators exist. Section IV discusses the importance of the policy environment for achieving progress on the goals. In Section V, the additional resource requirements are estimated, using the two approaches described briefly above (increasing income and increasing expenditures). The final Section concludes the paper.

# **II. The History of the Millennium Development Goals**

In 1995, development ministers from the member countries of the OECD Development Assistance Committee (DAC) committed themselves to a year-long process of reviewing past experiences and planning policies into the next century. The resulting report, _Shaping the 21st Century: The Contribution of Development Co-operation,_ published in May 1996, presented their vision for development progress into the next century. Emphasizing a partnership approach, 3
they fomnulated a broad strategic framework aimed at realizing seven goals drawn from the resolutions of international conferences and summit meetings. Subsequently, a series of expert group meetings jointly sponsored by the OECD, United Nations, and the World Bank, and including representatives of developing countries, NGOs, and United Nations funds and programs, helped to establish quantified targets for each goal and identified a set of 21 indicators for measuring progress. Collaborative efforts at monitoring and reporting on progress toward the goals culminated in the publication of A _Better World for All: Progress toward the International Development Goals_ in June, 2000.

The General Assembly of the United Nations incorporated most of the international development goals in the Millennium Declaration in September 2000, while setting new targets for reducing the proportion of people suffering from hunger, increasing access to improved water sources, improving the lives of slum dwellers, and reversing the spread of HIV/AIDS, malaria, tuberculosis, and other major diseases. The "Millennium Development Goals" (MDGs) comprise 7 social and environmental goals linked to 11 quantified targets and a new goal for "Partnership in Development" with 7 associated targets concerned primarily with improving opportunities for developing countries in the global economy (United Nations 2001). Other goals and resolutions of UN summits and conferences, though not included in the Millennium Declaration, also remain in effect. (See Appendix l.) As this paper is mainly concerned with the resource requirements for developing countries in reaching the social and environmental goals of the MDGs, it focuses on the targets and indicators associated with the first seven goals. Nevertheless, the targets of the "Partnership" goal may have a strong bearing on whether developing countries are able to attain the social and environmental goals and on the cost of doing so.

# **III. Progress on the Millennium Development Goals in the 1990s**<sup>**2**</sup>

Progress toward the Goals was uneven in the decade of the 1990s, with some countries and regions exceeding the targets established in the MDGs, while others continued to lag behind. Of particular concern is the weak performance of Sub-Saharan Africa, and to a lesser extent, of South Asia, where the majority of the world's very poorest citizens live. In 1999, there were 490 million people living in extreme poverty in South Asia, 300 million in Sub-Saharan Africa and 260 million in East Asia. This section discusses progress at the regional level toward the Millennium Development Goals.

# **_Goal 1 - Income Poverty and Hunger_**

The first of the Millennium Development Goals is to halve the proportion of people living in extreme poverty (living on less than $1.08 per day) by the year 2015. As a _single_ indicator, income poverty provides a good measure of overall well-being, since income is correlated with other social indicators such as education attainment and health status. Broad-based economic growth contributes to poverty reduction but the rate at which growth translates into reductions in

**2** The data presented in this section are taken from different sources, identified at the bottom of each table. The most recent year for which reliable data was available was used, with these dates varying from 1998 to 2001. Most of these data are available in the _WVorld Development Indicators_ (World Bank 2002) and the World Development Indicators CD ROM.

4
the number of poor depends on many factors including historic levels of income distribution, institutional constraints and policy choices.<sup>3</sup> As can be seen by reviewing Table 2, there was no simple relationship between the rate of growth and the rate of poverty reduction in the 1990s.

Between 1990 and 1999, the fastest growing region of the world was East Asia and the Pacific, where GDP per capita increased by two-thirds, increasing more than 6% annually. East Asia also experienced the greatest decline in poverty, from 27.6% to 14.2% - a nearly 50% decline. South Asia also posted strong growth in the 1990s, with GDP per capita rising by 3.6% per year on average (34% during the decade) and yet, the percentage of the population in extreme poverty fell more slowly, by 2% per year. In Eastern Europe, poverty increased sharply in the 1990s, growing by 9% per year, even though the average annual fall in GDP was lower, at 2.5%. SubSaharan Africa, with the highest proportion of people in extreme poverty, failed to grow in the 1990s and made virtually no inroads to move people out of poverty.

||**_Ta_**<br>|**_ble_**_2:Reduction_<br>|_sinPovertybyR _<br>|_egion1990-9_<br>|_9_<br>||
|---|---|---|---|---|---|---|
||**(I)**<br>**Populationin**<br>**extremepoverty**<br>**1990(%)**|**(2)**<br>**Populationin**<br>**extremepoverty**<br>**1999****_(%)_**|**(3)**<br>**Population in**<br>**extremepoverty**<br>**1999(millions)**|**(4)**<br>**Averageannual**<br>**rateofchange**<br>**in poverty**<br>**1990-99(%)**|**(5)**<br>**Average annual**<br>**rateofchange**<br>**neededtoachieve**<br>**goal(%)**<br>**(1999-2015)**|**(6)**<br>**Averageannual**<br>**changein**<br>**GDPper capita**<br>**1990-99**|
|Alldeveloping<br>countries|**29.0**|**22.7**|**1,151**|**-2.7**|**-2.8**|**1.9**|
|EastAsiaandPacific|27.6|14.2|260|-7.4|-0.2|6.1|
|EuropeandCentral<br>Asia|1.6|3.6|17|9.0|-9.4|-2.5|
|LatinAmericanand<br>Caribbean|16.8|15.1|**77**|-1.2|-3.7|1.8|
|MiddleEastand<br>NorthAfrica|2.4|2.3|7|-0.5|-4.1|0.8|
|SouthAsia|44.0|36.9|490|-2.0|-3.2|3.6|
|Sub-SaharanAfrica|**47.7**|46.7|300|-0.2|-4.2|**-0.2**|

Source: World Bank As a comparison of columns 4 and 5 in Table 2 indicates, East Asia and the Pacific is the only region on a path to meet the income poverty target of reducing by half the number of people in extreme poverty by 2015 - a goal they have actually come close to meeting in one decade. The prospects for poverty being halved in the other regions are much less favourable. In the Middle East and North Africa and Sub-Saharan Africa, the rate of poverty reduction would have to increase many times over to meet the goal, going from an average annual reduction of 0.5% or less in the 1990s to more than 4% annually until 2015. In Latin America the rate would have to triple, from 1.2% to 3.7% annually. Eastern Europe and Central Asia would need to see a dramatic turnaround, from rapidly increasing poverty to a rapid decline - a rate of progress greater than that posted by East Asia in the 1990s. In South Asia the challenge is great due to the large numbers of very poor; despite progress in the 1990s, a 50% increase in the rate of poverty reduction is needed between 1999 and 2015 to meet the goal.

The first Millennium Development Goal pairs reductions in hunger with the income poverty target. Reducing hunger is a challenge of a similar magnitude to reducing poverty; the Food and 3See _World Developnment Report 2000/2001, Attacking Poverty,_ Chapter 3, "Growth, Inequality and Poverty".

5
Agriculture Organization (FAO) of the United Nations estimates that 780 million people were undernourished between 1997 and 1999.

Several regions have made considerable progress on this goal in the 1990s, including Latin America and South Asia, still, only East Asia and the Pacific is on track to meet this goal by 2015 at current rates. In Eastern Europe and Central Asia and the Middle East and North Africa, the proportion of the population which was undernourished increased in the 1990s, posing a significant challenge if the goal is to be met. It is also useful to note that while progress on hunger is correlated with income growth and poverty reduction, this relationship is complex. For example, the rate of decline in under-nourishment in East Asia was only half the rate of decline in income poverty.

||_Table _|_3:Povertyandhunger_|_1990-99_||
|---|---|---|---|---|
||(1)<br>**Undernourished**<br>**population1990-92(%)**|**(2)**<br>**Undernourished**<br>**population1996-98(%)**|**(3)**<br>**Averageannualrateof**<br>**change1990-98(%)**|**(4)**<br>**Averageannualrateof**<br>**changenecessary toachieve**<br>**goal(%)**<br>**(1998-2015)**|
|**All**developingcountries|21|18|-2.2|-3.0|
|East AsiaandPacific|**21**|**17**|**-3.0**|**-2.7**|
|EuropeandCentralAsia||**6**|||
|Latin Americanand<br>Caribbean|13|**l**I|-2.4|-2.9|
|MiddleEastandNorth|||||
|Africa|8|IC|3.2|_-5.1_|
|SouthAsia|27|23|-2.3|-3.0|
|Sub-SaharanAfrica<br>__________________|__<br>~35|34|-0.4|-3.7|
|Source:FAO|||||

# _Goal 2 - Universal Primtary Education_

The Millennium Development Goals call for reaching universal enrolment of children in primary school by 2015, so that every child may be able to complete a full course of primary education. Progress toward this target is commonly measured by the net enrollment rate, which measures the ratio of enrolled children of official school age to the number of children of the same age in the population. Unfortunately data on net enrollment rates are available for fewer than a half of all developing countries, and even where data are available they are often late or incomplete. The enrollment rates shown in Table 4 are based on regional estimates produced by UNESCO using a special data set constructed for the 2000 Education for All conference in Dakar. UNICEF is currently developing new estimates for the U.N. Special Session on Children, to take place in May 2002.

6
||_Table_|_4:_**_Primarynetenrollm_**|**_ent_**_rates_||
|---|---|---|---|---|
||(1)<br>**Netprimaryenrollment**<br>**rate1990(%)**|**(2)**<br>**Netprimaryenrollment**<br>**rate1998(%)**|**(3)**<br>**Averageannualrateof**<br>**changerate1990-98(%)**|**(4)**<br>**Averageannualrateof**<br>**changenecessaryto**<br>**achievegoal(%)**<br>**(1998-2015)**|
|Alldeveloping countries|81|84|0.5|1.0|
|EastAsiaandPacific|96|97|0.1|0.2|
|EuropeandCentralAsia|85|93|1.1|0.4|
|LatinAmericanand<br>Caribbean|84|94|1.4|0.4|
|Middle Eastand North<br>Africa|82|86|0.6|0.9|
|South Asia|66|73|1.3|1.9|
|Sub-SaharanAfrica|54|60|1.3|3.0|

Source: UNESCO Progress toward universal primary enrollment was achieved in every region during the 1990s, with some of the fastest growth rates in enrollment in South Asia and Sub-Saharan Africa where the numbers of children out of school are the greatest. Though Sub-Saharan Africa lags farthest behind, progress in some African countries has been rapid. For example, Malawi and Uganda achieved large increases in enrollments in a very short period of time by removing impediments such as school fees. And Ethiopia, where enrollments remain very low, increased its enrollment rate by 18% a year between 1992 and 1996. Despite these gains, progress will need to be accelerated in Sub-Saharan Africa and most other regions in order to achieve the MDG education target by 2015.

Even in countries where progress toward universal primary enrollment is proceeding apace, there is concern with education quality; policy makers are questioning the value of getting more children into school if they aren't learning once they are there. Measuring progress in education attainment by school enrollment rates tells us little about learning outcomes or education quality. This is because figures on school enrollments, whether calculated on a net or gross basis, are not closely correlated with the rate of primary school completion. There is a growing body of evidence that completion of five to six years of schooling is necessary for mastery of basic competencies, so children who enroll in school and then leave before completing the primary course of study may not attain functional literacy or basic numerical skills (Mingat and Bruns 2002). Therefore, while monitoring progress on primary enrollments is important, the key indicator to monitor for measuring MDG progress is the primary completion rate, for which data is just recently being assembled.

# **_Goal_** _3 -_ **_Gender Equality_**

The Millennium Development Goals call for gender equality and the empowerment of women, with a target for equal enrollments of boys and girls in primary and secondary education, preferably by 2005, and in all stages of education by 2015. As can be seen in Table 5, girls'

> 4 This expands the coverage of the International Development Goals, which called for equal enrollments in only primary and secondary stages but also set a closer target of 2005. While progress on this goal was made in the 1990s, it was clearly not adequate to meet the 2005 goal in most regions. The Millennium Gender Equality Goal

7
enrollments are lowest in the regions with the lowest net enrollments - Sub-Saharan Africa and South Asia. An average six-year-old girl in South Asia can expect to spend six years in school - three years less than a boy of the same age - and girls based in rural areas are far more likely to drop out of school. (See Miller 2000) Nevertheless, there has been remarkable progress over the past decade in many countries where girls' enrollments have risen faster than boys. Gender differences at the primary level have been eliminated or greatly reduced in many countries such as Algeria, Angola, China, Bangladesh, Egypt, India, and The Gambia. In some countries girls' secondary school enrollments exceed those of boys.

_Table 5:_ **_Ratio_** _of girls to boys_ **_in primary and_** _secondary school_

||(1)<br>**Ratioof**<br>**girlstoboys**<br>**1990(%)**|**(2)**<br>**Ratioof**<br>**girlstoboys**<br>**1998(%)**|**(3)**<br>**Averageannualrateof**<br>**change 1990-98(%)**|**(4)**<br>**Averageannual rateof**<br>**changenecessaryto**<br>**achievegoal(%)**<br>**(1998-2015)**|
|---|---|---|---|---|
|Alldevelopingcountries|82|86|0.6|2.2|
|EastAsiaandPacific|84|89|0.8|1.6|
|EuropeandCentralAsia|90|88|-0.4|1.9|
|LatiniAmericanand<br>Caribbean|98|99|0.1|0.2|
|MiddleEast andNorth<br>Africa|79|84|0.8|2.5|
|SouthAsia|68|78|1.7|3.6|
||Sub-SaharanAfrica|79|8CI|0.2|3.2|

Source: World Bank Improving girls' enrollments involves overcoming the social and economic obstacles that stop parents from sending their daughters to school. For many poor families the economic value of girls' work at home exceeds the returns to schooling. Enrollment rates for girls from wealthy families tend to be higher, but there is little evidence of a correlation between girls' enrollment rates (relative to boys'), average income, and the distribution of income across countries. (Hanmer and Naschold 2000)

# _Goals 4_ **_and_** _5 -_ **_Infant,_** _Child_ **_and_** _Maternal_ **_Mortality_**

> The Millennium Development Goals call for reducing under-5 child mortality rates by two-thirds and maternal mortality ratios by three-quarters of their 1990 levels by 2015. These are widely perceived to be ambitious targets, but progress in reducing infant and child deaths in many countries demonstrates that they are feasible.

> extends the date for equality to 2015 and increases the challenge by including tertiary education as well. Thus, while the MDGs do not set aside the earlier date of 2005 - indicating that more immediate progress is preferable - they do recognize that additional time will be needed to meet this goal in many countries.

8
||**_Table_**_6:_<br>**(I)**<br>**Deathsper**<br>**1000livebirths**<br>**1990**|_Under-5mortalityrat_<br>**(2)**<br>**Deathsper**<br>**1000livebirths**<br>**2000**<br>._____________________|_es_<br>**(3)**<br>**Averageannual**<br>**rateofchange**<br>**1990-2000**(%)<br>_____________________|**(4)**<br>**Averageannual rateof**<br>**changenecessaryto**<br>**achievegoal(%)**<br>**(2000-2015)**|
|---|---|---|---|---|
|Alldevelopingcountries|88|84|-0.5|-7.0|
|EastAsiaandPacific|55|45|-2.0|-6.0|
|Europe and CentralAsia|34|25|-3.1|-5.3|
|LatinAmericanandCaribbean|49|37|-2.8|-5.5|
|MiddleEastandNorthAfrica|72|54|-2.9|-5.4|
|SouthAsia|121|96|-2.3|-5.8|
|Sub-SaharanAfrica|155|162|0.4|-7.6|
|Source:WHO/UNICEF|||||

In the 1990s, all regions except Sub-Saharan Africa reduced under-5 mortality rates, as seen in Table 6. However, no region is on track at this time to meet the 2015 goal. Annual reductions in child mortality of between 5.3% and 7.6% will be required to meet this goal. Fortunately, much is known about the causes of infant and child mortality, including the importance of clean water and the benefits of oral rehydration therapy for diarrhea, the role of vaccinations, especially against measles, the value of insecticide treated nets and prophylactics for malaria prevention & treatment, the importance of pre-natal and post-natal interventions in reducing mother to child HIV transmission and education of mothers in basic infant and young child care.

Unfortunately, progress in under-5 mortality has been slowest among the poorest countries where the problem is most acute. Between 1990 and 2000, 31 low and middle-income economies reduced their under-five mortality rates fast enough to achieve the goal of a two-thirds reduction by 2015. Of these, 9 were upper middle income, 16 lower middle income, but only 6 were low income. Of the 15 that suffered increasing mortality rates, 10 were low income. Still the regional and income-group averages disguise much variation. Two of the countries making the fastest progress over the decade were Tajikistan and Azerbaijan, both low income countries, while Botswana, an upper middle income country that has been badly affected by the spread of HIV/AIDS, saw under-five mortality rates rise from 62 to 100 per 1,000 live births in just 10 years.

Maternal mortality is much more difficult to measure accurately. Deaths as a result of pregnancy or child birth are relatively rare and may not be captured in general purpose surveys or those with small sample sizes. Furthermore, maternal deaths may be underreported in countries that lack good administrative statistics or where many births take place outside of the formal health system. What makes maternal mortality such a compelling problem is that it strikes exclusively young women undergoing what should be a normal process and because the difference in outcomes is so different between those who live in rich countries - where the average maternal mortality ratio is around 21 deaths per 100,000 live births - and those who live in poor countries where the ratio may be as high as 1,000 deaths per 1 00,000 live births. (AbouZhar 2000) 9
<!-- Start of picture text --> Table 7: Maternal mortality ratio<br>(1) (2) (3) (4) (5)<br>Maternal mortality Births attended by Births attended by Average annual rate Average annual<br>per 100,000 live skilled health skilled health of change 1990-99 rate of change<br>births 1995 personnel 1990 personnel 1999 (%) needed to reach<br>90% attendance<br>____________________ (1999-2015)<br>All developing<br>countries 430<br>East Asia and<br>Pacific 140 50 _ 61 a 2.2 2.4<br>Europe and Central<br>Asia 60 _<br>Latin American and<br>Caribbean 190 72 77 _ 0.7 1.0<br>Middle East and<br>North Africa 240 50 61 2.2 2.4<br>South Asia 430 . _<br>Sub-Saharan Africa 1,120 49 46 _ -0.7 4.2<br><!-- End of picture text --> a. Includes all Asia except India and China. Source: WHO / UNICEF Because of the lack of comparable time-series data, it is difficult to assess progress toward this goal. The last global estimates of maternal mortality for 1995 concluded that about 500,000 women died during pregnancy and childbirth, most of them in developing countries. Data on the proportion of birth attended by skilled health personnel are indicative and are presented in Table 7 above. In Latin America, where the proportion of births attended by skilled health care workers is high, maternal mortality is relatively low, while very high maternal mortality occurs in Africa, where skilled attendants are not readily available. Significant progress in reducing maternal mortality will, however, require more than increasing the number of skilled birth attendants: deaths in childbirth often involve complications such as hemorrhage that require fully equipped medical facilities. The maternal mortality ratio is thus an indication of the capacity of the health care system to meet the needs of the entire population.

# _Goal 6 - HIVIAIDS, malaria, and other diseases_

The Millennium Development Goals also target HIV/AIDS, malaria, tuberculosis and other major epidemic diseases, which pose significant threats to economic and social progress in developing countries. Unfortunately, the data on these illnesses, including AIDS, is often incomplete or collected on an irregular basis. In many countries only one reliable estimate has been made for the HIV/AIDS infection rate, so it is impossible to accurately determine rates of change. The targets for epidemic diseases are still under discussion and have not yet been fully quantified.

In 2000, 34.7 million adults and 1.4 million children were living with HIV/AIDS, and over 95 percent of them are in developing countries (see Table 8 below). The most devastated region is Sub-Saharan Africa (70 percent of cases) followed by South and South-East Asia (16 percent). For the first time, however, HIV incidence has fallen slightly in Sub-Saharan Africa in 2000, partly because successful prevention programs have reduced infection rates, particularly in Uganda, and also because the epidemic has already affected many people in the sexually active population. In Eastern Europe and Central Asia, the number of adults and children living with 10
HIV/AlDS in 2000 increased 700,000 or 67 percent from just a year ago. Most of the newly infected are men, and the majority of them are injecting drug users.

|_Table8:HIVAIDS(figure_|_sfor2001)_||
|---|---|---|
|**Region**<br>**Adultsandchildrenliving**<br>**withHIV/AIDS**|**Adultsandchildrennewlyinfecte**<br>**with HIV**|**dAdultprevalencerate**|
|Sub-Saharan Africa<br>28,100,000|3,400,000|8.4%|
|Middle East&NorthAfrica<br>440,000|80,000|0.2%|
|SouthandSoutheastAsia<br>6,100,000|800,000|0.6%|
|EastAsia&Pacific<br>1,000,000|270,000|0.1%|
|LatinAmerica&Caribbean<br>1,820,000|190,000|0.6%|
|EastemEurope&Central Asia<br>1,000,000|250,000|0.5%|
|Highincome<br>1,515,000|75,500|_0.5%_|
|World<br>41,490,000|5,141,000|1.2%|

Source: UNAIDS

# _Goal 7- Environmental sustainability_

The proposed Millennium Development Goals specify three targets intended to capture the spirit of the Millennium Declaration. The first is very broad and unquantified. It calls for the integration of principles of sustainable development. The second adopts a version of the World Water Forum goal of providing access to a sustainable water source by 2025 to all people. Although the reference dates are not yet agreed, the intention is to reduce by half the proportion of those who lack access to safe drinking water. The third environmental target focuses on urban slum dwellers. At this point, it too lacks a well specified target, but has associated with it indicators of the proportion of people with access to improved sanitation services and the proportion of the population with secure land tenure. Additional work remains to be done to validate the proposed indicators and specify operational targets for the environmental goal.

# _Access to water_

Between 1990 and 2000, about 900 million people gained access to an improved water source. However, this increase in the number of people served was just sufficient to keep pace with population growth. An improved water source refers to any form of water collection or piping used to make water regularly available. While the goal calls for access to "safe drinking water" there is no practical measure of whether water supplies are safe. Even so, connecting households to a reliable source of water that is reasonably protected from contamination would be an important step in improving their lives. In 2000, 1.2 billion people are still without access to an improved water source, 40 percent of whom live in East Asia and the Pacific and 25 percent in Sub-Saharan Africa. Access was far better in urban than in rural areas.
||**_Table_**_9:_|_Access_**_toimproved wa_**|**_tersource_**||
|---|---|---|---|---|
||**_(1) _**<br>**Withoutaccessto**<br>**improved watersource**<br>**1990**|**(2)**<br>**Withoutaccess to**<br>**improvedwatersource**<br>**2000**|**(3)**<br>**Averageannualrateof**<br>**change1990-2000**(%)|**(4)**<br>**Averageannualrateof**<br>**changenecessaryto**<br>**achievegoal(%/6)**<br>**(2000-2015)**|
|Alldeveloping countries|27|21|-2.5|-2.9|
|EastAsiaandPacific|30|25|-1.8|-3.4|
|EuropeandCentralAsia|..|10|||
|LatinAmericanand<br>Caribbean|19|15|-2.4|-3.0|
|MiddleEastandNorth<br>Africa|16|11|-3.7|-2.1|
|SouthAsia|20|13|-4.3|-1.7|
|Sub-SaharanAfnca|51|45|-1.3|-3.8|
|Source:WHO|||||

As can be seen in Table 9, several regions have made good progress on improving access to an improved water source, including South Asia and the Middle East and North Africa, which are on track to meet the Millennium Development Goal in advance of 2015. Unfortunately, progress in East Asia and the Pacific and in Sub-Saharan Africa is not on a path to meet the MDG, and will have to be doubled and tripled, respectively, to meet this target.

# _Access to sanitation_

In the proposed Millennium Development Goals access to an improved sanitation system has been coupled with the slum dwellers target. Sanitation remains vitally important for rural residents as well. In fact, sanitation plays a fundamental role in improving health outcomes. Lack of clean water and basic sanitation are critical causes of the prevalence of disease transmission by feces in developing countries. An improved sanitation system implies disposal facilities that can effectively prevent human, animal, and insect contact with excreta. The use of sanitation systems does not, however, assure that effluents are treated to remove harmful substances before they are released into the environment.

In 2000, 70 percent of the people who do not have access to sanitation live in East Asia and the Pacific and South Asia. These regions made great progress in serving more people with sanitation over 10 years, but could not catch up with population growth. Data in Table 10 indicate that the rate of progress would have to more than double in East Asia and quintuple in South Asia to meet this goal. It is also worth noting that there are enormous variations in the definition of improved sanitation among countries. For example, in many African countries the population "without access' to improved sanitation means people with no access to any sanitary facility. In Latin America and the Caribbean, however, it is more likely that those "without access" have a sanitary facility, but the facility is considered unsatisfactory. As Table 10 shows, Latin America and the Middle East are the regions which made the most progress on this indicator in the 1990s. All regions except Sub-Saharan Africa have a lower rate of access to sanitation compared to access to an improved water source.

12
||**_Table10: A_**|**_ccesstoimprovedsani_**|**_tationservices_**||
|---|---|---|---|---|
||**(1)**<br>**Withoutaccessto**<br>**sanitation1990**|**(2)**<br>**Withoutaccessto**<br>**sanitation2000**|**(3)**<br>**Averageannual rateof**<br>**change1990-2000(%)**|**(4)**<br>**Averageannualrateof**<br>**changenecessaryto**<br>**achievegoal(%)**<br>**(2000-2015)**|
|All**developing**countries|56|48|-1.5|-3.6|
|EastAsiaandPacific|62|53|-1.6|-3.6|
|**Europe**andCentralAsia|**..**|._|_..|_..||
|LatinAmericanand<br>Caribbean|28|22|-2.4|-3.0|
|MiddleEastandNorth<br>Africa|22|17|-2.6|-2.9|
|South Asia|69|64|-0.8|**4.1**|
|Sub-SaharanAfnica|45|45|0.0|-4.6|

Source: WHO

# IV. **Development progress and the policy environment**

Why have some countries done better than others in working toward the development goals and what implications does this have for how best to use development assistance to reach the goals? Recent empirical studies have shown that the _policies_ countries follow are important determinants both of economic growth<sup>5</sup> and of whether the poor share in the benefits of this growth6. Graph 1 below, from Collier and Dollar (2001), shows that countries with better economic policy saw faster increases in the growth of income of the poor in the 1990s. These countries also saw greater progress in the human development goals, such as primary education and reductions in infant mortality. Uganda is an example of a poor country that has made significant improvements in the policy framework, including macroeconomic and structural policies, public sector management and social inclusion, and which has registered substantial progress in most of the international goals (see Box 1).

> 5 Studies linking good policies with growth include Burnside and Dollar (2000), Hansen and Tarp (2000) and Collier and Dollar (2000).

> **6** Collier and Dollar (2001) link the quality of economic policy with the growth of incomes of the poorest quintile in 80 countries and find a positive correlation.

13
Fig. 1 Growth of Income of the Poor and Economic Policy in the 1990s <!-- Start of picture text --> Growth of income of the poor<br>(percent per year)<br>0.08<br>*Vietnam<br>0.04 *Ucanda Ghana<br>* Nepal _ ~<br>0 -_Guyana<br>-0.04 -0.04 ia Et+pa * Madagascar*~~j Zambia<br>* Cote d'lvoire<br>-0.08<br>Nigean:<br>-0.12<br>Poor < Good<br>Economic policy<br><!-- End of picture text --> Source: Collier and Dollar (2001) Collier and Dollar also find that aid effectiveness and the quality of policies are positively correlated. In a country with good policies, aid has double the impact on investment-an additional 1 percent of GDP in aid results in 0.9 percent additional gross investment-as it does in a country following bad policies. The implication is that countries with many poor citizens and good policies should receive more aid than they do today.<sup>7</sup> Collier and Dollar (2001) show that if poverty and the quality of policies are taken into account when distributing aid, the effectiveness of aid could be increased nearly two-fold. Were more aid is spent in good policy countries, where its marginal impact is greater, they estimate that 19 million people a year could be lifted out of poverty, instead of the current 10 million people. Furthermore, if the development community supports poor-policy countries in their efforts to improve their policies, the payoffs to poverty reduction and progress in the other development goals will be much greater.

# Box 1: **Making Progress Toward the Goals: Uganda**

In the 1990s, Uganda made substantial progress towards the international development goals. Between 1992 and 1999, the share of Ugandans living in poverty fell from 56 percent to 35 percent. Net primary school enrollments increased from 62.3 percent in 1992 to 83.8 percent in 1997. The ratio of girls to boys rose from 79.8 percent in 1990 to 97 percent in 1997, and continues to rise at 1 percent a year. Although morbidity increased from 1992 to 1997 (due mainly to HIV/AIDS and malaria), since then the health status of all Ugandans appears to be improving. Under-5 mortality has declined (from 165 to 162), There has also been an improvement in child malnutrition, resulting in gains in stunting.

7 Collier and Dollar (2001) also state that aid has a limited impact on poverty reduction in middle-income countries because a relatively small share of the population in these nations is in poverty, which suggests that aid to these countries would not be the most efficient allocation in terms of poverty reduction per dollar spent.

14
How did Uganda manage to make such progress? Three factors worked together.

**Macroeconomic stability:** Starting in 1987 the government introduced macroeconomic reforms aimed at restoring and maintaining macroeconomic stability. GDP growth has averaged close to 7 percent since 1987; inflation has averaged 5 percent since 1992; domestic govemment revenue doubled from 6 percent of GDP in 1986 to close to 12 percent currently. Government has been able to increase its expenditure from 8.6 percent of GDP in 1986 to 20.6 percent in 1999.

> **Shifting public resources towards poverty reduction:** The Medium-Term Expenditure Framework (MTEF), introduced by the government in 1992, has contained aggregate spending within the resource envelope and delivered the desired composition of spending. In 1994, Government expenditures on education amounted to 20 percent of total public spending, roughly equal to expenditures on both public administration and security. By 1999, the share spent on education had risen to 26 percent, compared with 22 percent for public administration and 16 percent for security.

Improving service delivery: In 1995, school survey results had shown that only 20 percent of the public non-salary education spending reached schools. Rather than shying away from this bad news, the government instituted several measures to improve transparency: Regular publication in the main newspapers and broadcast by radio of monthly transfers of public funds to districts; all district headquarters and govermnent primary schools were required to maintain public notice boards and post monthly transfers of finds; districts were required to pay all conditional grants for primary education directly on individual accounts. The result has been dramatic. A tracking survey in 1999 showed that schools now receive more than 90% of the non-wage spending.

> As the example of Uganda makes clear, the policy environment in a country can affect not only the rate of economic growth, but also the effectiveness of public service delivery and, hence, educational and health outcomes. The effect is compounded because economic growth typically increases the demand for education and health care, which further increases the effectiveness of service delivery. The challenge in making progress toward the development goals is to provide development assistance where it will do the most good: to countries that have demonstrated their ability to use assistance effectively and to those countries that need help in changing policies to increase their opportunities for growth and human development.

# V. Estimating **the Cost of Meeting the Development Goals**

In light of the unprecedented consensus on the development goals, but the highly uneven performance across countries, a natural question to ask is: What additional effort will it take to achieve the goals by 2015? Although this effort will depend mostly on actions by the countries themselves-improvements in public policy, allocation of public expenditures, and effective service delivery--the international community can and should play an important role. How much can additional financial assistance improve the chances of reaching the development goals? And how much is required?

Any attempt to determine the aggregate costs of achieving the development goals is a highly speculative exercise. Not only do countries vary enormously in their ability to use aid effectively, but the relationship between foreign aid (or other public resources) and outcomes is a highly uncertain one. Recognizing the possible errors associated with such an exercise, we approach the problem from two different perspectives.

15
We first calculate the additional aid required to meet the income poverty goal by estimating the additional growth required to raise average incomes by enough to reach the goal, and then estimating the additional aid required to attain that growth. This procedure yields an estimate of an additional $54 to $62 billion in foreign aid per year to reach the income po'verty goal. Growth also has a powerful effect on progress toward the other goals, especially those associated with health (infant mortality, maternal mortality, communicable diseases) and education (primary enrollment, gender equality). The mechanism by which growth affects these other goals is twofold: income growth increases demand for health and education services; and it increases public revenues which can be spent on the supply of these services. In addition, some of the additional foreign aid will be spent directly on the social sectors, increasing access and supply of these services too. Hence, by calculating the additional aid required (via the growth channel) to achieve the income poverty goal, we are approximating the aid required to reach the social and environmental goals.

Alternatively, we can attempt to calculate the additional public resources that would be used in meeting the social and environmental goals. As noted earlier, these calculations face enormous uncertainties, not least because the link between public spending and health and education outcomes is tenuous at best. In addition, there is a difference between the average cost of providing the services to those already in the system, such as children enrolled in school, and the incremental cost of bringing those outside the system-such as the children not in school-into it. Most of our calculations are based on the a.verage cost method and may either over or underestimate the incremental costs in particular countries. With these qualifications, as a rough approximation, we can estimate the additional costs of meeting the education goals (between $10 and $15 billion); and the additional costs of meeting the health goals (between $25-30 billion). The figure for meeting the health goal is quite close to estimates reached by other studies, including recent work by the Commission on Macroeconomics and Health (albeit using different assumptions and methods). Adding these numbers together, and adjusting for the other goals (environment and water) by another $10 billion yields a total lower-bound figure of _$45_ billion, which is somewhat less than the resources required to meet the income poverty goal. Despite the huge uncertainty surrounding these estimates, the fact they seem to arrive at the same order of magnitude gives us confidence that the overall estimate of $54 to $62 billion in additional aid is not unrealistic.

# **_In_** _comne, poverty reduiction, and development assistance_

In this section we estimate the amount of official development assistance (ODA)8 needed to raise the economic growth rate of countries by enough to achieve the poverty reduction goal Implicitly we assume that the additional amount of ODA needed to achieve the poverty goal will finance, inter alia, the effort to achieve the social and environmental goals, although it is not possible to provide a complete, country-by-country reconciliation of ODA receipts and expenditures. Thus it is possible in some countries that the ODA needed to achieve the projected level of growth for poverty reduction would be insufficient to finance the needed additional expenditures in

> 8 The Development Assistance Committee of OECD recognizes two forms of aid: official development assistance (ODA) and official aid. The latter comprises flows that meet the concessionality requirements of ODA but are directed to certain transition economies or to other countries and territories in part 11 of DAC's list of aid recipients. In this analysis we include official aid as part of ODA, but exclude those countries considered by the Bank to be high income.

16
education or health. Or the reverse could be true. Given the large range of the estimates and the critical importance of achieving efficient use of these resources, greater precision in matching supply to demand does not seem warranted.

Although there is much that we do not know about the connection between aid, public expenditures, and poverty reduction, the empirical studies by Collier and Dollar provide evidence that poor countries with good policies benefit from aid. Collier and Dollar (2001) ask whether a given level of aid could be allocated more efficiently to produce a greater reduction in poverty levels. They estimate an equation for the efficiency of aid which takes into account the policy environment and the extent of poverty. In their "poverty-efficient" allocation of 1998 ODA, 68 percent of all assistance would go to countries with good policies and high poverty, while 28 percent would go to countries with poor policies and high poverty. The result is that a total of $43.6 billion in ODA would go to 43 countries that had actual ODA receipts of only $17.6 billion in 1998, an increase of 150 percent. Although there is no guarantee that this amount of aid would allow the recipient countries to achieve the specific goal of reducing poverty rates to one-half of their 1990 level, the numbers help to illustrate the increased flows of ODA to selected countries that would be warranted by the objective of efficient poverty reduction.

In the estimates below, we also attempt to incorporate some estimate of the role played by the prevailing policy environment and to look at the consequences of policy improvements. As Collier and Dollar point out, providing assistance with no consideration of the policy environment leads to an inefficient allocation of resources. In other words, the cost of meeting the development goals is not fixed, but will depend on growth, policies and the efficiency of aid allocation.

In 1999, low- and middle-income countries received approximately $57 billion in net official development assistance and official aid (ODA) from members of the OECD Development Assistance Committee and from concessional loans and grants from multilateral institutions. This is less than the $63 billion in net ODA provided by DAC members in the same year, the difference being in part official aid to high income countries ($1.8 billion) and contributions to non-governmental organizations and in part the difference between contributions to multilateral institutions and the net amounts provided by those institutions in a particular year. Of the $57 billion, approximately $43 billion can be accounted for through direct transfers to developing countries. The balance went to regional initiatives and unallocated costs. In the discussion below, we assume that unallocated and regional aid was distributed proportionately across all recipient countries.

To estimate the additional ODA needed to reduce poverty rates to half of the 1990 levels, we begin with a simple, "two-gap" growth model in which growth depends upon the level of investment and the efficiency with which investment is turned into output<sup>9</sup> "1<sup>0</sup> . Investment funds come from domestic savings, official aid, and other non-aid flows. For a given rate of growth of

> 9 The workhorse development model of the 1960s and 1970s, the two-gap model has been criticized as being inappropriate for projections (Easterly [1999]) and for analyzing policies (Devarajan et al. [1997]) and poverty (Devarajan et al. [2000]). Nevertheless, the simple model used here is a transparent and flexible framework for examining, for a large number of countries, the aid requirements of achieving the poverty goal. **10** See Appendix 2.

17
per capita GDP, the rate of poverty reduction depends upon the shape of the income distribution and the level of average income relative to the poverty line. Working backward from the existing poverty level and distribution of income, the aiverage rate of growth required to reach the poverty goal in 2015 determines the amount of additional investment needed. For the poorest countries, this need is assumed to be met by official development assistance.

To capture the basic elements of an efficient allocation of aid, we divide developing countries into two groups. The first comprises 86 countries for which aid is unlikely to affect their ability to reach the goal. This includes countries that are already "on track' on the basis of their current resources. It also includes countries that may not be on track, but lor which increasing aid will have little effect on their growth rates. I This group has a total population of 4 billion people, an average income of almost $1400, and received over $40 billion a year in net ODA flows in 1999. We assume that aid flows to these countries, reflecting existing commitments and political agendas, will continue at present levels. The second group comprises 65 countries, most of them low-income, which may not reach the goal, absent an increase in aicd resources. In 1999 they had a total population of I billion, an average income per capita of less than $400 and received $ 18 billion in net ODA flows. While many of the members of the second group were included in Collier and Dollar's poverty-efficient aid allocation (see above), they are not identical. Of the 65 countries in group II, Collier and Dollar wxould have allocated ai.d to 40. These 40 received approximately $20 billion in ODA in 1998; Collier and Dollar's poverty efficient aid would have increased that to $37.4 billion.

> Given the key role of policies in aid effectiveness, we divide the second group of countries between thiose with higher and lower levels of policy effectiveness, looking at issues such as the macroeconomic policy framework, structural policies, the quality of public sector management and social inclusion. Forty-three countries were classified as having relatively good policies according to these criteria, while 22 were classified as having relatively poorer policy frameworks. For the better performing countries, we assume that their policy performance (as represented by the savings rate and incremental capital-output ratio) is equal to that of the

> 1990s.12 Under this assumption, aid to these better-perforrning countries would have to rise to $54 billion per year by 2003-05, or $39 billion a year more than in 1999, to be on track to meet the poverty goal (see Table 11).

For the worse performing countries we consider two scenarios based on policy performance. Under the first, improved policies lead to improvements in savings rates and incremental capitaloutput ratios (ICORs) to at least equal the average of the better performing countries. To meet the poverty goal, aid to the these countries would have to increase from $3 billion to $18 billion a year by 2003-05. Under the second scenario, the savings rate and ICORs of the worse performing countries do not improve compared with the 1990s, and aid requirements would have to rise to $26 billion a year. Improvement in ipolicies in the worse-performing countries results in This includes several countries that receive only limited amounts of aid relative to their GDP and have relatively high average incomes, but where an unequal distribution of income means that they have significant numbers of poor.

12 There are some exceptions. Countries with missing data are assigned average values of ICOR (7) and savings rates (7.5). Countries with declines or stagnation in output growvth (so the ICOR is meaningless) are assigned ICORs close to the maximum for the bulk of countries (10). A.nd countries with negative savings rates are assigned a savings rate of zero.

18
a savings of $8 billion in the cost of meeting the poverty goal, more than double the aid provided to these countries in 1999.13

**_Table 11: Additional aid levels required to halve poverty_**

||**Current**<br>**ODAlevels**|**AdditionalODA**<br>**reachpove**|**requiredto**<br>**rtygoals**|
|---|---|---|---|
||**1999**<br>**($billions)**|**Improved**<br>**policies**|**Current**<br>**policies**|
|Officialdevelopmentassistance|57|54|62|
|GroupIcountries|40|||
|GroupIIcountries|18|54|62|
|GroupIIcountrieswithgood policies|15|39|39|
|GroupIIcountrieswithpoorpolicies|3|15|23|
|Totalaid(%ofhighincome OECDGNP)|0.25|0.37|0.45|

Both increased aid levels and improved policy performance will help to increase progress toward the goal of halving poverty by 2015. Under all scenarios, significant increases in aid to the group II countries are needed to meet the goal, but the countries with worse than average policies "need" a much greater percentage increase in aid to halve poverty. The projections shown in Table 11 suggest that between $39 and $54 billion in additional aid will be needed. This range represents the amount of aid required to enable reforming countries to reach the poverty goal. If the worse-performing countries fail to reform and are still given aid, the total bill could be as high as $62 billion.

There are serious limitations to these estimates, and they should be used cautiously. The historical data on income growth and poverty reduction are particularly weak in the poorest countries and in some countries where data are available a growing discrepancy between growth in income measured by the national accounts and mean income measured through household surveys has been observed (see Ravallion 2001). Furthermore, the projections depend critically on the assumption that changes in aid flows do not affect savings rates and ICORs. It is also assumed that the poor share equally in the benefits of growth. While this may be true on average, there are substantial differences among countries that could affect the aggregate level of aid requirements. Also, the rate of poverty alleviation in response to growth depends critically on the depth of poverty - the distribution of personal income in the vicinity of the poverty line.

These calculations assume that, with the exception of foreign aid, all other international exchanges continue as "business as usual." Specifically, we assume that private capital flows, already quite small in these countries, will not increase as a share of GDP. If instead private capital flows increased by one percentage point faster than GDP, the difference in the aid requirement would be negligible. If private capital flows in the weak-policy countries rose to the average of those with adequate policies, the additional aid required to meet the income poverty goal would be reduced by $0.5 billion.

**13** It is worth noting that this result was quite sensitive to the level of improvement we assumed in the policy framework. Under more optimistic assumptions about improvements in the macroeconomic, structural and public management frameworks, the additional aid saved would be $21 billion, rather than $8 billion.

19
We also assume that the world trading system will remain essentially unchanged-becoming neither more protectionist nor more open. If the Doha summit produces tangible results, developing countries should gain greater market access. For developing countries as a group, the benefits of increased market access would be much larger than financial transfers through official development assistance over the period to 2015. Unfortunately, these gains would not substitute for development assistance in helping _all_ countries reach the MDGs. There are two reasons.

First, Africa plays such a small part in world trade (and already has preferential access in certain areas) that the geographic distribution of trade-related benefits favors the high-trading, low- and middle-income countries. A general-equilibrium-model simulation of reducing protection by half worldwide yields a welfare gain in 2015 of about $200 billion for developing countries as a whole. But only $2.4 billion of that accrues to Sub-Saharan Africa, and another $3.3 billion in South Asia outside India. While small, these gains are not trivial: when combined with the price changes and distributional effects of trade reforms, they would lift an additional 10 percent of Africans out of poverty<sup>14</sup> .

Second, these low-income countries are too poor to benefit fully from multilateral trade liberalization without aid. To take advantage of market access, they require hefty investments in trade-creating infrastructure, transportation, and telecommunications, as well as investments in trade-related government institutions, such as better customs and tax administration, and overall management of public investment. These in turn require development assistance-"aid for trade". In short, even though it will undoubtedly benefit developing countries by stimulating growth and reducing global poverty, reducing trade barriers is not sufficient to eliminate the need for aid in those countries with the largest income-poverty MDG gal).

Finally, there is the question of whether this $39 - $54 billion in aid, even if accompanied by improvements in policies and institutions, would strain the "absorptive capacity" of recipient countries. There are different ways to look at absorptive capacity. One way is to examine whether there are diminishing returns to aid. One piece of recent research on the growth impact of additional aid calculates that, for countries which have policies and institutions that are among the best of developing countries, a "saturation point"-the point beyond which the growth impact is zero-is reached when aid is around 30 percent of GDP. By contrast, the saturation point for countries with extremely weak policies and institutions is calculated to be around 6 percent of GDP. Applying these estimates to our estimates, we find that for four of the 43 Group II countries with adequate policies, the saturation point would be reached. On average, the additional aid will leave the Group II countries with aid-to-GDP levels that are 35 percent of their saturation point. In short, for most Group II countries with adequate policies, absorptive capacity is unlikely to be a problem.

To be sure, these estimates may understate the effect of the absorptive capacity constraint. If there are diminishing returns to aid throughout, the amount of additional aid required to meet the income poverty goal would be higher. However, improvements in donor policies could mitigate

> 1 4This is not enough to offset the increase in population growth, so the number of people living in poverty in Africa would still rise during the period.

20
this effect. Much of the diminishing returns to aid is the result of congestion effects-too many projects absorbing the limited technical and managerial talent in developing countries. A shift by donors towards simplified and harmonized aid modalities could therefore be an important element in reaching the goals. We emphasize that we are working to achieve the MDGs countryby-country. This strategy is different from an aid allocation scheme designed to maximize global poverty reduction.

No separate estimates were made of the cost of achieving the hunger target. It is generally agreed that economic growth combined with slowing population growth and continuing innovations in agriculture will be sufficient to reach the goal of reducing the rate of undernourishment by half.'<sup>5</sup> However, some estimates suggest that alleviating malnutrition in children will require, in addition to income growth, "additional direct measures to combat malnutrition."'<sup>6</sup> Here we assume that additional spending on nutrition programs could be financed out of the additional ODA directed toward meeting the under-5 mortality goal.

# _Estimating the cost of meeting the targetsfor education, health and the environment_

In this section, we estimate the costs of attaining the specific education, health and sustainable development targets of the development goals, excluding the poverty and nutrition goals. Investments in education, health and the environment have high rates of return and contribute to poverty reduction. Likewise, economic growth and poverty reduction are likely to increase demand for education and health service, improving the chances of achieving these goals. If the linkages between poverty reduction and improving social indicators are ignored, we run the risk of overstating the cost of achieving the goals. For this reason, we do not include a separate estimate of the cost of poverty reduction in this section. At the same time, we do not know the exact relationship between progress on these social indicators and poverty reduction so it is possible that additional resources would be required to meet the poverty reduction target even if the social targets were met (or vice-versa). Therefore, the estimate provided in this section should be interpreted as suggesting the order of magnitude of resources required rather than the specific amount.

Estimates of the costs of meeting specific human development goals, such as those for education and health, are highly problematic. The relationship between public expenditures and outcomes is complex and empirical evidence from developing countries suggests only a weak link between public spending on education and school enrollments, or between health expenditures and mortality or disease<sup>17</sup> . First, these human development outcomes depend on household characteristics, such as whether the mother is educated, or the family can afford to send the children to school. Second, as noted earlier, there is a difference between the average cost of providing services, and the incremental cost of enrolling a child or treating a patient. While average costs are reported below, they should not be automatically interpreted as incremental costs. Third, public spending does not always translate to outcomes because the delivery of public services, which is the vehicle for translating policies into desired outcomes, is often highly

> _15_ See "The State of Food Insecurity in the World 2000," Rome: Food and Agricultural Organization, 2000, p 19.

> 16 Harold Alderman and others, "Reducing Child Malnutrition: How Far Does Income Growth Take us?", March, 2001, p. 18.

> **7** See Filmer (1999), "A Note on Public Spending and Health and Education Outcomes".

21
Box 2: Failures in public service delivery One reason for the weak link between public expenditures and outcomes is that public service delivery in many developing countries is notoriously poor. The following examples illustrate the extent and nature of the problems.

1) A study in India documents teachers arriving ,drunk with some regularity and high levels of absenteeism.

2) In a survey in Zimbabwe, 13% of respondents gave as a reason for not delivering babies in public facilities that "nurses hit mothers during delivery", 22% that nurses ridiculed mothers for not having baby clothes, and 16% that mothers were ordered to clean linens soon after delivery; these results were confirmed by a survey of nurses where 11 % explained it as harassment by nursing staff.

3) In Guinea in 1984, 70% of government drugs disappeared.

> 4) World Bank studies (1994) find 30-40% misappropriation of drugs in dleveloping countries.

5) In outlying regions of Indonesia, vacancy rates in public services are 50% or more.

6) Costa Rica's absenteeism rate is 30% in public health facilities.

inefficient (see Box 1 on Uganda and Box 2 on examples of failures in public service delivery). Fourth, in the case of infant mortality for example, it is not a single, public-health intervention such as immunization, but a combination of factors, including access to potable water and mothers' education, that influences its decline. Finally, in the case of maternal mortality, data quality is so poor that it is difficult to estimate the size of the problem, much less the cost of meeting the goal.

The most accurate way to estimate the cost of meeting the social and environmental goals is at the country level. Country work, and in some cases, even sub-national studies, allow an assessment of the efficiency of public service delivery, the costs of reaching the most vulnerable populations and the ability to identify speci,fic interventions which are required to accelerate progress toward the targets. Estimates of the relationship between economic growth and poverty reduction are also much more meaningful at the country level. The World Bank is undertaking work in a selected group of countries, through the Poverty Reduction Strategy Paper (PRSP) consultative process, to identify the major constraints to accelerating progress toward the education, health, and environmental goals, including assessments of the resources (time, human capital, institutional, policy as well as monetary) required to meet the goals. Some country-level work has already been advanced, including estimates of the cost of meeting the health and education goals in Honduras and estimates for meeting the universal primary education objective in several African countries. This country-level work, together with other international experience in these sectors, including cross-country analytical work on the links between public expenditures and outcomes, form the basis for the estimates provided in this section.

# _Eduicationr_

Estimating the cost of attaining universal primary education by 2015 is an exercise beset by many of the problems described above: weak, and sometimes contradictory, evidence on the relationship between public expenditures on education and enrollments (due in part to problems in public service delivery); difficulty in disentangling the complementary roles of supply and 22
demand for education in increasing enrollments; and poor data quality. Table 12 below provides four estimates for the additional annual resources required to meet the target for universal primary education, based on a unit cost approach. In column A, an average cost per student schooling in developing countries, $110.60 per student, is multiplied by the number of primary school-age children not in school, estimated at approximately 100 million, resulting in an estimated $11.4 billion in additional annual resources. Columns B and C use more targeted estimates of per-student costs, the regional median and the country average respectively, and obtain estimates of $14.9 and $10.4 billion. These are slightly higher than the "minimum global cost estimate" by UNICEF staff, which put the required additional recurrent and capital costs at $9.1 billion. (Delamonica, Mehrotra and Vandermoortele 2001) Since they are derived from actual, current spending per pupil, these unit cost estimates are best interpreted as the cost of sustaining a child in primary school once he or she is enrolled. It may not represent the additional cost required to enroll a child in school, as that cost would entail increasing education system capacity, as well as improving the quality of schooling (which affects the demand for education).

||**_Table_**_12:_**_"Uni_**|**_t_**_cost"_**_estimates_**_ofu _<br>**_(billions_**_of_**_US_**|_niversal_**_enrollment._**<br>$)||
|---|---|---|---|---|
||A|B|C|D|
|Region|$110.60peroutof<br>schoolchild|Regional/Group<br>medianofspending<br>per studentspent<br>oneachoutof<br>school child|Countrylevelof<br>spendingper<br>studentspenton<br>eachoutofschool<br>child|13percentofGDP<br>percapitaspenton<br>allchildrenof<br>schoolage|
||(I|I)|II|(IV)|
|EastAsiaand|||||
|Pacific|0.89|0.89|0.38|10.4|
|Europeand|||||
|CentralAsia|0.30|0.47|0.63|0.46|
|LatinAmerica|||||
|andCaribbean|0.73|1.45|3.23|8.10|
|MiddleEast<br>andNorth|||||
|Africa|0.90|0.87|2.18|5.73|
|South Asia|3.69|2.24|1.80|1.58|
|Sub-Saharan|||||
|AfTica|4.94|2.63|2.15|1.27|
|All regions|11.4|14.9|10.4|27.6|

These per-student costs do not reflect, however, the adequacy of the budget dedicated to education or guarantee the quality of the education. A calculation that uses as a rule-of-thumb a norm of 13 percent of GDP per capita on each primary-school student yields an estimate of an additional $28 billion<sup>1</sup> and is presented in Column D.

> **18** Estimates using the measured response of enrollments to expenditures yields disturbingly high numbers-using the most responsive estimate yields an incremental cost of about $130 billion.

23
In addition to the quality of education, the efficiency of public expenditures on education will play a large part in determnining additional resource requirements. Work at the country level in several African nations underscores the importance of the policy environment in determining the costs and resource requirements of meeting the goals. Table 13 shows that the public financing gap depends upon assumptions about the education policies, the level of teacher salaries, and the priority given by the country for publicly financed primary education. If we consider the total for the four countries, we see that the financing gap amounts to $487 million if no policy changes are undertaken in the countries. Assuming that policy changes are introduced just to improve education quality, the financing gap increases to $683 million, because these quality-enhancing interventions are costly. But if policies are introduced to adjust teacher salaries to levels proportional to average incomes, the financing gap falls to $394 million, a drop of almost $290 million. Finally, if further policy changes are made such that public budgetary support for primary education is adjusted to adequate levels, the financing gap falls again, to $258 million. Calculating the financing gap on an annual basis indicates that, for the period 2000-2015, the average annual financing gap to reach universal primary education of a reasonable quality in 2015 in the four countries is around $191 million -- $48 million per country on average.

The total number of children who will be enrolled in primary school in the four countries is about 3.1 million (see Table 14). Thus, an annual additional expenditure of $191 million will enable 3.1 million children to enroll in primary school, meaning the per-student cost is about $62, which is close to the sustaining cost in Africa and South Asia as well. In other words, if we extrapolate from these country studies to the population at large in Africa and South Asia, and apply appropriate multipliers for the other regions (to reflect their much higher per-student expense), the cost of reaching universal primary enrollment taking into account some of the additional policy and institutional changes required could amount to as much as $10 billion but could be less if countries bring additional resources to bear.

24
**_Table_** _13 . Resources_ **_needed to achieve universal primary education in_** _2015 (1999 $_ **_millions)_**

||NoPolicy<br>Change|Improvements<br>inEducation<br>Quality<br>(a)|Improvementsin<br>EducationQuality+<br>Teacher Salary<br>Adjustments(b)|ImprovementsinEducation<br>Quality+Teacher Salary<br>Adjustments+Ensuring<br>appropriatepublicbudgetsupport<br>forEducation (c)|
|---|---|---|---|---|
|CountryA|||||
|LevelofSpendingin2015|225|291|186|186|
|PublicResourcesin2015|91|91|91|117|
|FinancingGapin2015|134|200|95|69|
|Yearly average2000-2015||||49|
|CountryB|||||
|LevelofSpendingin2015|58|67|88|88|
|PublicResourcesin2015|35|35|35|38|
|FinancingGapin2015|23|32|53|50|
|Yearlyaverage 2000-2015||||39|
|CountryC|||||
|LevelofSpendingin2015|252|238|131|131|
|PublicResourcesin2015|76|76|76|85|
|FinancingGapin2015|176|162|55|46|
|Yearly average2000-2015||||41|
|Country**D**|||||
|LevelofSpendingin2015|335|470|372|372|
|PublicResourcesin2015|181|181|181|279|
|FinancingGapin2015|154|289|191|93|
|Yearlyaverage2000-2015||||62|
|Total|||||
|LevelofSpendingin2015|870|1066|777|777|
|Public Resourcesin2015|383|383|383|519|
|FinancingGap in2015|487|683|394|258|
|Yearly average2000-2015||||191|

(a) Improvement in primary education quality: The following elements are considered to lead to a reasonable setting for the operation of education : i) Teachers recruited with 10 years of general education plus 1 year of pre-service training, ii) Pupil teacher ratio set to 45:1, iii) Resources beyond teacher salaries (admninistrative and support services, textbooks for pupils and teaching guides for the teachers, in service training activities, student assessment) to represent 40 % of the teacher salary bill. These improvements in conjunction with direct measures to reduce repetition (use of sub-cycles of study with non repetition within each sub-cycles) are expected to bring repetitions rates below 10 % in 2010.

(b) Recruitment of new teachers according to a salary scale in which teacher remuneration to represent about 4 times the country's per capita GDP.

(c) The modeling used the assumptions on the likely overage rate of economic growth The country is supposed to i) to increase its allocation of resources to the sector (in particular by using at least 40% of its HIPC resources, but possibly beyond if the country was initially allocating too little to education), and ii) to allocate at least 50 % of its budget for education to primary schooling (this amount is assumed both to materialize a clear priority for primary education while ensuring that enough resources are secured for post-primary educational investments (lower and upper secondary, technical and vocational education and higher education).

_25_
||_Table14:Additionalre_<br>_univrsal primaryenroll_|_sources neededtoa_<br>_entinfourAfrican_|_chieve_<br>_countries_|
|---|---|---|---|
||No.ofchildren|Enrollmentrate|Additionalno.of<br>childrenenrolledfor<br>UPE|
|A|1,244,003|0.4|746,402|
|B|1,223,956|_0.55_|550,780|
|C|1,770,072|0.3|1,239,050|
|DI|1,509,360|0.62|573,557|
|Total|5,747,391||3,109,789|

# _Gender equality_

The estimate for meeting the 2005 gender equality target in secondary education is $3 billion. It was arrived at by assuming constant average costs for enrollment and then increasing the numbers of girls in school so that the ratio of girls to boys would be 1:1 by 2005. The basic underlying assumption for this estimation is that the progress towards the goal achieved in the 1990s will continue into 2005. In order to capture this assumption-and calculate only the additional resources needed to attain the goal--we fit a simple trend line for all outcome indicators to forecast actual targets that would be reached if the 1990s trends continued. The projected actual is then compared against the global target to see by how much each region falls short of the targets. If a region's performance is projected to exceed the global goal, the additional cost of achieving the goal is regarded as zero. Otherwise, the difference between the global target and the projected actual target would be multiplied by the relevant projected average annual population _and_ the cost per unit to arrive at the additional spending required to meet the goal 19 Note that, while these cost estimates refer to additional resource requirements, they are based on average-cost calculations. -lence they are likely to understate the incremental costs of reaching the gender-equality target. Furthermore, they do not take into account the quality of education - a problem alluded to in the treatment of the universal primary education goal.

## _Health_

One of the characteristics of the development goals, such as the goal of reducing under-five child mortality, is that they are not only targets to be met, but also robust indicators of a country's economic and social development. Countries experiencing economic growth and implementing successful poverty reduction strategies will usually see improvements in access to education, basic health care, income levels of the poor, access to potable water and other improvements in living standards which affect child mortality. However, the fact that so many factors affecting health indicators are not in the health sector makes estimating the cost of attaining the health goals very difficult. Inefficient delivery of public health services in developing countries also contributes to the difficulty of linking health expenditures and improvements in health outcomes.

There are health interventions, however, which can be identified as critical inputs to attaining the health goals, and which then lend themselves to cost estimates. In the case of infant mortality

> U9 unit costs per pupil were obtained from UNICEF for 1998 and adjusted for inflation over the period 1998-2000. It is also assumed that the unit cost of educating a girl is the same as the unit cost of educating a boy. Projected annual number of school age boys (ages 5-14) for each region was obtained from the U.S. Bureau of Census, International Data Base, and a simple average was used to annualize the costs.

26
these inputs include access to rehydration therapy, vaccinations and promotion of breast feeding. For malaria, inputs include prophylaxis treatments for pregnant women and infants and bed nets treated with insecticide, as well as spraying in and around the home for mosquitoes. With tuberculosis, the DOTS strategy has proved to be very successful, and cost estimates exist for DOTS programs based on country experiences. In the case of AIDS, it is possible to estimate the costs of both prevention and treatment campaigns. The maternal mortality goal may be one of the most difficult development targets to cost, both because of the dearth of data about the scope and nature of the problem (many countries lack reliable statistics on maternal mortality) and because maternal deaths are largely due to bleeding and other acute problems that require immediate access to a functioning health system and not just a simple, targeted intervention.

Adding up the costs of achieving the different health goals, however, could easily lead to an overestimation of the resource requirements, because they are inter-related. For example, tuberculosis spreads much more rapidly in the presence of AIDS infections; AIDS also has a significant impact on both child and maternal mortality rates; and malaria kills a large number of young children so advances against malaria should reduce infant and child mortality. Moreover, progress toward other key development targets, especially education and access to potable water, are likely to have a very large impact on the health outcomes.

Adding up the costs of individual treatments could also lead to a major underestimate of the costs of reaching the goals, because of the many "weak links in the chain" between public spending on health and health outcomes (Filmer, Hammer and Pritchett 2000): average costs are not incremental costs; public supply sometimes displaces private supply (leading to no change in health outcomes); and public provision is often inefficient (see Box 2).

With the caveats described above, we estimate that approximately an additional $15 to $25 billion in ODA would be necessary to attain the health goals in the world's poorest countries. This figure is consistent with other estimates of the cost of attaining basic health in the poorest countries, such as the estimate developed by the Committee on Macroeconomics and Health (CMH). The CMH estimate is arrived at by calculating the cost of the specific interventions required to reduce avoidable deaths (about $30 - $40 per person per year), and assuming that low-income countries will increase public spending on health by about 1.5 percent of GDP, and there is no increase in the efficiency of public spending.

A large share of the additional funds required should be allocated to HIV/AIDS prevention and treatment. The United Nations has previously indicated that an additional $7 to $10 billion is required on an annual basis to address the HIV/AIDS crisis worldwide. Analysis at the regional level, including a detailed cost exercise for the cost of addressing the epidemic in Sub-Saharan Africa, where 71 percent of people with HIV/AIDS live, roughly supports this estimate. Appendix 3 provides a detailed estimate of the cost of addressing the AIDS crisis in Sub-Saharan Africa, developed by the World Bank, using both low and medium cost estimates. The appendix table shows that Sub-Saharan African countries would annually need between $2.6 and $4.2 billion in additional aid for both prevention and treatment of the disease.

Additional resources are also needed to address the HIV/AIDS epidemic in other regions with high and growing, infection rates, especially in East Asia, South Asia and the transition 27
countries. Although the numbers of infected are lower than in Sub-Saharan Africa, the gap in funding is larger in relative terms in countries such as China and India, which are still developing their response to the disease.

It is particularly difficult to estimate separately the cost of reducing infant, child and maternal mortality because they depend on a variety of factors, such as education and income, which are outside the health sector. Furthermore, as noted above, the relationship between public spending and health outcomes is quite weak (Filmer, Hammer and Pritchett 2000). Even when the coefficient on public expenditures is found to be positive, its magnitude is minuscule (Bidani and Ravallion 1997). Another way to estimate the cost of reaching the under-5 mortality goal is to use a "frontier analysis" -- taking the maximum observed health expenditure for countries with GDP per capita of $1,000 or less and the maximum performance in terms of health outcomes in that group of countries to estimate the impact that an increase in health expenditures to the maximum observed amount would have - and then what would be the expenditure gap, if any, for meeting the goal. This approach resulted in an estimated expenditure gap of $5 billion for these countries. This estimate represents a lower bound for reaching this goal, because it assumes that countries will improve both their allocation of public spending and its efficiency up to the level of the best-performer in the group. It is analogous to the estimate of the savings in ODA required to reach the income poverty goal if all the Group II countries improved their policies to the level of the Group I countries.

There are no separate estimates of the cost of rneeting the maternal nmortality goal, although the frontier analysis mentioned above calculates the financing gap of meeting this goal to be of the same magnitude, i.e., about $5 billion, We emphasize, however, that progress on this goal is likely to be highly correlated with the under-5 mortality goal. For example, birth attendance by a skilled health professional reduces both maternal and infant mortality. Improving the education of the mother also impacts on both statistics. B3ecause maternal mortality is a much rarer event than infant and child mortality, it will depend more on access to critical care and a functioning health system that can deliver that care, so additional expenditures in the health sector are important for progress on this indicator.

Other comnmunicable diseases, such as tuberculosis and malaria, have specific interventions and therapies which can be costed. In the case of mnalaria, it is the cost of prophylaxis, insecticides and treated bed-nets as well as drugs for treatrnent of malaria. For tuberculosis, the focus is on DOTS. In both cases, an estimate of between $1 and $1.5 billion in additional annual assistance is the estimated cost of prevention and treatment.

# _Environment targets_

Work done by the Global Water Partnership, assuming that the costs and levels of new services would be similar to current mixes, estimate that it would cost an additional $30 billion a year over the next 25 years to reach a target of universal coverage (excluding any costs of treatment). Looking only at very basic levels of coverage the Water and Sanitation Collaborative Council estimates that it would take $9 billion a year (also over 25 years) to reach a target of universal water and sanitation coverage<sup>20</sup> .

> 2 "Financing the international goals for water and sanitation," Washington, DC: The world Bank (processed), 16 October 2001.

28
Because of the many different institutional arrangements under which investments related to water supply are made, it is not possible to give an precise estimate of current annual expenditures. One approximation suggests that they are in the range of US$13 billion a year. If this number is accurate and expenditures are incurred under appropriate institutional arrangements with proper incentive structures in place, then it is possible that there exist adequate resources to achieve the goal for water access. Given the measurement issues referred to earlier, it is possible that incremental public funds may well be required to meet the development goals, but in the current analysis we do not include additional funding for access to water.

Significant additional resources (approximately $16 billion per year) would be required to improve sanitation and hygiene. Although a formal target has not been proposed within the framework of the Millennium Development Goals for access to sanitation, we include the cost estimates because improvements in sanitation and hygiene are likely to be highly correlated with improvements in child health outcomes. For the same reason, these expenditures should not be added directly to the costs of meeting the health goals.

The Cites Without Slums initiative has proposed a program for providing secure land tenure and upgrading slums costing $3.5 billion per year, based on an estimate of $51 billion (average cost of approximately $500 per person for 100 million people, plus preparation costs) divided over 15 years.

# _Total costs of reaching_ **_the_** _goals_

In sum, we have estimated the additional foreign-aid costs of reaching the development goals using two, complementary methods. First, we calculated the additional foreign aid requit-ed to achieve the income poverty goal of halving extreme poverty by 2015. Focusing on those countries where additional aid is needed (namely low-income countries that are not currently projected to reach the goal), we estimate the incremental costs of achieving this goal to be in the range of $54 - $62 billion. We noted that achieving this goal will imply substantial progress towards, if not fulfillment of, many of the other goals, given the close connection between income growth and education and health outcomes..

Second, we attempted to calculate the costs of achieving the social goals by themselves. Here too there is a danger of double-counting, since these goals are interdependent. For instance, child mortality reduction is achieved by, among other things, increasing the number of mothers with primary education. Nevertheless, we made use of existing estimates of some of the individual goals, some of which are based on country-level analysis (which is always more reliable). These estimates yield a rough breakdown of the additional costs of achieving the social goals as follows: Education: $10 - $30 billion Health: $20 - $25 billion Environment _$5_ - $21 billion Total $35 - $76 billion 29
Because these figures are in the same range as those estimated to achieve the income poverty goal, there is some reason to think that an increase in foreign aid of an amount equal to current foreign aid ($57 billion) is about the right order of magnitude for achieving the development goals. That said, we emphasize first that these estimates are extremely crude, and based on a host of heroic assumptions, many of which may not be borne out as history unfolds. Second, we cannot stress enough the fact that financial assistance is but one of the factors required to reach these goals. As the example of Uganda shows, country-level policies aimed at making all resources used more effectively, not to mention political commitment, are at least as important. To emphasize the fact that financial assistance alone cannot achieve the goals, we prefer to refer to these estimates as the costs that are likely to be incurred when achieving the goals. Finally, we reiterate our view that the most relevant and useful costing of additional foreign assistance must be done at the country level, a task we are currently undertaking in several countries.

30