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WB approves $400 m loan to support poverty reduction program in Guangxi

The World Bank’s Board of Executive Directors approved a US$400 million loan today to help enhance the impact and efficiency of the consolidated poverty reduction program of China’s Guangxi Zhuang Autonomous Region.

This is the first Program-for-Results (PforR) operation in support of rural poverty reduction in China that links loan disbursements with results achieved on the ground. It is also a multi-sectoral operation that addresses agriculture, education, rural infrastructure, public financial management, and poverty monitoring systems.

China’s success in reducing extreme poverty is recognized globally, and it is the first country to achieve the Millennium Development Goal of halving the number of people living in poverty by 2015. Committed to eliminating rural poverty by 2020, China has placed two institutional innovations as central to its poverty reduction strategy: accurately targeting poor households and villages through the establishment of the National Poverty Registration System, and decentralizing poverty reduction efforts with the aim of empowering county governments to achieve their poverty targets.

 “The new PforR operation will enhance institutional innovations for poverty reduction through connecting planned activities more closely to poor households and villages, and align fiscal inputs with results – by introducing improved planning, budgeting and monitoring systems for poverty programs in Guangxi,” said Paavo Eliste, World Bank Lead Agriculture Economist from the Agriculture Global Practice and co-task team leader for the program. "The lessons learned through the program can be used in similar complex rural settings and help other countries eradicate extreme poverty by 2030."

Located in the southwestern part of China, Guangxi still has more than 3 million rural poor. The rural poverty rate is above 7 percent, partly due to limited natural resource base in the karst mountain areas and low levels of infrastructure and connectivity compared to other regions in China. Its mountainous areas are also vulnerable to extreme weather events such as heavy rains and floods.

To be implemented in 28 poor counties, the Guangxi Poverty Reduction Program will achieve its objective through three result areas; topped by improved income generation for the rural poor, by enabling them to engage in agriculture-related economic activities through the development of farmers cooperatives and “poverty reduction leading enterprises” which connect small-scale farmers with modern markets and skills development.

The three areas also include improved rural infrastructure, by upgrading facilities for drinking water supply and rural roads for poor villages; and improved institutional arrangements and capacity, by introducing program-based budgeting for poverty reduction funds and enhancing monitoring and evaluation systems, which enable better alignment of budget allocation with the expected outputs and outcomes.

 “This program takes the engagement in poverty reduction in China to a next level, by enhancing the impact and efficiency of the government's own poverty reduction programs, " said Samuel Freije-Rodriguez, World Bank Lead Economist from the Poverty Global Practice and a co- task team leader for the operation. “China's success will inspire other countries to do the same.”

“Institutional innovations supported under the PforR will empower local governments to develop rural poverty reduction programs to meet their local needs and priorities. Program-based budgeting systems to manage poverty reduction funds will enable local governments to make informed decisions and support improvements in public expenditure and achieving results,” said Min Zhao, World Bank Senior Economist from the Governance Global Practice and also a co-task team leader for the program.

Total financing for the government program over the 2018-2021 period is expected to be $5.53 billion, of which 93 percent will be financed by the government and 7 percent by the World Bank. The program is expected to benefit about 1.74 million rural poor people, and generate climate co-benefits through the dissemination of climate-smart farming practices and technologies to strengthen climate resilience.

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