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Poverty interacts with conflict both as a cause and as a consequence. The harrowing situation in many countries, such as Haiti, Iraq, Lebanon, Libya, Sudan, Syria, and Yemen, serve as stark reminders of the interrelation between poverty and conflict. The case of Gaza is also illustrative. Prior to the Israel-Gaza Crisis, 61 percent of Gaza’s population lived in poverty, acute or moderate food insecurity affected 62.9 per cent of households, daily water consumption was lower than the 100 liters per day recommended by the World Health Organization, and unemployment affected 46 per cent of the population.
Displacements, foreign intervention, and recurrence of conflict often occur when domestic factors have led to reaching the tipping point towards conflict, with poverty being catalyzed by widespread inequalities, exclusion, and discrimination. In this regard, fragile and conflict-affected countries, home to more than one billion people across more than 40 countries, are at particular risk in this era of polycrisis.
Ending poverty in fragile and conflict-affected settings is inextricably linked to strengthening public financial management—a reality underscored by two pressing challenges: achieving sustainable poverty reduction and fostering a more peaceful and hopeful world. Ineffective financial governance and poor financial management, often marred by corruption or bias, not only perpetuate poverty but also fuel conflict while undermining State legitimacy. Thus, addressing these deficiencies is crucial for poverty reduction. However, expenditure measures dedicated to poverty reduction need to consistently be evaluated in relation to the long-term allocation of public resources and the efficiency-related impact.
Effective public budgeting, forecast-based and objective-oriented medium-term frameworks (as recommended by the CEPA strategy guidance note on strategic planning and foresight, 2021), and participatory budgeting (in line with the CEPA strategy guidance note on participatory budgeting, 2022) can help identify the needs of different population groups and actors, preventing exclusion that can exacerbate poverty. Budget credibility and predictability then become fundamental instruments. So does sound accounting and reporting on both revenues and expenditures. This is essential in fragile and conflict-affected settings where trust in government is oftentimes undermined due to the opacity of resource allocation processes and corruption.
Mitigating risks related to poverty reduction measures
Furthermore, risks associated with poverty reduction strategies, such as deficit spending, high debt, currency devaluation and aid dependency traps, need careful consideration as they may contribute to long-term instability, sometimes even leading to more fragility. The concept of pro-poor budgeting also requires critical examination, as it does not always target the intended beneficiaries effectively and can sometimes benefit higher income groups, as, for example, seen in subsidized gasoline schemes.
Moreover, public sector recruitment, often disguised as a poverty mitigation mechanism, may carry significant long-term political and macroeconomic risks, including rent-seeking behavior, such as lobbying and bribery, which in turn, may erode several pillars of poverty reduction, including inclusiveness and accountability.
The political nature of public financial management can also not be overlooked. Distorted practices in this area not only hinder peace but deepen poverty by increasing inequality and marginalization—fertile grounds for conflict.
Reframing the paradigm
Reforming the approach to poverty reduction involves a comprehensive strategy that incorporates core principles of sound public financial management, linking short-term actions to long-term goals and effective governance. This also includes integrating the CEPA governance principles, the PEFA framework, and the targets of SDG1 to ensure a robust and sustainable strategy.
By considering the necessity for sound public financial management to achieve Goal 1, poverty reduction strategies can become ironclad. The approaches outlined in the 11 CEPA governance principles and related CEPA strategy guidance notes are valuable tools.
Additionally, donor policies and aid disbursement should emphasize conditional performance-based criteria for official development assistance (ODA) to prevent politicization of poverty as well as promote meritocracy and inclusiveness in the public sector.
Ultimately, achieving sound public financial management by investing in related capacities at both central and subnational government levels is fundamental to both exiting conflicts and preventing poverty, a dual objective that requires a balanced, informed, and strategic approach.
By Lamia Moubayed Bissat, Member of the Committee of Experts on Public Administration and Director, Institut des finances Basil Fuleihan, Ministry of Finance, Lebanon