The international community is committed to millennium development goals which postulate a vision of global development that makes eliminating poverty and sustaining development the overriding objective of global development efforts. In the hierarchy of the MDGs, the first and foremost goal is to reduce by half, between 1990–2015, the proportion of people whose income is less than a dollar a day (a widely used yardstick to measure extreme poverty). However, estimating such poverty across developing countries and globally is by no means a simple exercise nor has it yielded unambiguous results. This article provides a brief summary of the state of the art in global poverty estimates, including the problems as well as the possible solutions.

This article reviews some recent research on aid effectiveness. An important finding of this research is that foreign aid has been much more effective than is generally presumed. It also suggests that the current aid allocation policy of development agencies, based on selectivity, has a fragile empirical foundation and discriminates against capacity-constrained/geographically disadvantaged countries. To achieve international development objectives, the fundamental basis for foreign aid allocation should be the Millennium Development Goals and national poverty reduction strategies—a bottom-up approach, as contrasted from the top-down method currently being practiced.