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Connect-World, November 17, 2008

Ahead of this weekend's G20 Summit, the World Bank Group called last week for a rapid response to the spreading global financial crisis, and announced commitments of up to US$100 billion over the next three years for developing countries.“Leaders meeting on Saturday to discuss the global financial crisis must not lose sight of the human crisis. As always, it is the poorest and most vulnerable who are the hardest hit”, said World Bank Group President Robert B. Zoellick.

The bank published a background paper ahead of the summit: Global Financial Crisis: Responding Today, Securing Tomorrow. It argued that the crisis will have a limited direct impact on financial sectors in Low-Income Countries, which are less integrated into global financial markets. "Nevertheless, the poorest countries will be harmed through slower export growth, reduced remittances, and lower commodity prices (which will reduce incomes in commodity exporters). The crisis may also lead to a reduction in private investment flows, making weak economies even less able to cope with internal vulnerabilities and development needs. In this environment, meeting global commitments to provide development assistance to the poorest countries becomes paramount."

However, foreign aid is regarded by some as a soft target for spending cuts. Barack Obama may reassess his promise to double foreign aid now he has been elected president. His vice presidential running mate Sen. Joe Biden said last month that it was "the one thing" they might have to slow down.Development aid "looks like a potential casualty of the financial crisis", according to Peter Beinart at the Council on Foreign Relations. Wealthy nations are reneging on commitments to help feed the world's hungry, former UN secretary-general Kofi Annan said in Dublin recently. Former president Bill Clinton has also expressed concern that the economic downturn could undermine major charitable investments around the world.

The World Bank lowered its growth forecast for developing country economies to 4.5 percent for 2009, compared to a previous projection of 6.4 percent. Some developing countries will experience negative growth in per capita or even absolute terms. "Coming on the heels of the food and fuel price shock, the global financial crisis could significantly set back the fight against poverty", according to the report.

See also:
World Bank, IMF loans not universally welcomed
Crisis, which crisis?

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