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Poor Countries Pushed Into 'Danger Zone': World Bank PDF Print E-mail
Sunday, 26 April 2009

A triple jeopardy of food, fuel and financial crises is pushing many countries into a danger zone, a joint World Bank and International Monetary Fund report warned on Friday.

The report called for strong and urgent actions to address a deepening human and development crisis in the world's poor countries, including more aid to help countries shore up their economies and protect the poor.

"The development emergency that now confronts many poor countries calls for commitment to a set of actions that signal a clear resolve to avert the potentially large human costs of the crisis and assist these countries," the report said.

"The challenge ahead is to ensure that the actions are commensurate with the scale and depth of the crisis and are appropriately coordinated internationally," it said.

It said the deepening recession, rising unemployment and volatile commodity prices since last year are seriously affecting countries' ability to reduce poverty levels.

Poor countries were hard hit last year with record high global prices for food and oil, while a global economic slowdown are likely to throw more people deeper into poverty, the global institutions said.

The report called for a global fiscal stimulus to halt the downward spiral in the world economy and more aid to support growth in poor countries.

The report said there was also a role for the private sector to cushion the impact of the crisis on the poor. For example, one-half of health spending in developing countries comes from private sources.

More than half of all low-income countries could see a decline in revenue to gross domestic product in 2009, but most won't make up the shortfall in their budgets by borrowing domestically or internationally due to a global credit crunch.

The IMF estimates that about a quarter of poor countries will face a drop in revenue of more than 2 percentage points of GDP in 2009.

Meanwhile, preliminary findings by the World Bank show that only 13 percent of poor countries for which data is available will be able to run a budget surplus in 2009, compared with 28 percent in 2008 and 34 percent in 2007.

It said additional aid is vital to soften the economic blow on poor countries, but prospects for more aid are uncertain given the deepening recession in rich donor nations.

"Without additional external assistance, the impact on poor countries could be severe," the report said, adding: "However, concerns are growing that aid could be cut precisely when an increase is sorely needed."

The report said making aid more effective is vital.

The institutions said prospects for reaching aid targets in 2010 have become uncertain. Even before the crisis unravelled, the gap between aid commitments and aid delivery was large.

It said the impact of the current global crisis on aid will depend on how deep and how long the crisis is.

The impact of falling aid on poor countries is devastating since aid makes up a large portion of their fiscal revenues, for example, aid accounts for around 40 percent of budgets revenues in Ghana and Mali in 2006.


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