World Bank warns of growing risks in poor countriesJuly 30th, 2009
Reuters - The global economic crisis could have a "disastrous" impact on health and school projects in the developing world unless rich nations spend a tiny fraction of stimulus measures to help the poor, a World Bank official said.
Marwan Muasher, the World Bank's senior vice president for external affairs, said that although there were some signs in global markets the economic meltdown might be bottoming out poor nations were now starting to feel the worst of the crisis.
"Poor countries have been hit hard by a crisis that is not of their making and they don't have the fiscal space to deal with it because it comes hard on the heels of a severe food and energy crisis," he told Reuters in an interview on Tuesday.
Muasher said the crisis had pushed 90 million more people into poverty worldwide, most of them in the developing world, and that 30 million jobs had been lost.
"This is a global crisis and it requires global solutions but many African countries and many low-income countries feel they have been left out of the equation. The social aspect of the crisis has been largely ignored."
Muasher, a Jordanian who served as foreign minister and deputy prime minister before joining the Washington-based body, repeated a World Bank call on rich nations to set aside 0.7 percent of stimulus packages to support poor countries.
Key aid donors have repeatedly pledged to raise their aid spending to 0.7 of gross national income, but some -- including the United States and Japan -- still give far less.
Major economies struggling to emerge from a recession have spent trillions in stimulus packages to renew growth but Muasher said "ignoring to help poor countries is short-sighted."
Developing countries, initially shielded from the direct impact, are now being hurt by "second and third waves" of the financial crisis, which is coming on the heels of a damaging upward spiral of food and fuel costs, he said.
In particular, this was being felt in a drop of remittances, reduced investment in health, education and infrastructure projects and the inability to find credit, Muasher said.
"Health and education are the first areas to be dropped by governments in poor countries when budget deficits are high. This will have disastrous consequences in the long term."
CAUTIOUS ON RECOVERY
The World Bank has forecast that global economic activity will shrink by 3 percent in 2009, down from an earlier projection of a 1.7 contraction.
Investors are eager for economic data in hopes the worst of the crisis might be over, but Muasher was cautious about predictions of an economic recovery.
"We do think that the crisis might be bottoming out but the pace of the recovery is still very uncertain. We might see positive growth in 2010," he reiterated.
Muasher said stimulus packages approved by governments around the world "appear" to be working, but said more needs to be done to help spark a recovery.
"There are other measures that need to be taken, including the cleaning of the banking sector, putting in place new financial regulations, concluding the Doha round of trade talks so we don't end up in protectionist measures and makings sure that the poor are not left behind."
The International Monetary Fund and the World Bank will hold their annual meeting in Istanbul in October. Muasher said that among the issues to be discussed at the meeting will be climate change and sustainable growth.
"We cannot ask developing countries to take measures to avoid climate change without assistance. This will be one of the topics discussed in the meeting."