9 March 2009 With many in the private sector eschewing emerging markets, developing countries – only one quarter of which have the resources needed to prevent a spike in poverty – face a financing shortfall of up to $700 billion this year, according to the World Bank.
International financial institutions alone cannot cover the gap, including both public and private debt and trade deficits for these 129 nations, the body said in a new paper ahead of the upcoming meeting of the so-called Group of 20 nations in London, calling for support from governments, multilateral institutions and the private sector.
“We need to react in real time to a growing crisis that is hurting people in developing countries,” said World Bank Group President Robert B. Zoellick. “This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis.”
He stressed the need for investments in safety nets, infrastructure and small- and medium-size companies to spur job creation and avert social and political unrest.
For the first time since World War II, the global economy is set to shrink this year, and the World Bank forecasts that global industrial production in mid-2009 could be 15 per cent lower than the same time last year.
Meanwhile, world trade will likely experience its largest drop in 80 years, most noticeably in East Asia.
The poorest are “innocent bystanders,” forced to bear the brunt of the financial crisis, said Ngozi Okonjo-Iweala, World Bank Managing Director.
“We must look at poor people as assets and not liabilities,” she said. “The new globalization should mean we adopt new ways of caring for our infants, educating our youth, empowering our women and protecting the vulnerable.”
Many of the poorest nations are becoming increasingly dependent on development aid as their exports and fiscal revenues dwindle due to the crisis, and donors are already behind by nearly $40 billion on their commitment made in Gleneagles in 2005 to double aid to Africa by 2010.
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