Poor countries say their problems forgotten as crisis bites
Developing countries complained Sunday that the global financial crisis will put their recent hard-won economic gains at risk while the rich nations focus only on their own problems.
By Agencies |
WASHINGTON: Developing countries complained Sunday that the global financial crisis will put their recent hard-won economic gains at risk while the rich nations focus only on their own problems.
The poorer countries could be hit twice by the crisis -- finding it more difficult to get access to funding and as their exports fall as the crisis undercuts demand, Finance Minister P. Chidambaram said.
"The developing countries will suffer for no fault of theirs. They did not cause the contagion. Many are not well-equipped to face the consequences," Chidambaram told the Development Committee of the International Monetary Fund and World Bank.
The Development Committee advises the World Bank and IMF on how to promote economic development in poor countries, many of whom feel their problems are being neglected amid the turmoil on global markets.
The plight of the poor countries has been "largely forgotten," said Sierra Leone Finance Minister David Carew.
"We expect to see a reduction of inflows to Africa and that is of concern to us," Carew said, citing likely falls in remittances, foreign exchange reserves and foreign investment.
Worse still, the banking system in poorer countries could face volatility because of links with banks in the developed world which have been pushed to the brink by the crisis destroying their capital.
"Africa does not have (the) capacity for intervention" to help its banks that the developed world does, Carew said, adding: "The ripple effect of the crisis is coming ... likely later this year."
IMF head Dominique Strauss-Kahn warned on Saturday that it would be a mistake to forget the "other crisis" of soaring food prices and aid cutbacks faced by developing countries.
"We are in a big crisis but don't forget the other one," Strauss-Kahn said, adding that while food costs had moderated in recent months, "this bill is still unaffordable for poor countries."
With donor aid programs under pressure due to the financial crisis, the World Bank estimates that up to 100 hundred million people are at risk of falling into poverty because of higher food and energy prices.
"The large surge in food and energy prices -- and an associated rise in inflation -- present major policy challenges for most countries, further compounded by the uncertain global conditions as the financial crisis unfolds," an update for the IMF and World Bank Development Committee said.
The poorer countries could be hit twice by the crisis -- finding it more difficult to get access to funding and as their exports fall as the crisis undercuts demand, Finance Minister P. Chidambaram said.
"The developing countries will suffer for no fault of theirs. They did not cause the contagion. Many are not well-equipped to face the consequences," Chidambaram told the Development Committee of the International Monetary Fund and World Bank.
The Development Committee advises the World Bank and IMF on how to promote economic development in poor countries, many of whom feel their problems are being neglected amid the turmoil on global markets.
The plight of the poor countries has been "largely forgotten," said Sierra Leone Finance Minister David Carew.
"We expect to see a reduction of inflows to Africa and that is of concern to us," Carew said, citing likely falls in remittances, foreign exchange reserves and foreign investment.
ADVERTISEMENT
Worse still, the banking system in poorer countries could face volatility because of links with banks in the developed world which have been pushed to the brink by the crisis destroying their capital.
"Africa does not have (the) capacity for intervention" to help its banks that the developed world does, Carew said, adding: "The ripple effect of the crisis is coming ... likely later this year."
IMF head Dominique Strauss-Kahn warned on Saturday that it would be a mistake to forget the "other crisis" of soaring food prices and aid cutbacks faced by developing countries.
"We are in a big crisis but don't forget the other one," Strauss-Kahn said, adding that while food costs had moderated in recent months, "this bill is still unaffordable for poor countries."
ADVERTISEMENT
With donor aid programs under pressure due to the financial crisis, the World Bank estimates that up to 100 hundred million people are at risk of falling into poverty because of higher food and energy prices.
"The large surge in food and energy prices -- and an associated rise in inflation -- present major policy challenges for most countries, further compounded by the uncertain global conditions as the financial crisis unfolds," an update for the IMF and World Bank Development Committee said.
ADVERTISEMENT
The 185-member IMF and especially the World Bank are tasked with aiding development and their annual meetings normally devote much time to reviewing progress made and new programs.
This year, however, they have been overshadowed by the financial crisis, with a major summit of eurozone leaders underway in Paris to follow up a Group of Seven industrialized nations gathering in Washington on Friday.
The G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- said they would use all means available to combat the crisis, having already spent hundreds of billions of dollars to support their banks and financial systems.
For some developing countries, the difference between these sums and the money that they need is galling.
"Who will compensate the innocent countries who are going to ... suffer from this debacle?" Kenyan Foreign Minister John Michuki asked Saturday.
ADVERTISEMENT
A top Chinese official criticized rich nations for the problems in the global financial system and called on them to "shoulder the responsibility" of preventing more damage being caused. "The major reserve currency-issuing countries should shoulder the responsibility for preventing further spillovers and minimizing shocks to other countries," said Yi Gang, deputy governor of the People's Bank of China.
The charity Oxfam was highly critical of the IMF.
"The IMF's only plan for the poorest countries is to offer them small amounts of money, loaded with conditions. This will be too little, too late," said Marita Hutjes, senior policy advisor at Oxfam International.
ADVERTISEMENT
"The IMF has agreed that rich countries must use all possible tools to deal with the crisis but the same institution is limiting the tools available to the poorest countries by loading its lending with conditions." As for aid budgets, Hutjes said the "poorest countries need a bailout, too. The rich world can raise one trillion dollars in just a couple of weeks; surely it can respond to the needs of developing countries with the same level of urgency."
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
