Worrying clouds have developed on horizon: Pranab Mukherjee

WASHINGTON: Observing that the developing world withstood the economic turmoil of 2008 in a commendable fashion, Finance Minister Pranab Mukherjee on Saturday warned that worrying clouds have developed on the horizon even as countries recover from the crisis.

"The financial crisis in the euro zone, the downgrading of US sovereign debt, the concerns about fiscal sustainability in high-income countries, uneven and sluggish global growth, lower capital flows to developing countries, higher inflation rates in several emerging economies -- particularly for food products -- and lastly, the more frequent recurrence of natural calamities, are all issues that could collectively snowball into a crisis of significant proportions with dire consequences for the poor in all countries," Mukherjee said.

Speaking during the World Bank Development Committee lunch on the current state of the global economy, growth and jobs, the Finance Minister said that developing countries see the World Bank as an important partner to help them meet any foreseen and unforeseen challenges, as well as a strong ally for their long-term development finance needs.

"But we are faced with a situation where IBRD and IFC are unable to fulfill even normal client demand and are forced to be 'selective' as a result of this resource constraint. They have no headroom to expand lending rapidly in case there is a spike in demand resulting from another crisis or calamity. This needs to be addressed immediately," he asserted.

Commenting on the recent World Development Report (WDR), Mukherjee said it would be useful for it to focus on how protectionism hurts jobs globally, in both developing and developed countries.