Tuesday, October 06, 2009

New World Bank report shows that the global economic crisis is putting developing countries at risk


AllAfrica.com: Nigeria: Poorest Countries Will Be Poorer - World Bank

World Bank: Economic Crisis Roundup: Recovery Emerging, But Not Yet for All

AllAfrica.com: Africa: Keeping Africa's Turnaround On Track

Pittsburgh Post-Gazette: Advocates lobby G-20 nations on behalf of Africa's poor

Recent reports have shown that the trickle down effects of the global financial crisis will have serious impacts on developing economies in Africa. The contracting world economy is shrinking the domestic economies of many African nations, and will cause a corresponding reduction in domestic spending. In addition, the global crisis is also forcing “first-world” donor countries to re-evaluate their financial contributions. World Bank Group President Robert B. Zoellick says, "The poor and most vulnerable are at greatest risk from economic shocks—families are pushed into poverty, health conditions deteriorate, school attendance declines, and progress in other critical areas is stalled or reversed.”

A World Bank paper prepared for the recent G-20 summit in Pittsburgh, Pennsylvania shows that the poorest countries face a $11.6 billion shortfall in spending in crucial sectors such as education, health, infrastructure and social protection. The report also says that net private capital has dropped from $30 billion in 2007 to $21 billion in 2008 to a projected $13 billion in 2009. Their export markets will have dipped 5%-10% in 2009. While developed economies are seeing the first green shoots of recovery, the lag will continue to put pressure on these developing countries.

Along with shrinking domestic spending, there is the problem of foreign aid spending by more developed countries. As these nations find their coffers drying up, there is concern that they will either renege on previously promised donations, or cut back on future spending. Liberia’s president Ellen Johnson-Sirleaf described international aid as a foundation that spurs more private investment. She points out that Africa did nothing to cause this crisis, but that it comes at a time when real success is being seen in Africa. If the aid from developed nations does not continue, it threatens to derail progress that has been decades in the making. In her own country she cites doubling public school enrollment, hundreds of rebuilt health care facilities, and renovated infrastructure as achievements that could be threatened.

Understanding the risk of backsliding, the World Bank has plans to double its financing for small and medium sized businesses by 2013 to $15.5 billion. During the G-20 conference, advocates for Africa kept the pressure on the leaders of developed countries. Members of the G-20 reiterated their commitment to aid, but African representatives continue to focus on economics and put pressure on global financial leaders. Reports like this one by the World Bank legitimize these concerns and stress the importance of not overlooking the impact of the world economic crisis on all countries. 


1)During times of global economic crisis, is it more important or less important for developed countries to maintain their donations to less developed countries?

2)How could developed nations use their donations to less developed nations to help stimulate their own economy?

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