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FINANCE: World Bank, NGOs Exhort G20 Not to Forget the Poorest

Jim Lobe and Eli Clifton

WASHINGTON, Sep 16 2009 (IPS) - The World Bank and major non-governmental organisations (NGOs) are calling on leaders who will gather for next week’s Group of 20 (G20) Summit in Pittsburgh not to forget the needs of the world’s poorest countries, which have been severely affected by the last year’s financial crisis.

In a report released here Wednesday, the Bank said the global recession, whose repercussions are still being felt around the world, will have resulted in an additional 89 million people living in absolute poverty, or on less than 1.25 dollars a day, by the end of next year.

“The reality is that as the world is showing signs of recovery, at least in affluent countries, low income countries simply do not have the fiscal space to implement countercyclical policies,” said Sam Worthington, president of InterAction, a coalition of U.S.-based international NGOs.

Moreover, nearly 12 billion dollars in critical spending on basic needs and infrastructure of the world’s poorest people have been put at risk by the crisis, according to the 24-page report prepared by the Bank for the G20 meeting, which takes place Sep 24-25.

“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,” said Bank President Robert Zoellick.

“The poorest countries may not be well represented on the G20, but we cannot ignore the long-term costs of the global downturn on their people’s health and education,” he added.

A number of western-based NGO heads added their voice to Zoellick’s, stressing that the G20, which includes the world’s richest nations, as well as powerful emerging markets, such as China, Brazil, India, and Indonesia, must meet the pledge leaders made at the London Summit last April to provide 50 billion dollars to low-income countries (LICs) to help them cope with the effects of the crisis.

Development NGOs have insisted that new G20 aid to developing countries must be added to existing financing.

“It is crucial that this is additive and not deducted from current aid budgets,” said Oxfam America President Ray Offenheiser during a teleconference Wednesday.

When the G20 leaders get together next week, they are expected to tackle an ambitious agenda headed by reform of financial markets and the global financial system; renewed efforts to conclude the stalled Doha Round of trade negotiations by next year; countering growing protectionist pressures in some of the world’s biggest economies; and gaining wider consensus on measures to address global warming in advance of the U.N. Climate Change Conference in Copenhagen in December.

The two-day summit, which will be hosted by U.S. President Barack Obama, is also likely to be taken up with intense discussions among various groups of leaders about simmering foreign policy issues, including efforts to resolve the Israeli-Arab conflict, the growing intensity of the war in Afghanistan, and how to deal with nuclear programmes in Iran and North Korea.

With such a heavy agenda packed into such a tight schedule, the Bank and the NGOs are concerned that pressing concerns of the world’s 43 poorest countries, most of which are situated in sub-Saharan Africa, may not get the attention they need. South Africa is the G20’s only member from the region.

The new Bank report notes that the financial crisis, which exploded with the collapse of the Lehman Brothers investment house exactly one year ago this week, has been the last in a series of three external shocks over which most poor countries, whose economic performance had improved dramatically over the previous decade, had little or no control.

Soaring food and fuel prices had already pushed 130 million to 155 million people in developing countries into absolute poverty by the end of 2008, according to the Bank.

“One of the reasons food security is so important is that food prices which went up in 2007 and 2008 have not come back down. People in developing countries are paying 30 percent more for food (than before prices dramatically shot up),” said Ritu Sharma, president of Women Thrive Worldwide, a U.S.-based NGO that advocates for economic policies to help women out of poverty.

“For many people in developing countries this means they are eating less than they were before,” she added.

The financial crisis, which resulted in negative growth in the world’s richest countries, sharply reduced demand for minerals, other commodity exports, and apparel-assembly industries on which many of the world’s poorest countries depend.

In Zambia, for example, the decline in copper prices led to the unemployment of one quarter of the country’s miners.

Recessions in wealthy countries also reduced the amount of remittances that immigrants were sending home to their families. Tourism has also been hard hit.

By the time of the London Summit, the Bank and its sister institution, the International Monetary Fund (IMF), were warning that poor countries faced a “development emergency” that would put at least some of the U.N.’s key poverty-reducing 2015 Millennium Development Goals (MDGs) out of reach for many countries, especially in Africa and South Asia.

To cope with the crisis, the G20 agreed to provide 750 billion dollars to the IMF, most of which, however, was directed at middle-income countries. At the same time, it supported an increase in lending by the major multilateral development banks (MDBs), including the World Bank, of 100 billion dollars a year over three years and endorsed the Bank’s plans to sharply increase lending for infrastructure projects, small and medium enterprises (SMEs), and maintaining social safety nets.

In spite of these moves, however, the new report says that the poorest countries still face serious financing shortfalls in all of these areas, amounting to a total of about 11.6 billion dollars.

“Unless these shortfalls are covered, achievements to date in reducing poverty and establishing the foundations for longer-term development will be eroded,” the report concluded.

“Even more will be needed if additional progress is to be made in reaching the MDGs,” it said, which include such objectives as achieving universal primary education, and sharply reducing the incidence of infant and maternal mortality by 2015.

In particular, the Bank report calls for the G20 to take coordinated action on several fronts. The group should endorse and reinforce the 20-billion-dollar pledge made by the Group of Eight (G-8) Summit in L’Aquila, Italy to enhance agricultural development in the poorest countries and scale up efforts to expand financing for SMEs as the most effective means for increasing employment.

“President Obama made big commitment to food security and agriculture at the G8,” said Sharma. “We want to make sure that these new investments in agro are really reaching the poorest of the poor. We don’t want to see these large commitments going to large-scale agribusiness that turns small farmers into migrant workers.”

The report also calls for the creation of a permanent global “Crisis Response Facility” (CRF) with the authority to provide quick aid to low-income countries that suffer severe shocks such as the food, fuel and financial crises, and which are not of their own making.

“At present there is a gap in the global aid architecture in the provision of timely and flexible support following crises,” the report noted, adding that the Bank intends to consult with donors and other key participants in its soft-loan facility, the International Development Association (IDA), about establishing such a fund as soon as possible.