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Funding for crisis management

Mar 13, 2009

Swimming against the Tide: How Developing Countries are Coping with the Global Crisis, a background paper by the World Bank reveals a huge financial shortfall for developing countries. It says that rich nations should spend some of their fiscal stimulus to help low income countries restore growth.

Swimming against the Tide: How Developing Countries are Coping with the Global Crisis

Publisher: World Bank, 2009

This is a Background Paper prepared by World Bank for the G20 Finance Ministers and Central Bank Governors Meeting at, Horsham, United Kingdom on March 13-14, 2009.

The World Bank estimates that developing countries face a financing gap of $270-$700 billion depending on the severity of the economic and financial crisis and the strength and timing of policy responses.

Even at the lower end of this range, existing resources of international financial institutions would appear inadequate to meet financing needs this year. Should a more pessimistic outcome occur, unmet financing needs will be enormous.

There is a therefore a strong need to expand assistance to low income countries (LICs) to protect critical expenditures and prevent an erosion of progress in reducing poverty.

Attention must be directed to protecting the poor through targeted social spending, including expanded safety nets, and to maintaining and expanding the infrastructure assets that will be critical to restoring growth following the crisis.

A concerted effort is also needed to support the private sector, especially SMEs, which are essential to a resumption of growth and job creation in developing countries.

The report calls on developed nations struggling with their own financial and economic turmoil to dedicate 0.7 per cent of the money they spend on stimulus programmes toward a new Vulnerability Fund to help developing countries.

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