July 30, 2010  Print Email | World Bank urges fund for poor nations
Striking a balance between economy and justice
Posted by Agencies at 06:47 AM GMT on Mar 10, 2009 | LONDON (Reuters): The Group of 20 developed and emerging nations could make a quicker recovery from the economic crisis if they divert part of their stimulus packages to the world's poorest states, a World Bank official said on Monday.
 The bank's managing director Ngozi Okonjo-Iweala said rich countries must resist "beggar-thy-neighbour" trade policies in favour of targeted support to help developing nations.
Cutting aid to poor countries during the downturn could trigger a "monumental" human crisis, while choosing to offer more help would create new markets and help put richer nations back on the path to recovery, she said.
She urged G20 leaders, who meet for a summit in London next month, to pledge 0.7 per cent of their recovery packages for a fund to help the poorest nations. The money should be added to existing commitments.
"It is a question of justice, but it is also a question of economics and self-interest," she told Reuters in an interview on the sidelines of a global poverty conference in London.
"If you assist them to cushion the impact of the crisis, they could generate the demand that will help developed countries to come out of the current crisis. You cannot go back to the global imbalances that used to exist."
British Prime Minister Gordon Brown told the conference the the World Bank and leading global economies would work towards a new fund to help the world's poorest through the recession.
Failure to support the poorest countries could lead to widespread unrest in conflict-prone nations, soaring unemployment and a big rise in premature deaths.
Developing nations would see a "lost global generation", with the deaths of between 1.4 and 2.8 million more babies by 2015, she added.
The economic turmoil has hit developing nations particularly hard. After struggling with higher prices for food, fuel and fertilizers, poor states have seen trade drop sharply, unemployment rise and foreign investment fall.
Developing nations' gross domestic product is expected to fall to three per cent or lower in 2009 from 5.9 per cent in 2008, according to World Bank estimates.
"For every one percentage drop in the growth rate, 20 million people fall into poverty," Okonjo-Iweala said. "That is those people living on $1.25 a day."
The global economy must undergo a "paradigm shift" to end the imbalances that fuelled the downturn, she added. Tough financial regulation must extend to commodity markets, while trade should be liberalised to help growing countries.
"It is a matter of self-preservation for the developed world and of life and death for the developing world," she said in her speech to the conference in London.
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