Sunday, March 08, 2009

Developing world may need $700 billion

DAR ES SALAAM, March 8 (Reuters) - Developing countries could face a financing gap of $270 billion to $700 billion this year as trade income dwindles and rich nations vie for capital to deal with a global slump, the World Bank said on Sunday.

The World Bank said even at the lower end of that estimate, resources of international institutions would not be sufficient to meet the financing needs as more and more emerging and developing countries are hit.

"Should a more pessimistic outcome occur, unmet financing needs will be enormous," the World Bank said in a paper prepared for meetings of the G20 group of countries in London in April.

The World Bank spends billions of dollars annually fighting poverty in developing countries.

Last week, the International Monetary Fund said developing countries would need $25 billion, and possibly as much as $140 billion, in 2009 to meet their financing needs.

The World Bank said the crisis could have long-lasting repercussions for developing countries, which are contending with a drop in exports as world trade shrinks for the first time since 1982 at the same time remittances from overseas workers slow and falling commodity prices saps a revenue source many countries rely on.

Here is the link to the orignal story: 700 Billion

Here is a related report:

Global Economy to Shrink First Time Since WWII, World Bank Says

March 8 (Bloomberg) -- The global economy is likely to shrink for the first time since World War II, and trade will decline by the most in 80 years, the World Bank said today.

The World Bank’s assessment is more pessimistic than an International Monetary Fund report in January predicting 0.5 percent global growth this year. The Washington-based World Bank didn’t provide a specific estimate in its report.

World growth will be 5 percent below its potential, the bank said. Developing nations will bear the brunt of the contraction. They will face a shortfall of between $270 billion and $700 billion to pay for imports and service debts, the bank said.

“We need to react in real time to a growing crisis that is hurting people in developing countries,” said World Bank President Robert Zoellick in a statement. Action is needed by governments and multilateral lenders “to avoid social and political unrest.”

East Asia will be hit the hardest by the decline in global commerce, the bank said. Global industrial production is expected to be as much as 15 percent lower than in 2008.

The World Bank said that a surge of debt issuance by rich nations risks “crowding out many developing country borrowers, both private and public.” Emerging nations that can access capital markets will be forced to pay higher rates of interest.

The report said that 94 out of 116 developing countries had experienced a slowdown in economic growth, with poverty increasing in 43. The result, the bank said, would be growing dependence on foreign aid.

Here is the linik for the complete report: Economy

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