Low-income countries require more and better support
While the global economy is showing tentative signs of recovery, 43 low-income developing countries are still suffering the consequences of the global recession, which highlights the need to increase support to the poorest countries dealing with economic volatility and crisis, the World Bank said.
The World Bank Office in Moldova quoted a paper prepared for the upcoming G-20 meeting in Pittsburgh, in which the World Bank said that as a result of the crisis 89 million more people will be living in extreme poverty, on less than $1.25 a day, by the end of 2010. The global recession has also put at risk $11.6 billion of core spending in areas such as education, health, infrastructure and social protection in the most vulnerable countries.
"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. The poorest countries may not be well represented on the G-20, but we cannot ignore the long-term costs of the global downturn on their people's health and education," said World Bank Group President Robert B. Zoellick.
Despite strong international efforts to cushion the impact of the global recession on Low-Income Countries, the paper states that low-income developing countries continue to suffer the consequences of the food, fuel and financial crises, and the poorest countries will need additional assistance to confront and move beyond the global recession.
In Moldova, workers' remittances equivalent to about 30 percent of GDP in 2008 were more than enough to offset a current account deficit that would have reached 25 percent of GDP without them. With almost two thirds of these flows coming from Russia, Moldova was hit hard by the global crisis, and remittance inflows as a share of GDP are expected to fall by as much as half.
Further compounding the economic shock, remittances are largely used to finance household consumption and fuel imports, on which the government depends heavily for tax revenue. As a result, in addition to the sharp contraction in external financing, last year's modest fiscal surplus is expected to turn into a sizeable deficit in 2009, perhaps as large as 10 percent of GDP.
The paper describes how the World Bank Group stepped up its financial assistance to help developing countries mitigate the impact of the crisis over its past fiscal year. For the World Bank Group as whole, the result has been record levels of activity-with $58.8 billion committed in FY09 to support countries hit by the global crisis, a 54 percent increase over the previous year, and a record high.
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