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Poverty and the Credit Crunch

Thursday, March 05, 2009
by Jon Mace

A report published today by UNSECO highlights the fact the current global economic crisis is hitting the income of the world’s poorest the most.

The Global Monitoring Report estimates that the poorest 390 million Africans will see their income drop by 20%. The global recession has seen a fall in commodity prices as well as a drop in investment flows to developing economies. The report estimates that this will cost the poorest household’s in sub- Saharan Africa $18bn or $46 per person.

The report has also highlighted wider development issues. Aside from the drop in household income there is a possibility of an increase in infant mortality of between 200,000 and 400,000. This is down to the rise in child malnutrition.

This latest UNSECO report follows shortly after one from the IMF that says that the world’s poorest countries need an additional $25bn in aid this year to cope with the financial crisis.

UNSECO argues that poor countries will need around $7bn to meet key educational targets that form part of the Millennium development goals. The report also uses a new indicator of fiscal capacity to estimate that 43 out of 48 low income countries lack the wherewithal to provide a pro-poor fiscal stimulus. The current at risk countries include Mozambique, Ethiopia, Mali, Senegal, Rwanda and Bangladesh.

Developing countries are receiving lower aid payments. Many aid budgets in rich countries are expressed as a percentage of GDP, GDP in many of these countries is currently contracting. For example the EU’s commitment to provide 0.56% of GDP in aid by 2010 will actually mean a drop of $4.6bn. Hence the report calls for a $4.6bn aid adjustment premium.

Further Reading

Original Guardian article

IMF Report

IMF Video clip based upon the report.

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