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Cash crisis is hitting developing world hardest

The credit crunch is hitting the income of the world’s poorest people the most and will make the U.N.’s Millennium Development Goals more difficult to achieve than ever, according to research released on Thursday. The Global Monitoring Report from Unesco estimates the 390 million poorest Africans will see their income drop by around 20 per cent — far more than in the developed world.

The global financial crisis has seen a fall in commodity prices as well as a drop in investment flows to poorer countries. The report’s authors — Kevin Watkins and Patrick Montjourides — estimate this will cost sub-Saharan Africa’s poorest people $18b, or $46 per person.

“These numbers will bring the region’s limited progress in poverty reduction to a shuddering halt,” says Watkins.

Douglas Alexander, the U.K. international development secretary, is hosting a conference in London next week to discuss the future of the goals, such as reducing child mortality and poverty amid growing concern progress towards these, agreed with great fanfare in 2000, is grinding to a halt.

The study also highlights wider human development impacts, including the prospect of an increase of between 200,000 and 400,000 in infant mortality. Child malnutrition, already a rising trend, will be one of the main drivers of higher child death rates. “Millions of children face the prospect of long-term irreversible cognitive damage as a result of the financial crisis,” says Montjourides.

The Unesco warning follows hot on the heels of one from the International Monetary Fund. It said the world’s 22 poorest countries might need an additional $25b aid this year to cope with the financial crisis. If the crisis is worse than the IMF expects, though, that could hit $140b.

Unesco reckons poor countries will need around $7b to meet key education targets which form part of the goals. That compares with the $380b of public money pumped into banks by rich countries in the fourth quarter of 2008. “Aid donors could clearly do far more to protect the world’s poorest people from a crisis manufactured by the world’s richest financiers and regulatory failure in rich countries,” says Watkins.

The report analyses the scope of many of the poor countries affected by the credit crunch to use tax and spending measures to help themselves combat it. The conclusion is their capacity to do so is very limited. Using a new indicator for fiscal capacity, the analysis estimates 43 out of 48 low-income countries lack the wherewithal to provide a pro-poor fiscal stimulus. — © Guardian Newspapers Limited, 2009

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