In a paper prepared for the Doha Follow-up Conference on Financing for Development to Review the Implementation of the Monterrey Consensus, the World Bank said it is imperative that donors meet their Gleneagles commitments to debt relief and scaled-up aid. At present, G7 countries are falling $30 billion short of these goals. According to the paper, The Implications of Global Crises on Developing Countries, the Millennium Development Goals, and the Monterrey Consensus, developing countries are facing a "perfect storm," with a convergence of slowing world growth, a withdrawal of equity and lending from the private sector, and higher interest rates.
Investment, the main driver of developing country growth over the past five years, will be hard hit by the financial crisis, and remittances from developing country migrants - a powerful poverty reduction mechanism - will likely decline in line with the global slowdown. All this comes in the wake of the severe food and fuel price crises, which placed a heavy fiscal, economic and social burden on many developing countries.
Reflecting deteriorating global conditions, the World Bank has revised its 2009 growth forecast downward. Developing country growth in 2009 is now forecast at 4,5 percent, nearly 2 percentage points lower than previously estimated; growth in high-income countries, many of which are already in the midst of recession, is now expected to be marginally negative in 2009. The volume of global trade is projected to contract in 2009, the first decline since 1982.
"This is not just about finance, as crucial as that is," Zoellick said. "In a world where developing countries represent new drivers of global growth, we must learn to listen to their experiences, and we must take better account of their needs. "Financing for development is no longer about the old paradigm of aid dependency or charity, it is about an investment in a stable, prosperous and inclusive future - that means having more and different voices at the table, and accepting that the North must learn to listen to the South."
Heading the World Bank delegation to Doha, Justin Yifu Lin, the World Bank's Chief Economist and the first such appointee from a developing country, said "This unfolding crisis highlights the extent of our global connectedness and has left us in a position whereby, in the next year, developing countries could account for all of the world's GDP growth. In this transformed world, empowering developing and emerging countries is imperative."
"Financing for development should focus more on adapting to countries' conditions and aspirations,” continued Lin. “It should be geared toward working with governments and stakeholders in those countries to support practical economic development programs. Helping nations pursue economic development and long term prosperity should be the goal of development finance. We must not lose sight of this principle amidst the current crisis."
To meet growing needs, President Zoellick has announced that the Bank Group will front load the $42 billion it has available to support low-income (IDA) countries over the next three years, and rely on its strong capital basis to lend up to $100 billion to developing countries over the same period. IFC, the private sector arm of the Bank Group, is also increasing support, doubling the Global Trade Finance Program to $3 billion, launching a global equity fund with support from the Government of Japan to recapitalize distressed banks, and establishing a new facility to provide roll-over financing to existing, viable, privately funded infrastructure projects facing financial distress.
