Bangladesh News

The International Monetary Fund and the World Bank were meeting Sunday as the most severe financial crisis since the 1930s threatens to undo recent progress made by developing countries.

With donor aid programs under pressure as the crisis bites into budgets, the World Bank estimates that up to 100 hundred million people are at risk of falling into poverty because of higher food and energy prices.

“The large surge in food and energy prices — and an associated rise in inflation — present major policy challenges for most countries, further compounded by the uncertain global conditions as the financial crisis unfolds,” an update for the IMF and World Bank Development Committee said.

The Development Committee advises the World Bank and IMF on how to promote economic development in developing countries, many of whom feel neglected as a crisis they had no responsibility for threatens them directly.

Sierra Leone Finance Minister David Carew said the plight of the poor countries has been “largely forgotten” even though their recent development gains are at risk as the crisis bites.

“We expect to see a reduction of inflows to Africa and that is of concern to us,” Carew said, citing likely falls in remittances, foreign exchange reserves and foreign investment.

Worse still, the banking system in poorer countries could face volatility because of links with banks in the developed world which have been pushed to the brink by the crisis destroying their capital.

“Africa does not have (the) capacity for intervention” to help its banks that the developed world does, Carew said, adding: “The ripple effect of the crisis is coming … likely later this year.”

IMF head Dominique Strauss-Kahn warned on Saturday that it would be a mistake to forget the “other crisis” of soaring food prices and aid cutbacks faced by developing countries.

“We are in a big crisis but don’t forget the other one,” Strauss-Kahn said, adding that while food costs had moderated in recent months, “this bill is still unaffordable for poor countries.”

Donor country budgets were being strained as the financial crisis rips through markets and banks, slowing the economy, but Strauss-Kahn called on them not to cut back on their aid commitments.

Poor countries “absolutely need this money to avoid starvation.”

The 185-member IMF and especially the World Bank are tasked with aiding development and their annual meetings normally devote much time to reviewing progress made and new programs.

This year, however, they have been completely overshadowed by the financial crisis, with a major summit of eurozone leaders underway in Paris to follow up a Group of Seven industrialized nations gathering in Washington on Friday.

The G7 — the United States, Britain, Canada, France, Germany, Italy and Japan — said they would use all means available to combat the crisis, having already spent hundreds of billions of dollars to support their banks and financial systems.

For some developing countries, the difference between these sums and the money that they need is galling.

“Who will compensate the innocent countries who are going to … suffer from this debacle?” Kenyan Foreign Minister John Michuki asked Saturday.

A top Chinese official criticized rich nations for the problems in the global financial system and called on them to “shoulder the responsibility” of preventing more damage being caused.

“The major reserve currency-issuing countries should shoulder the responsibility for preventing further spillovers and minimizing shocks to other countries,” said Yi Gang, deputy governor of the People’s Bank of China.

The charity Oxfam was highly critical of the IMF.

“The IMF’s only plan for the poorest countries is to offer them small amounts of money, loaded with conditions. This will be too little, too late,” said Marita Hutjes, senior policy advisor at Oxfam International.

“The IMF has agreed that rich countries must use all possible tools to deal with the crisis but the same institution is limiting the tools available to the poorest countries by loading its lending with conditions.”

As for aid budgets, Hutjes said the “poorest countries need a bailout, too. The rich world can raise one trillion dollars in just a couple of weeks; surely it can respond to the needs of developing countries with the same level of urgency.”

Meanwhile, European leaders met in Paris for a summit designed to hammer out a coordinated bank rescue package before the resumption of trading in panic-stricken stock markets.

French President Nicolas Sarkozy, the current head of the European Union, said he hoped to persuade his counterparts “to speak with one voice” in a bid to contain the worst financial crisis since the Great Depression.

After talks with Britain’s Prime Minister Gordon Brown–who has already part-nationalised some of his country’s major banks–Sarkozy was to meet with the 14 colleagues from the single-currency euro bloc in the Elysee Palace.

As he greeted European Commission President Jose Manuel Barroso, who is also joining the talks, Sarkozy said he expected a “coordinated, ambitious” plan to contain the financial crisis to emerge from their discussions.

“We’re going to receive the British prime minister to explain to him what we are going to propose to the eurogroup,” Sarkozy told reporters.

“On Wednesday we’re going to try to get all of Europe facing in the same coordinated and ambitious direction,” he said, referring to this week’s Brussels summit of all 27 European Union members.

“That’s what I expect: Europe speaking with one voice,” he added.