World Financial and Economic Crisis and its Impact on Development

The United Nations Conference on the world financial crisis adopted a wide-ranging Outcome Document (http://www.un.org/ga/search/view_doc.asp?symbol=A/CONF.214/3&Lang=E). The Outcome Document recognizes that the incoherence of the global economic system needs to be urgently addressed. It stresses the importance of the United Nations’ role in international economic issues,emphasizing that its universal membership and legitimacy makes it well positioned to participate in various reform processes aimed at improving and strengthening the effective functioning of the international financial system and architecture. It makes references to issues and recommendations of the Stiglitz Commission which presented an advanced report to the Conference, including on resources and policy space for developing countries to mitigate the crisis, debt restructuring and standstills, reform of the global reserve system and an independent panel of experts on the world economic and financial crisis that would inform international action, political decision-makin and foster constructive dialogues and exchanges among policy makers, academics, institutions and civil society. The precise role of the UN in global economic governance reform will likely be hotly debated in the coming months. Source: UN-NGLS

The European Commission stressed that the crisis shows how deeply the prosperity and the future of advanced economies, the emerging economies and the developing countries are linked. The cooperation and contribution of all developed, emerging and developing countries is needed. Source: European Commission, http://www.eu-un.europa.eu

As developing countries face the full impact of the economic crisis, European governments are falling short by nearly €40bn on their aid promises, a new report from CONCORD, the European confederation of Relief and Development NGOs, reveals. Source: Concord, http://tinyurl.com/numbm8

A groundbreaking study coordinated by ODI finds that developing countries are being hit harder than expected by the global financial and economic crisis, and that, sooner or later, they will need to respond. Research in ten developing countries, carried out by 40 researchers, provides a vivid picture of how these countries are faring in the crisis. The research examines the transmission belts — such as remittances, private capital flows and trade — that have been affected and are now carrying the crisis from the rich industrialised countries of the north to the poor developing countries of the south. Source: ODI, http://tinyurl.com/nc5yoy

The African, Caribbean and Pacific (ACP) Group called for urgent solutions to financial crisis. ACP states are amongst those hard hit by the crisis and want solutions to focus on countering the effects of the crisis. Since the crisis started, ACP states have experienced major falls in their export earnings; foreign direct investment has slowed down, official development aid declined and remittance flows have shrunken. The ACP Group believes that the crisis poses a severe threat to its members, compromising not only the efforts and economic gains achieved over the past years, but also the attainment of the Millennium Development Goals (MDGs). The ACP Group underscores that the impact of the crisis would undoubtedly exert strong pressure on the macro-economic balance of the ACP countries. ACP cited sub-Saharan Africa as an example, where growth outlook has dropped to 1.5% for 2009, against 5.4% in 2008 and 6.8 percent in 2007. Source: ACP Secretariat, http://www.acp.int/en/press_releases/financialcriisis/pressrelease_financialcrisis09.html

A Joint Statement by the African Development Bank, European Commission, and World Bank calls to align support to mitigate the impact of the economic crisis. The crisis calls for more coordination of infrastructure development in Africa. This statement outlines the concerns shared by the three institutions and highlights the priority interventions required at this time. Responding to urgent needs, the three organisations have announced their willingness to increase their aid volumes to provide much needed counter-cyclical spending in support of rapid recovery, job creation and to promote long-term growth. In this context, the three institutions call on development partners to support harmonized spending and interventions around the following strategic areas of alignment with proven high impact: development of regional infrastructure: transport corridors, power networks and ICT; maintenance of existing assets; and enhancement of policy, regulatory and administrative frameworks. Source: European Commission, http://tinyurl.com/mjz86l

The recent second Global Review of Aid for Trade demonstrates that despite the crisis, there is good news for developing countries: in 2007, total aid for trade reached USD 25.4 billion, USD 4.3 billion (21%) more than the 2005 baseline. Even so, World Bank estimates show that 53 million more people are expected to be living on less than USD 1.25 a day. And while a few countries have slightly reduced the targets they set in 2005 for 2010, the bulk of the commitments remain in force. DACnews describes the action being taken on many fronts. A survey recently concluded by OECD and the WTO – the second of its kind – demonstrates that the Aid-for-Trade Initiative is a success. Since its inception in 2005, developing countries have given higher priority to trade in their development strategies. Donors have responded by offering more funds to help them overcome their supply-side constraints. Source: OECD, http://www.oecd.org/dataoecd/43/52/43150493.htm

Friedrich-Ebert-Foundation released the publication Re-Defining the Global Economy (http://library.fes.de/pdf-files/iez/global/06293.pdf) after forum in April 2009. The current global economic crisis presents an opportunity to to engage the political governance of the global economy. Leading economist and Nobel Laureate Joseph Stiglitz introduces this publication for which FES invited expert authors to discuss three approaches to Re-Defining the Global Economy namely, necessary institutional arrangements for a just well-governed and well-functioning financial system, the question of national or regional versus global regulation of such a system and the necessary political and economic arrangements for securing social protections.

Canadian IDRC suggested solutions for Global Economic Governance based on their project findings: http://www.idrc.ca/en/ev-139286-201-1-DO_TOPIC

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2 thoughts on “World Financial and Economic Crisis and its Impact on Development

  1. I see one underlying matter and that is that the western economic development was keeping the rest of the world from performing better and since the development activity stopped in the west the rest of the world has started catching up. I do nor blame for any thing but rather the western effort at scientific reserch has made the world a better living place. What I mean to say is that the minerals and fossil fuels are necessary for any developing economy and west used to be competing for the supplies which others could not match and hence had to contend with lesser supplies of the same. Now thats not the case any more.

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