IMF, World Bank warns of ‘human calamity’

Published by rudy Date posted on April 28, 2009

Amid worst economic crisis since Great Depression
WASHINGTON: The IMF and World Bank have warned the global economic crisis is turning into a “human calamity” and called on members to speed up pledged aid and give even more to help the most vulnerable.

At the end of spring meetings in Washington Sunday, the two Bretton Woods institutions told their 185 member countries that the worst global slump in generations had already driven more than 50 million people into extreme poverty.

“The global economy has deteriorated dramatically . . . Developing countries face especially serious consequences as the financial and economic crisis turns into a human and development calamity,” the International Monetary Fund and World Bank joint development committee said in a statement.

“We must alleviate its impact on developing countries and facilitate their contribution to global recovery,” the World Bank’s policy steering committee said.

Pledges of aid by countries, including by the Group of 20 countries at a London summit earlier this month, should be delivered, it said.

“We urged all donors to accelerate delivery of commitments to increase aid, and for us all to consider going beyond existing commitments,” the committee said.

How to help the developing world cope with the worst global slump since the 1930s Great Depression was top of the agenda for the bank’s steering committee meeting that wrapped up the sibling institutions’ two-day gatherings.

“No one knows how long this crisis will last,” World Bank president Robert Zoellick told a news conference.

Although the bank’s finances are “in a strong position to help our partner countries,” he said, the crisis was putting the United Nations’ Millennium Development Goals to reduce poverty by 2015 increasingly at risk.

The World Bank Saturday launched a $55-billion infrastructure investment program designed specifically to help developing countries weather the global slump.

US Treasury Secretary Timothy Geithner told the committee that Washington was “on track” to meet a pledge to double development aid to Sub-Saharan Africa by next year and would increase other help “to vulnerable populations . . . so that we can give people the tools they need to lift themselves out of poverty.”

No new pledges of aid were announced for the World Bank or for the IMF at the meetings, which followed up on the G20 commitment of more than $1.1 trillion to multilateral institutions, mostly to the IMF, at a London summit on April 2.

The IMF’s policy steering committee endorsed Saturday a massive expansion of the fund’s lending resources to combat the recession and boost lifelines to poor countries.

The IMF recently forecast the global economy would contract 1.3 percent this year before growth of 1.9 percent in 2010.

IMF head Dominique Strauss-Kahn said Saturday it was time to talk exit strategies from the crisis after all members had agreed on the fiscal stimulus measures taken and “on the absolute necessity of cleansing the financial system.”

The International Monetary and Financial Committee (IMFC) said a key achievement of the meeting was “ensuring the doubling of the Fund’s loanable resources.”

Strauss-Kahn said the IMFC also discussed the sale of IMF bonds to member states to raise extra funds, a move allowed by fund rules but never exercised.

The sale of bonds is linked to the issue of IMF quotas and approved but as yet not enacted reforms to give developing countries more voice in the institution, traditionally dominated by the United States and other major advanced economies.

“The Bank and IMF said all the right things, but the true test is whether their rich country shareholders will turn words into action,” said Marita Hutjes, senior policy advisor at anti-poverty group Oxfam International.

“Contributions to the bank and the IMF for the poorest countries are needed now. Bureaucratic delay and lack of political will on this will cost lives,” Hutjes warned.

Meanwhile, China called for reform of the global currency system, dominated by the dollar, which it said is the root cause of the crisis.

Chinese Vice Finance Minister Li Yong said the “flawed” international monetary system is “a major defect in the current international economic governance structure.”

At the closing news conference, Zoellick and Mexican Finance Minister Agustin Carstens announced that the World Bank would send more than $205 million to Mexico to support the government’s efforts to fight the spread of a new swine flu virus that has killed at least 20 people.

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