World Bank: G20 Warned Unrest Will Sweep Globe
A wave of social and political unrest could sweep through the world's poorest countries if G20 leaders fail to come to their aid, the World Bank warns today, as new research says the credit crunch will cost developing countries $750bn (£520bn) in lost output and drive millions more into poverty.
Ngozi Okonjo-Iweala, managing director of the World Bank, is urging G20 leaders to use the London summit in less than a fortnight's time to help protect the developing world against the worst effects of the financial crisis.
"We have to look at the impact of this on low income countries. Otherwise, without wanting to sound alarmist, social unrest and political crisis could be the result. It's in the self-interest of everyone to prevent that," she told the Observer
Her stark warning came as a new report from the Overseas Development Institute (ODI) said the collapse of the global economy would cost 90 million lives, lead to an increase to nearly a billion in the number of people going hungry and cost developing countries $750bn in lost growth.
"Tens of millions of people will be forced back below the poverty line. There will be irreversible effects on the very poorest," said Simon Maxwell, the ODI's director.
The ODI is calling for an extra $50bn in aid for Africa, and urging G20 countries to set aside a "significant proportion" of the cash they are spending on fiscal packages, to help build up the infrastructure in poor countries, and lift people above the breadline.
"When they sit down around the table at the G20, there will be plenty for the leaders to disagree about. This should not be one of those things, but it might well be," Maxwell said.
The ODI also said the G20 should not set unrealistic expectations about resuscitating the stalled Doha round of international trade talks, and should instead make a firm promise to avoid tit-for-tat protectionism.
Okonjo-Iweala said hundreds of thousands of workers were losing their jobs across the developing world, where social safety nets are almost non-existent, and called for more resources for the World Bank's "vulnerability fund," which helps cash-strapped governments to make direct welfare payments. "There is a credit crunch in many of these countries: foreign direct investment has dried up," she said.
Gordon Brown will fly to Brazil this week to try and win the support of President Lula for his agenda of co-ordinated fiscal stimulus, free trade, and a boost to overseas aid budgets.
Downing Street wants to secure a doubling in the resources of the International Monetary Fund, so it can bail out the worst-affected countries; and a promise of new loans to help facilitate cross-border trade.
With budgets tight at home, and noisy demands for help from domestic constituencies, however, Brown is concerned many countries are failing even to live up to the promises on aid they made at the Gleneagles G8 meeting in 2005. In Italy, Silvio Berlusconi has slashed aid spending in the face of a fiscal crisis.