Financial crisis hits poor nations as well

WASHINGTON: As the world's richest nations debate how to bring a catastrophic financial crisis under control, international groups are warning that its reach now goes far beyond the developed world.

Poor countries in Africa, Asia and Latin America, which are already dealing with a surge in food and energy prices, are now finding it harder to sell goods abroad and encourage investment in their own economies.

Rich nations are falling well behind on their aid pledges as they face problems at home. As many as 30 countries are dealing with severe balance of payment problems, in other words, a shortfall of cash, according to the World Bank.

That lack of investment could lead to a rash of bank and business failures in poor nations, similar to the chaos that has played out since September in the United States and Europe.

As a result, the World Bank has "tentatively" cut its forecast for 2009 growth in developing countries to about 4 percent, down from an April prediction of 6.6 percent, World Bank President Robert Zoellick told reporters Thursday.

While that compares favourably with the likely recession many advanced economies will face next year, Zoellick said the slowdown in poorer nations was "so sharp as to feel like a recession".

The International Monetary Fund said it was ready to make emergency loans to developing countries to meet the cash shortfall from the broadening financial crisis.

from: http://economictimes.indiatimes.com