World Bank Ups Poor-Nation Aid

By Christopher Swann
Bloomberg News
Wednesday, November 12, 2008

The World Bank said yesterday that it would almost triple lending this year to help prevent a "human crisis" in developing countries amid the turmoil in financial markets.

Lending to developing nations may reach $35 billion over the 12 months ending June 30, compared with $13.5 billion last fiscal year, the Washington-based lender said in a statement. The bank said it was prepared to commit as much as $100 billion in the next three years to meet demand for loans.

A credit crisis that is shrinking economies in the United States, Europe and Asia threatens to cut government revenue from India to Mexico, reducing public spending on health care and education. World Bank President Robert Zoellick called on leaders from the Group of 20 countries meeting Saturday in Washington to act together to stabilize markets.

"The response to this crisis must be global, coordinated, flexible and fast," Zoellick said in a statement. "It is more critical than ever that the international community acts in a coordinated and supportive way."

The World Bank also cut its forecast for growth in developing countries to 4.5 percent for 2009 compared with its previous projection in June of 6.4 percent, saying that financial turmoil, slower export growth and weaker commodity prices are hurting the outlook.

Growth in high-income countries will shrink 0.1 percent next year, compared with a 1.4 percent increase in 2008, the bank said in its new forecasts. Global trade may decline next year for the first time since 1982, Zoellick said.

Developing countries such as China, India and Brazil grew less dependent on World Bank loans in recent years because of ready access to international capital markets. As private sources of financing dry up, many governments may come back to the lender to help pay for infrastructure projects, health care and education programs.

Zoellick said yesterday that the bank had already received loan inquires from countries in Asia and Latin America.

Meanwhile, the World Bank estimates that a 1 percent decline in developing-country growth pushes an additional 20 million people into poverty. So far, the surge in food and fuel prices in recent years has driven about 100 million people into poverty, the bank says.

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