Developing Countries Could Face $270B to $700B Financing Gap in 2009, World Bank Says

Developing countries could face a financing gap of between $270 billion and $700 billion this year as a result of the global economic downturn and declining trade income, the World Bank said Sunday, Reuters reports. The bank added that international institutions might not have enough resources to meet the financing gap even at the low end of the estimate. According to Reuters, the International Monetary Fund last week said developing countries would need between $25 billion and $140 billion in 2009 to meet financing needs. In a paper prepared for the London Summit of the Group of 20 Industrialized Nations, which will take place in April, the World Bank said, "Should a more pessimistic outcome occur, unmet financing needs will be enormous."

According to Reuters, many developing countries that the economic situation has affected greatly also are "heavily reliant on aid, which could be cut off" as industrialized countries face domestic budget challenges. In addition, the World Bank said the economic situation could become particularly severe in lower-income nations, where it would affect vulnerable families living near the poverty line. Therefore, there is a "strong need to expand assistance to [lower income countries] to protect critical expenditures and prevent an erosion of progress in reducing poverty," the bank said. The organization added that the "challenge facing developing countries is how, with fewer resources, to pursue policies that can protect or expand critical expenditures, including on social safety nets, human development and critical infrastructure" (Wroughton, Reuters, 3/8).