"More aid needed" for developing countries

While developing countries currently suffering from the global economic downturn are likely to experience a rebound in growth this year, but the rate of growth will still be too low to allow for rapid poverty reduction in many poorer countries, according to the World Bank. What less developed countries needed was better trade and market access, as well as a significant step up in aid, in order to assist their development, it reported on Thursday. Developing countries' output was expected to rise by 3.2 percent this year, only slightly more than in 2001, but growth was expected to accelerate to 5 percent in 2003, it said. However, there would also be significant performance differences between the different developing countries. The economic rebound will be less pronounced in many of the poorer, commodity-dependent economies due to continuing weakness in commodity prices, according to the World Bank. These countries would fall short of the growth rates needed to meet the Millennium Development Goals (MDGs) to reduce by half the proportion of people in extreme poverty between 1990 and 2015, it said. "Low commodity prices will continue to restrain economic growth in some of the poorest countries, particularly in Sub-Saharan Africa," the World Bank stated. The Bank drew particular attention to the position of non-oil commodity exporters in Sub-Saharan Africa. In 2000, it said, they suffered from the high oil prices. Then, when oil prices softened somewhat in 2001, non-oil commodity prices fell further - by a margin of 8 percent in real terms last year. Although some recovery in commodity prices was envisaged, it would not suffice to compensate for recent losses, it added. "Thinking about the prospects now and what's been happening in developing countries, there's no doubt... that this has been a difficult year for developing countries," World Bank Senior Vice-President and Chief Economist Nicholas Stern told a press conference in Washington, USA. "With the reduction in global growth that's taken place, the impact of that on developing countries has been serious and significant." According to Stern, the key challenges now are to deepen the global partnership for development, which has three key elements: policies, institutions and governance in developing countries; trade and market access for them, particularly to markets in the developed world; and the need for a significant increase in development assistance. Developing countries themselves had shown "strong progress" in the last 10 or 15 years on reforming their policies and institutional environment, Stern stated. They are "delivering on that side of the bargain in large measure, and they've seen increases in growth and poverty reduction as a result of the measures they've taken themselves." A crucial second part of partnership for development was developed countries' access to markets in the rich countries, where agricultural subsidies stood at well over US $300 billion a year - almost six times the level of aid flows, he said. The final key element was aid, with the World Bank arguing for an increase by $10 billion or so a year over the next five years, from the current level of around $50-55 billion a year, Stern added. Many developing countries have also had less access to capital markets, due to a global decline in lending, increased uncertainty among investors, and reduced willingness to assume risk, according to the World Bank. Overall, net long-term private flows to developing countries fell in 2001 for the fifth year in a row to an estimated $234 billion, $30 billion below the previous year's level and more than $100 billion lower than the peak in 1997, it said. Official Development Assistance (ODA) has also fallen, widening the gap between the availability of aid and the needs of the poorest countries. ODA dropped sharply in the 1990s following the end of the Cold War, picked up briefly in response to the 1997 East Asian financial crisis, but declined again in the past two years. According to World Bank economist William Shaw, total ODA in 2001 was 20 percent less than in 1990, in inflation-adjusted dollars. For Sub-Saharan Africa, the composition of national economies - often with a high dependence on commodity products - meant that they were more vulnerable than most to global slowdowns - such as that experienced in the last year - the sharpest in almost 30 years. For Sub-Saharan Africa, there had been no increase in productivity over the last 20 years, and that meant that every decline in prices, and additional declines because of the global slowdown, immediately translated into lower incomes, it added. Since 1990, aid flows have declined by more than 20 percent in real terms, according to the World Bank. Yet preliminary estimates indicate that a doubling of aid flows - coupled with improved policies applied by developing countries, and increased allocation of aid to countries with good policies - will be required to meet the MDGs, including a halving of poverty and improvements in health and education indicators by 2015.