Front Matter

Author(s):
International Monetary Fund
Published Date:
April 2009
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    © 2009 The International Bank for Reconstruction and Development / The World Bank

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    ISBN: 978-0-8213-7859-5

    eISBN: 978-0-8213-7860-1

    DOI: 10.1596/978-0-8213-7859-5

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    Contents

    Foreword

    The title of this year’s Global Monitoring Report is “A Development Emergency.” Appropriately so. We are in the midst of a global financial crisis for which there has been no equal in over 70 years. It is a dangerous time. The financial crisis that grew into an economic crisis is now becoming an unemployment crisis. It risks becoming a human and social crisis—with political implications. No region is immune. The poor countries are especially vulnerable, as they have much less cushion to withstand events. This poses serious threats to the hard-won gains in boosting the economic growth of many developing countries, especially in Africa, as well as achieving progress toward the Millennium Development Goals (MDGs). It also poses a threat to global recovery, because developing countries can provide a growth platform to help the global economy pull out of the crisis.

    Middle-income countries were the first among developing countries to feel the impact of the financial crisis, given their heavier reliance on private capital flows. Private capital flows to the developing world are seeing their sharpest decline in many decades. Both middle- and low-income countries will be hit hard in 2009 by a second wave of effects reflecting the global recession and declining world trade. Poor countries will be affected through reductions in export volumes, commodity prices, remittances, tourism, foreign direct investment, and possibly even foreign aid. These shocks will hurt public revenues, constricting fiscal space for public programs.

    Economic growth in developing countries has declined sharply to the lowest rates for some decades; per capita incomes will fall in many countries. Sub-Saharan Africa will see a rise in the poverty count in 2009, with the more fragile and low-growth economies especially at risk. Globally, we estimate that because of the crisis there will be more than 50 million additional people living in extreme poverty in 2009 than expected before the crisis, compounding the impact from soaring food and fuel prices of recent years.

    These numbers have a human face. We estimate that as a result of sharply lower economic growth rates, about 200,000 to 400,000 more babies may die each year. School enrollments will suffer—especially for girls. The prospect of reaching the MDGs by 2015, already a cause for serious concern, now looks even more distant.

    A global crisis requires a global solution. The crisis began in the financial markets of developed countries, so the first order of business must be to stabilize these markets and counter the recession that the financial turmoil has triggered. This calls for timely, adequate, and coordinated actions by developed countries to restore confidence in the financial system and counter falling demand. At the same time, we need strong and urgent actions to counter the impact of the crisis on developing countries by helping them to boost growth while protecting the poor. The report sets out six priority areas for action to confront the development emergency that now faces many of these countries.

    First, we must ensure an adequate fiscal response in developing countries to protect the poor and vulnerable groups and to support economic growth. Priority areas must be strengthening social safety nets and protecting infrastructure programs that can create jobs while building a foundation for future productivity and growth. The precise fiscal response needs to be tailored to individual country circumstances, consistent with maintenance of macroeconomic stability. Second, we must provide support for the private sector and improve the climate for recovery and growth in private investment, including paying special attention to strengthening financial systems. Helping small and medium enterprises get access to finance for trade and investment is vital for job creation. But the crisis has also underscored the importance of broader reforms to improve the stability and soundness of the financial system. Third, we must redouble efforts in human development and recover lost ground in progress toward the MDGs. We can do this not only by strengthening key public programs for health and education, but also by better leveraging the private sector’s role in the financing and delivery of services.

    In support of these efforts to help developing countries, the report emphasizes three key global priorities. Donors must deliver on their commitments to increase aid. Indeed, the increased needs of poor countries hit hard by the crisis call for going beyond existing commitments. National governments must hold firm against rising protectionist pressures and maintain an open international trade and finance system. Completing the Doha negotiations expedi-tiously would provide a much-needed boost in confidence to the global economy at a time of high stress and uncertainty. Finally, multilateral institutions must have the mandate, resources, and instruments to support an effective global response to the global crisis. The international financial institutions will need to play a key role in bridging the large financing gap for developing countries resulting from the slump in private capital flows, including using their leverage ability to help revive private flows.

    World leaders made important progress in coordinating a global response to the crisis at the recently held summit of the Group of Twenty countries. This must be followed by strong, concerted actions. The need for international cooperation has never been greater.

    Robert B. Zoellick

    President

    The World Bank Group

    Dominique Strauss-Kahn

    Managing Director

    International Monetary Fund

    Acknowledgments

    This report has been prepared jointly by the staff of the World Bank and the International Monetary Fund. In preparing the report, staff have collaborated closely with partner institutions—the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the Organisation for Economic Co-operation and Development, the World Trade Organization, the United Nations Conference on Trade and Development, and other UN agencies. The cooperation and support of staff of these institutions are gratefully acknowledged.

    Zia Qureshi was the lead author and manager of the report. The core team for the report included Felipe Barrera, Peter Berman, Jean-Pierre Chauffour, Punam Chuhan-Pole, Stefano Curto, Mary Hallward-Driemeier, and Homi Kharas (World Bank) and Stijn Claessens, Richard Harmsen, Laura Kodres, Andrea Maechler, and Axel Palmason (IMF). Other significant contributions were made by Katharina Gassner, Arthur Karlin, and Linda Lee (World Bank) and Alberto Espejo, Emmanuel Hife, and Ioana Niculcea (IMF). Sachin Shahria assisted with the overall preparation and coordination of the report. The work was carried out under the general guidance of Justin Yifu Lin, Senior Vice President and Chief Economist, World Bank.

    A number of other staff and consultants made valuable contributions, including the following from the World Bank: Philippe Ambrosi, Uranbileg Batjargal, Amie Batson, Iwona Borowik, Penelope Brooks, Andrew Burns, Shaohua Chen, Robert Cull, Susan Davis, Asli Demirgüç-Kunt, Shanthi Divakaran, Simeon Djankov, Sharon Felzer, Ariel Fiszbein, Vivien Foster, Caroline Freund, Boris Gamarra, Alan Gelb, Navin Girishankar, Neil Gregory, Juliana Guaqueta, April Harding, Masako Hiraga, Bernard Hoekman, Ludwina Joseph, Johannes Sebastian Kiess, Stephen Knack, Gerard Martin La Forgia, Gina Lagomarsino, Benjamin Loevinsohn, Knut Lonnroth, Mattias Lundberg, Frank Lysy, Mariem Malouche, Aaditya Mattoo, Dominique van der Mensbrugghe, Inez Mikkelsen-Lopez, Dominic Montague, Marisela Montoliu-Munoz, Joyce Msuya, Richard Newfarmer, Israel Osorio-Rodarte, Harry Patrinos, Emilio Porta, Abha Prasad, Alexander Preker, Martin Ravallion, Lulu Shui, Eric Swanson, Nigel Twose, Marilou Uy, Daniel Villar, Dileep Wagle, and Elizabeth White.

    Other contributors from the IMF included Elif Aksoy, Alexandre Chailloux, Peter Dattels, and Deniz Igan.

    Contributors from other institutions included: Gaston Gohou, Ellen Goldstein, Josephine Kiyenje, and Timothy Turner (AfDB); Indu Bhushan, Christopher Maccormac, Manju Senapaty, and Gina Marie Umali (ADB); Yannis Arvanitis, Gary Bond, and James Earwicker (EBRD); Nathaniel Jackson and Max Pulgar-Vidal (IDB); Yasmin Ahmad, Simon Scott, and Suzanne Steensen (OECD); and Alessandro Nicita (UNCTAD).

    Guidance received from the Executive Directors of the World Bank and the IMF and their staff during discussions of the draft report is gratefully acknowledged. The report also benefited from many useful comments and suggestions received from the Bank and Fund management and staff in the course of its preparation and review.

    The World Bank’s Office of the Publisher managed the editorial services, design, production, and printing of the report, with Susan Graham anchoring the process. Others assisting with the report’s publication included Denise Bergeron, Martha Gottron, Nancy Lammers, Stephen McGroarty, Santiago Pombo-Bejarano, Kirsten Dennison and associates of Precision Graphics, and Bill Pragluski of Critical Stages.

    The report’s dissemination and outreach was coordinated by Merrell Tuck-Primdahl, working with Prianka Nandy, Kavita Watsa, and Roula Yazigi.

    Abbreviations

    ACP

    African, Caribbean, and Pacific countries

    ADB

    Asian Development Bank

    AfDB

    African Development Bank

    AIDS

    Acquired immune deficiency syndrome

    AMC

    Advanced Market Commitment

    CCT

    Conditional cash transfer

    CDM

    Clean Development Mechanism

    CERs

    Certified emissions reductions

    COMPAS

    Common preference assessment system

    CPA

    Country programmable aid

    CPIA

    Country Policy and Institutional Assessment

    CRS

    Creditor Reporting System (of the OECD DAC)

    CSR

    Corporate social responsibility

    DAC

    Development Assistance Committee

    DRF

    Debt Reduction Facility (of the World Bank)

    EBRD

    European Bank for Reconstruction and Development

    EC

    European Commission

    EITI

    Extractive Industries Transparency Initiative

    FAO

    Food and Agriculture Organization (of the UN)

    FDI

    Foreign direct investment

    FSAP

    Financial Sector Assessment Program

    G-8

    Group of Eight

    G-20

    Group of Twenty

    GAVI

    Global Alliance for Vaccines and Immunizations

    GDP

    Gross domestic product

    GEF

    Global Environmental Facility

    GFATM

    Global Fund to Fight AIDS, Tuberculosis, and Malaria

    GHG

    Greenhouse gases

    GNI

    Gross national income

    HIPC

    Heavily indebted poor country/countries

    HIV

    Human immunodeficiency virus

    IBRD

    International Bank for Reconstruction and Development

    ICP

    International Comparison Program

    IDA

    International Development Association (of the World Bank)

    IDB

    Inter-American Development Bank

    IEA

    International Energy Agency

    IFC

    International Finance Corporation

    IFI

    International financial institutions

    IFFIm

    International Finance Facility for Immunizations

    IHP

    International Health Partnership

    ILO

    International Labour Organization

    IMF

    International Monetary Fund

    ITC

    International Trade Centre

    LDCs

    Least-developed countries

    MDBs

    Multilateral development banks

    MDG

    Millennium Development Goal

    MDRI

    Multilateral Debt Relief Initiative

    MFIs

    Microfinance institutions

    MSE

    Micro- and small enterprise

    NAMA

    Nonagricultural market access

    NEPAD

    New Partnership or African Development

    NGOs

    Nongovernmental organizations

    NTM

    Nontariff measure

    ODA

    Official development assistance

    OECD

    Organisation for Economic Co-operation and Development

    OTRI

    Overall Trade Restrictiveness Index

    PFM

    Public financial management

    PPIAF

    Public-Private Infrastructure Advisory Facility

    PPP

    Purchasing power parity

    PTA

    Preferential trade agreement

    SIAP

    Sustainable Infrastructure Action Plan

    SME

    Small and medium enterprises

    SWF

    Sovereign wealth fund

    TTRI

    Tariff Trade Restrictiveness Index

    UN

    United Nations

    UNDP

    UN Development Programme

    UNFCCC

    UN Framework Convention on Climate Change

    WFP

    World Food Programme

    WHO

    World Health Organization

    WTO

    World Trade Organization

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