Financial crisis may affect fund flows to poor nations, say IMF and World Bank

13 October 2008

A prolonged global financial crisis could badly affect the flow of funds to  developing countries whose banks have fewer resources to prevent a market collapse, the World Bank and the International Monetary Fund (IMF) have warned.

The Fund and the Bank said they stood ready to use their ''full range of resources'' to help countries that cannot manage the spreading financial crisis on their own. The IMF, in fact, boosted its own lending facilities for struggling countries.

Developed countries also promised to keep aid to poor countries flowing despite the turmoil in their own financial markets.

Hit already by surging food and fuel prices, developing countries ''risk very serious setbacks to their efforts to improve the lives of their populations from any prolonged tightening of credit or sustained global slowdown,'' World Bank president Robert Zoellick said.

''The poorest and most vulnerable groups risk the most serious - and in some cases permanent - damage.''

The Development Committee of the IMF and the World Bank has sought increased contributions to a special fund to fight the food crisis. Nations have so far pledged some $1.2 billion, including $50 million offered this week by Australia.