Developing countries face a financing shortfall of $270-700 billion says World Bank

Developing countries face a financing shortfall of $270-700 billion this year, as private sector creditors shun emerging markets, and only one quarter of the most vulnerable countries have the resources to prevent a rise in poverty, the World Bank said.

In a paper for next Saturday's meeting of the Group of 20 finance ministers and central bank governors, the World Bank said that international financial institutions cannot by themselves currently cover the shortfall - that includes public and private debt and trade deficits - for these 129 countries, even at the lower end of the range.

A solution will require governments, multilateral institutions, and the private sector. Only one quarter of vulnerable developing countries have the ability to finance measures to blunt the economic downturn, such as job-creation or safety net programs.
 
World Bank President Robert Zoellick''We need to react in real time to a growing crisis that is hurting people in developing countries,'' said World Bank Group President Robert Zoellick.

''This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis. We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest,'' he added.

The global economy is likely to shrink this year for the first time since World War II, with growth at least 5 percentage points below potential. World Bank forecasts show that global industrial production by the middle of 2009 could be as much as 15 per cent lower than levels in 2008. World trade is on track in 2009 to record its largest decline in 80 years, with the sharpest losses in East Asia.

The financial crisis will have long-term implications for developing countries. Debt issuance by high-income countries is set to increase dramatically, crowding out many developing country borrowers, both private and public.