World Bank Agrees To Protect Poor And Vulnerable Countries In The Current Financial Turmoil

“The World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems, maintain growth and protect the poor against the financial turmoil roiling international markets.” The head of the bank's policy-setting committee, Mexican Finance Minister Agustin Carstens, and World Bank President Robert Zoellick announced the commitment at the end of a daylong meeting. Zoellick said the financial crisis ‘has been a manmade catastrophe. The actions and responses to overcome it lie in our hands.’” [Associated Press/Factiva]

“Picking up on complaints that the crisis will put recent hard-won economic gains in the developing world at risk, World Bank head Robert Zoellick insisted that this would not be allowed to happen. ‘Developing countries ... risk very serious setbacks to their efforts to improve the lives of their populations from any prolonged tightening of credit or a sustained global slowdown,’ Zoellick told a news conference. ‘We must ... ensure that as governments and publics turn their attention to problems close to home, they do not step back from their commitments to boost overseas assistance to meet the Millennium Development Goals,’ he said. [Agence France Presse/Factiva]

Robert Zoellick also stressed the “importance of recapitalizing banks in developing countries that will likely suffer losses from the current global financial turmoil. ‘We've already started to see distress with some developing countries' financial institutions...Some of the small banks could be under stress, take losses and need recapitalization,’ Zoellick told a press conference after a one-day meeting of a joint panel of the bank and the IMF.”[Kyodo News/Factiva]

The World Bank said it has the “capacity to ‘comfortably double’ lending to developing countries in need. The bank's private-sector lender, the International Finance Corp, said on Saturday it planned a $3 billion fund to help small banks hit by the financial crisis.” [Reuters News/Factiva]

EFE (Spain) quotes Zoellick as saying that ‘we are starting to see that some institutions in emerging economies are increasingly under pressure.’ To assist those banks, the World Bank is currently considering to launch a new fund that would inject capital, a initiative close to the one adopted by the euro-zone for their own area. Zoellick explained that the international organization is on "preliminary" discussions with private banks and other multilateral institutions.” [EFE/Factiva]

Meanwhile, Zoellick said Sunday that the “global financial crisis underscores the need for coordinated action to build a better multilateral system. ‘We need to modernize multilateralism for a new global economy’ Zoellick said in Washington. ‘We need concerted action now to ... build a better system for the future.’ With donor aid programs under pressure due to the financial crisis, the World Bank estimates that up to 100 hundred million people are at risk of falling into poverty because of higher food and energy prices.” [Agence France Presse/Factiva]

Henry Paulson “welcomed the World Bank's recent role in coordinating the international response to help countries dealing with the surge in food and fuel prices. ‘Now, these same countries are likely to face a host of new pressures stemming from declines in export demand, private investment and remittances,’ he said. ‘Emerging markets, too, are likely to face difficulty accessing private capital necessary to finance critical priorities, such as infrastructure.’ Paulson said the World Bank should consider expanding trade lines, ensure local financial systems function well, and pushing for well-targeted safety-net programs. In addition, he said the World Bank and IMF should encourage governments to remain open to trade and investment.” [Dow Jones/Factiva]

Poor Countries Say Their Problems Forgotten As Crisis Bites

“Developing countries complained Sunday that the global financial crisis will put their recent hard-won economic gains at risk while the rich nations focus only on their own problems. The poorer countries could be hit twice by the crisis -- finding it more difficult to get access to funding and as their exports fall as the crisis undercuts demand, Indian Finance Minister P. Chidambaram said.

The plight of the poor countries has been ‘largely forgotten,’ said Sierra Leone Finance Minister David Carew. ‘We expect to see a reduction of inflows to Africa and that is of concern to us," Carew said, citing likely falls in remittances, foreign exchange reserves and foreign investment. Worse still, the banking system in poorer countries could face volatility because of links with banks in the developed world which have been pushed to the brink by the crisis destroying their capital. ” [Agence France Presse/Factiva]

Meanwhile, “Japan pledged Sunday it will provide a total of $150 million over the next five years to help African nations raise their farm productivity and to assist developing economies in tackling natural disasters induced by climate change. Naoyuki Shinohara, vice Japanese finance minister for international affairs, said in his speech to a joint panel of the World Bank and the IMF that the aid addressing a food crisis and climate change will be offered to developing nations through a trust fund set up at the bank. Shinohara said a fundamental remedy for the high food prices in developing countries ‘would inevitably require improving agricultural productivity.’” [Kyodo News (Japan)/Factiva]

European Leaders Agree Crisis Measures

“European leaders agreed a plan that would inject billions of dollars into troubled banks in an attempt to restore confidence in the financial system, leading to a cautious rebound in Asian markets Monday. Meeting in Paris, governments from the 15 nations that use the euro promised to tackle the crisis together, buying into banks by taking preference shares and guaranteeing inter-bank lending to help increase liquidity. The United States was reportedly also heading towards taking direct stakes in threatened banks in the coming days.

Precise details of the emergency European measures were not released, but French President Nicolas Sarkozy said governments would reveal more on Monday. Officials have said the package will cost several hundred billion dollars on top of the huge sums already spent rescuing banks and propping up the money markets.” [Agence France Presse/Factiva]

Under a 13-point draft action plan adopted last night, the European Central Bank will intervene in the financial turmoil to boost liquidity; eurozone governments will underwrite bank debt until the end of next year and the same governments will commit to preventing the collapse of ‘systematically relevant institutions through appropriate means including recapitalization.’ The three elements - liquidity support, inter-bank lending guarantees and recapitalization of distressed banks - are the core of last week's Brown plan and look set, with national variations to take account of differing systems, to become the European standard.” [The Guardian (UK)]

“In a statement endorsed by the euro group, leaders pledged to buy shares in banks to shore up their balance sheets. The statement said: ‘Governments remain committed to avoiding any failure of systemically relevant institutions, through appropriate means including recapitalization.’ The text sends a direct warning to the banks that many people blame for the current crisis. It said: ‘In doing so, we will be watchful regarding the interest of taxpayers and ensure that existing shareholders and management bear due consequences of the intervention.’ Banks that receive emergency recapitalization will have to follow an ‘appropriate restructuring plan,’ the Europeans said. Inter-bank loans will also be guaranteed until the end of next year, the statement said.” [The Daily Telegraph (UK)]

“European central banks have opened the floodgates with promises of unlimited dollar funding in a coordinated action with the US Federal Reserve,” writes the FT. “The European Central Bank, Bank of England and Swiss National Bank said they were ready to inject as much as needed into the markets for dollars funding covering periods of seven days, a month and 84 days. Banks would ‘be able to borrow any amount they wish against the appropriate collateral in each jurisdiction,’ the central banks said in a statement. In Tokyo, the Bank of Japan said it was considering a similar step.” [The Financial Times]

The BBC meanwhile reports that “European and Asian markets have rallied in response to efforts by world leaders to stem the recent financial turmoil. London's FTSE 100 index and France's Cac 40 index both jumped more than 5 percent - tracking earlier gains on Asian markets. Bank shares led the advance.”

Opinion: A flexible G-14 is the key to Our Future

September and October are shaping up to be hard months in a precarious year: a meltdown in financial, credit and housing markets; the continuing stress of high food and fuel prices, and the dangers of poverty and malnutrition; anxieties about the global economy, writes World Bank President Robert. B. Zoellick in an opinion piece in The Australian.

The events of these two months could be a tipping point for many developing countries. As always, the poor are the most defenseless. Voices across the world are blaming free markets. Others are asking about the failures of government institutions. We cannot turn back the clock on globalization. So we must learn the lessons from the past as we build for the future. We must modernize multilateralism and markets for a changing world economy.

Today's globalization and markets reflect huge changes in information and communications technology, financial and trade flows, mobility of labor, worldwide interconnectivity and vast new competitive forces. New economic powers are on the rise, making them stakeholders in the global system. These rising powers want to be heard.

Private financial markets and businesses will continue to be the strongest drivers of global growth and development. But the developed world's financial systems, especially in the US, have revealed glaring weaknesses after suffering titanic losses. The international architecture designed to deal with such circumstances is creaking. The new multilateralism, suiting our times, will need to be a flexible network, not fixed.

It needs to maximize the strengths of interconnecting as well as institutions, public and private. It should be oriented around pragmatic problem solving that fosters a culture of co-operation.

Our new multilateralism must build a sense of shared responsibility for the health of the global political economy and must involve those with a significant stake in that economy. We must redefine economic multilateralism more broadly, beyond the traditional focus on finance and trade. Today, energy, climate change and stabilizing fragile and post-conflict states are economic issues. They are already part of the international security and environmental dialogue. They must be the concern of economic multilateralism as well.

The new multilateralism will rely on national leadership and co-operation. But the Group of Seven is not sufficient. We need a better group for a different time. We need a core group of finance ministers who will assume responsibility for anticipating issues, sharing information and insights, exploring mutual interests, mobilizing efforts to solve problems, and at least managing differences.

We should consider a new steering group -- including Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa and the present G-7 -- that meets regularly, with active formal and informal dialogues. The new steering group should not just replace the G-7 with a fixed-number G-14. We must not use old world methods to remake the new. The steering group should evolve to fit changing circumstances. We need this new network so that global problems are not just mopped up after the fact, but anticipated. The steering group will still need to work through established international institutions, but the core group will increase the likelihood that countries draw together to address problems larger than any one state.

Just as the financial crisis has been international because of interconnectedness, the reforms will need to be multilateral. Whether through an expanded Financial Stability Forum with the International Monetary Fund or the steering group, these financial supervisory issues will need to be addressed in a broader multilateral context.

The new multilateral network must also interconnect energy and climate change. World energy markets are a mess. We need a global bargain among main producers and consumers of energy. There could be a common interest in managing a price range that reconciles interests while transitioning towards lower carbon growth strategies, a broader portfolio of supplies and greater international security.

A climate change accord also will have to be supported by new tools. We need new mechanisms to support forestation and avoid deforestation, develop new technologies and encourage their rapid diffusion, provide financial support to poorer countries, assist with adaptation, and strengthen carbon markets. The steering group should help push action on energy, the environment and financing to assist the UN negotiations and the practical implementation of a climate change treaty.

Dealing with the economic aftermath will be one of the foremost responsibilities of the next US president. But this work is not about the US alone. Multilateralism, at its best, is a means for solving problems among countries, with the group at the table willing and able to take constructive action together. Fate presents an opportunity wrapped in a necessity: to modernize multilateralism and markets.

Fiscal woes could delay climate change efforts

"The financial crisis and a deepening economic downturn are threatening to delay efforts to deal with another pressing global crisis: climate change…

In the short term, a declining global economy could reduce the growth in greenhouse gas emissions as consumption of goods and energy usage drops. But world leaders warn it could also undermine efforts to find long-term solutions.

European Union leaders are discussing delaying planned emissions cuts in response to the financial crisis. United Nations officials worry that wealthier nations may cut back on commitments to help poorer countries invest in clean energy or adapt to the impacts of warming, which is seen as crucial in getting a global deal to reduce emissions. [San Francisco Gate]

“Transfers of financial resources and technology by industrialised countries to developing countries "are fundamental to the success of any global strategy to address the issue" of climate change, [Indian] finance minister P. Chidambaram has told a meeting of world financial leaders.

Noting that developing countries are the most vulnerable to adverse effects of climate change, Chidambaram Sunday called for a higher World Bank support for adaptation efforts in the Climate Investment Funds, than the $500m envisaged.

The finance minister's statement to the Development Committee of the World Bank and the International Monetary Fund was read out at its annual meeting here, held about six weeks before the next summit of the United Nations Framework Convention on Climate Change.[The Economic Times]

World Bank President Robert Zoellick acknowledged there was a "risk of distraction" and…noted that the current global credit crunch might have been averted if people heeded the financial clouds on the horizon only a few years ago. "One of the lessons of today's crisis is that you have to get ahead of these things," Zoellick told reporters Sunday. "There's no doubt that climate change is a problem today and will be a problem tomorrow." [The Earth Times]

Also in this Edition; Briefly Noted…

Former South African President Thabo Mbeki is due in Harare for further mediation aimed at breaking the political impasse in Zimbabwe. A government list published on Saturday gave the main ministries, including defence, home, foreign affairs, and justice to Zanu-PF. [BBC News]

China's Communist Party leaders have agreed a package of rural reforms that could shape the country's economic policy over the coming years. No details were given but it is thought farmers will now have more power to transfer or rent out their land. Leaders have said they want to lift the income of China's 740m rural population to boost growth and ease social unrest. [BBC News]

The World Bank Uzbekistan Country Office had joint World Bank and Asian Development Bank country project portfolio review (CPPR), the World Bank said on its official website. The Government of Uzbekistan and the World Bank have built a good record of implementation of the recommendations of previous CPPRs. [UzReport.com (Uzbekistan)]

With plunging stock markets and currencies, evaporating credit lines and sinking prices for the commodities that have made many Latin American economies boom, the bank now expects regional growth of 2.5 to 3.5 percent next year, according to Pamela Cox, vice president for Latin America and the Caribbean. [Financial Times]

Argentina's government is considering a host of measures to contain the impact of global financial turmoil amid growing fears of declining output and employment, local media reported on Sunday, citing government sources. President Cristina Fernandez wants a pact with businessmen and unions to avoid layoffs, coupled with measures to help underpin output, such as higher tariffs on imports, trade barriers and a weaker currency, they said. [Reuters News/Factiva]

The World Bank has taken a more conflict sensitive approach in the new Country Assistance Strategy of the Bank for the next three years (2009-2012). The Bank has pledged US$ 900 million development assistance for the three years and has specially focused on development issues in the North and East provinces. [Sunday Observer (Sri Lanka)]

As the credit crisis deepens, US charities are bracing for a decline in giving from both corporations and financially stretched individuals. According to the Giving USA Foundation, a group that looks at trends in philanthropy, charitable giving fell during past downturns. [Financial Times]

Brazil's national monetary council has bestowed additional powers on the central bank (BCB) to manage troubled banks that sell their loans to the authority, with the idea of making more cash available to the market, BCB announced in a statement. BCB will now be able to require controlling shareholders to inject capital and/or sell assets. Further, it will be able to block executive salary increases and limit commercial banks' operations.[Business News Americas/Factiva]

[Nepal] Finance Minister Dr Baburam Bhattarai has appealed to the international community to provide Nepal with additional financial assistance for its economic transformation. The government has envisaged mobilizing 65bn rupees [approx 865m US dollars] in foreign aid for this fiscal year in order to implement its ambitious budgetary plans. While the amount is twice that of the previous budgetary target, donors are sceptical about Nepal receiving that kind of assistance. More so given that the leading bilateral donors themselves are seeing budget strains due to the global financial crisis. [BBC Monitoring South Asia/Factiva]