Press Release
9 March 2009
Credit crunch ‘tsunami’ to hit world’s poor as 90 million forced into poverty
The economic downturn could devastate the developing world as 90 million more people are forced into poverty by the end of next year, International Development Secretary, Douglas Alexander, warned today.
New estimates suggest the fight against extreme poverty could be put back by up to three years, with the number of men, women and children being forced to live on less than 90p a day growing by millions every week.
The International Development Secretary was speaking ahead of next month’s G20 meeting and set out new proposals to protect the poor groups with an international ‘rapid response’ fund that would provide a safety net for the world’s most vulnerable people.
The multi-billion pound fund would offer basic services such feeding children and medical care for pregnant women and be specifically targeted at the most vulnerable groups including women, children, elderly people and the disabled. The fund would also invest in projects to get people back into jobs including ‘food for work’ projects.
The fund would be supported by a new ‘Global Poverty Alert’ system that would link international organisations, aid agencies and research groups into a single network that would provide instant updates on the impact of the economic crisis on the poor. This would include ‘real-time’ updates using text messaging and emails.
The proposal will be put forward at next month’s G20 meeting in London.
Speaking at a UK-led conference investigating the impact of the downturn on the world’s poor, the Prime Minister Gordon Brown said:
"Sharp falls in trade, production and investment mean a real threat to the years of progress we have made in lifting people out of poverty. The World Bank have estimated that over two million children could die as a result of the downturn. That must not happen. "Today's talks are a key opportunity for the UK, donor countries and developing nations to look at how we find our way through the current economic crisis in a way that protects the world's poor."
Secretary of State for International Development Douglas Alexander, said:
“We meet today in the shadow of a global financial crisis more serious than we have seen for generations. The impact of the crisis can be seen all around us but the knock-on effect is now being felt by the world’s poor.
“Although less affected by the immediate fall-out of the credit crunch, the economies of developing countries could be seriously damaged by a second wave of a credit crunch tsunami.
“As global trade and investment disappears, businesses close and jobs are lost. For people living close to the poverty-line, the impact could be devastating.
“Globally, by the end of next year, we could see some 90 million more people living in extreme poverty.
“Radical action needs to be taken to protect people from this financial CRISIS and that is why the British Government will be putting forward proposals to the G20 next month that will safeguard the most vulnerable. It is right that we put in place life-saving support for those hit hardest by the crisis.”
Mr Alexander also stated that the UK would be keeping its promise to raise aid levels to 0.7% of GDP by 2013 and other leading nations must do the same.
In addition to immediate action, the UK will reform the way aid is distributed to get the fight against poverty back on track and accelerate the recovery.
This will include new action to improve trade, tackle climate change and stop conflict in fragile states. The UK will bring forward reforms later this year and seek a new international agreement on these slow-burn threats.
In the early stage of the economic downturn many developing countries showed few effects compared to the US and countries in Europe. There are growing signs that the downturn is now being felt in these countries and that a devastating impact is on its way.
As world trade shrinks, private sector investment slows and the flow of cash from family members abroad dries up, it will be the poorest and most vulnerable countries that will be hit hardest.
- Experts predict that foreign direct investment – the flow of cash from foreign companies into developing countries – will fall by 80% from $929 billion in 2007 to $165 billion in 2009.
- Remittances – cash sent by foreign workers to their home country – are expected to drop by close to $20 billion next year. Remittances are worth three times as much to developing countries as global aid. In Kenya, it is already down a third.
- Less demand for exports will mean a fall in world trade of 2.8% in 2009 - the first fall in 25 years. Less demand means fewer jobs. In the Democratic Republic of Congo, 300,000 miners are reported to have already lost their jobs.
Douglas Alexander said that the historic commitment to end extreme poverty made between the developed and developing world at Gleneagles in 2005 was now facing its third and potentially most devastating blow following last year’s oil and food price crises.
Notes to editors
The International Development Secretary was speaking at a gathering of development experts, scientists, economists and aid agencies. The conference comes ahead of the G20 in London where the UK is expected to demand united action to protect and support developing countries alongside developed ones.
The conference will also be attended by Secretary of State for the Department of Energy and Climate Change Ed Miliband. Other speakers include Sir Bob Geldof, Lord Nicholas Stern, Dr Ngozi Okonjo-Iweala, Managing Director, The World Bank; Professor Paul Collier, University of Oxford.
Later this year, the Department for International Development will be producing a new White Paper which will set out what the UK Government will do to reduce world poverty over the next five years.
The Rapid Social Response Fund is embedded in the World Bank's overarching Vulnerability Financing Facility. It aims to promote employment, provide social safety nets and protect basic social services. It is designed to assist countries to target urgent social needs stemming from the global financial crisis, as well as build up existing capacity to respond to future crises.
Journalists are asked to register their interest in attending the conference in advance. To do this, call Paromita Saha on 0207 023 1125 or mobile 07779 239327 or Zahra Akkerhuys on 0207 023 0338 or 07525 901932.
