Aid to Developing Countries Decreases

World Bank Report on Eve of Monterrey Summit

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ROME, MARCH 15, 2002 ( Aid to developing countries nose-dived in the 1990s, warns the World Bank´s latest annual report.

The report says rich countries must grant between $40 billion to $60 billion a year in additional aid, in order to meet the goal of halving poverty in developing countries. Instead, aid from rich countries fell from 0.34% to 0.22% of their gross national product, the report states.

The warning comes on the eve of the Monterrey, Mexico, summit that will gather leaders of 50 countries for an International Conference on Financing Development. The summit runs March 18-22.

The World Bank report, entitled «Global Development Finance,» explains that an increase of aid for development is indispensable to reach goals set by the international community: «halving the proportion of people who live on less than a dollar a day, compared to 1990, and substantially improving health and education in developing countries by 2015.»

The report released Wednesday reveals that official development assistance has dropped from $45 billion in 1990 to $39 billion in 2001, a decrease of 20% in inflation-adjusted dollars.

«A growing number of poor countries are putting in place the policies, institutions and governance needed to achieve sustained pro-poor growth,» said World Bank chief economist Nick Stern. «The gathering in Monterrey presents a historic opportunity for the richer countries to demonstrate their support for these efforts by continuing to open their markets and by substantially increasing aid.»

Five donor countries have reached or surpassed the international target of contributing 0.7% of their GNP to development assistance, but many other donor countries fall short.

Small signs of increase are coming from major cooperating countries like France, Germany, Japan and the United States. Together they contribute more than two-thirds of the aid.

According to the World Bank, the decrease in aid is due above all to the fall of the Soviet Union. Until the 1980s, aid was decided using strategic criteria. Now, countries that offer more guarantees are preferred, because they are prepared to implement viable economic policies.

The recession has hurt poor countries too. Not since 1974 has the world gross domestic product decelerated so sharply. Countries dependent on commodities exports have been hit especially hard, with prices for commodities as diverse as coffee, cotton, rice, soybeans and precious metals at or near historic lows.

Countries that rely on tourism have also suffered the negative effects of the world economy for the last two quarters. However, given that several of the strong market reactions to the Sept. 11 terrorist attacks have been substantially reversed, and signs of a recovery in the United States and the high-tech sectors have started to mount, strong growth rates in the second half of 2002 are expected.

The report projects global GDP growth of 3.6% in 2003, an improvement over 2001 and 2002, but still short of the strong 3.9% performance of 2000.

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