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• Development goals under threat from global slump
• Shrinking GDP will see $4.6bn fall in EU aid flow
The credit crunch is hitting the income of the world's poorest people the most and will make the UN's Millennium Development Goals more difficult to achieve than ever, according to research released today. The Global Monitoring Report from Unesco estimates the 390 million poorest Africans will see their income drop by around 20% - far more than in the developed world.
The global financial crisis has seen a fall in commodity prices as well as a drop in investment flows to poorer countries. The report's authors - Kevin Watkins and Patrick Montjourides - estimate this will cost sub-Saharan Africa's poorest people $18bn (£12.8bn), or $46 per person.
"These numbers will bring the region's limited progress in poverty reduction to a shuddering halt," says Watkins.
Douglas Alexander, the international development secretary, is hosting a conference in London next week to discuss the future of the goals, such as reducing child mortality and poverty amid growing concern progress towards these, agreed with great fanfare in 2000, is grinding to a halt.
The study also highlights wider human development impacts, including the prospect of an increase of between 200,000 and 400,000 in infant mortality. Child malnutrition, already a rising trend, will be one of the main drivers of higher child death rates. "Millions of children face the prospect of long-term irreversible cognitive damage as a result of the financial crisis," says Montjourides.
The Unesco warning follows hot on the heels of one from the International Monetary Fund. It said the world's 22 poorest countries might need an additional $25bn aid this year to cope with the financial crisis. If the crisis is worse than the IMF expects, though, that could hit $140bn.
Unesco reckons poor countries will need around $7bn to meet key education targets which form part of the goals. That compares with the $380bn of public money pumped into banks by rich countries in the fourth quarter of 2008. "Aid donors could clearly do far more to protect the world's poorest people from a crisis manufactured by the world's richest financiers and regulatory failure in rich countries," says Watkins.
The report analyses the scope of many of the poor countries affected by the credit crunch to use tax and spending measures to help themselves combat it. The conclusion is their capacity to do so is very limited. Using a new indicator for fiscal capacity, the analysis estimates 43 out of 48 low-income countries lack the wherewithal to provide a pro-poor fiscal stimulus.
Fiscal constraints are especially marked in many of the countries furthest from the international goals, it adds. There is a real danger these countries, many of which have been making progress towards universal primary education, will suffer setbacks, it says. The at-risk group includes Mozambique, Ethiopia, Mali, Senegal, Rwanda and Bangladesh.
The report says aid budgets in rich nations are being squeezed because they are expressed as a share of GDP, which is contracting. It estimates the EU's commitment to provide 0.56% of GDP in aid by 2010 will actually mean a drop of $4.6bn.
Unesco wants a concerted international effort to limit the impact of the financial crisis on the poor. Suggested measures include an increase of more than $500bn in IMF special drawing rights, along with governance reforms to give developing countries an increased voice.
The authors also call for the EU to provide a $4.6bn aid adjustment premium. They argue increased aid should be directed towards social protection and safety nets for the most vulnerable.
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