On 3 September the European Parliament Development Committee discussed the effects of the economic crisis on developing countries. Oxford University professor Ngaire Woods presented a report that the Parliament had commissioned on this topic. This analysed the main impacts of the crisis on developing countries and assessed the counter-measures put in place by the G20, European Union and International financial institutions in response. Development Committee chair French MEP Eva Joly said the study would be used for amendments to a forthcoming parliamentary report on the impacts of the crisis on developing countries.
Professor Woods pointed out the serious risk for many developing countries to fall into a lost development decade. To avoid this additional resources must be made available, be delivered with more flexibility and rapidity. Furthermore appropriate regulatory measures must be undertaken in order to prevent an ever deeper crisis. Some of the key concerns raised by her study are the following:
- Millenium Development Goals out of reach for most developing countries: the gains achieved in the last few years by many developing countries are being rapidly lost with the crisis. Some 40% of developing countries are highly exposed to serious poverty level increases and an additional 90 million people will fall under the poverty line as a result of the crisis.
New resources for Low Income Countries are lacking. IMF resources have been significantly increased but only 1.6% of the new money is being directed to Africa. The bulk of new IMF lending - 82% - is going to European countries. Other proposals for additional funds such as the World Bank call to G20 countries to devote 0.7% of their stimulus packages to finance poor countries needs have been ignored.
Only short term stop gap measures: the EU’s response mainly brings forward existing funding, which will lead to funding shortages in future years. The European Commission’s proposed €8.8billion for development aid, budget support and agriculture financing are just frontloaded finance. The only new EU spending is the small €100 million EU-Africa infrastructure trust fund.
Insufficient IFI governance reform: Developing countries are insufficiently involved in finding solutions to the global crisis; they would get more involved only if there is a substantial reform of the international financial institutions to favour a more balanced representation of developing countries.
The European Union has a key role to play in these areas and action is needed from the new European Parliament to push for substantial reforms. As well a pressing for additional resources the EU also needs to ensure that comprehensive regulatory measures are implemented to ensure a sustainable and development friendly financial system. This should be a key pillar of the EU policy coherence for development. The Development Committee should therefore have a say in the discussions in the Economic and Monetary affairs Committee, which deals with financial sector regulation and supervision.
Published by EURODAD